Here are a few trading ideas by Prakash Diwan

In an interview to CNBC-TV18’s Latha Venkatesh, Sonia Shenoy and Anuj Singhal, Prakash Diwan, Market Expert at Altamount Capital Management shared his reading and outlook on the market and also gave recommendations on various stocks.

Below is the verbatim transcript of the interview.

Q: In capital goods, it looks like a return of ordering, am I guessing it right or just getting carried away by the optimism?

A: Look at a very small snippet that we read today morning, Bharat Electronics Ltd (BEL) has been slapped a sales tax notice. A government company, which is doing so well, selling all those EVMs and POS and stuff like that and of course part of that defence, which has certain exemptions is also getting into a stage where the Sales Tax department sits up and takes notice. So what is changing is, we are getting more and more into – I call it the return of the natives – so what is happening is all government companies are getting more efficient, focused and cash sitting in a Coal India or a Hindustan Zinc has been utilised so effectively. So government does not need to look at the private sector to pay taxes. You have enough of your family silver that is giving you enough. So that trend will be the first because the pump-priming of the economy will be soft. The government is not going to do something at the cost of a fiscal deficit number getting deteriorated, they cannot reduce interest rates so readily so it has to be the government role writing the biggest cheques.

Look at the likes of Larsen and Toubro (L&T), Crompton Greaves, Siemens of the world, and look at the infrastructure plays, Dredging Corporation order book, that whole segment, the government is unleashing new programme, the Brahmaputra Cleaning Project is huge. You have the Namami Gange which will start seeing money coming in. So capital goods, infrastructure is the great play right now and midcaps because they are the ones which start getting the order percolation.

Q: I saw some notes on Madhucon Projects. We do not know whether it is at the joint venture (JV) level but they did receive letters of intent (LoI) for about Rs 500 crore, various EPC projects?

A: Look at Dilip Buildcon, you have it in the news for all the right reasons, you look at JKumar Infraprojects, of course it had a little bit of a slipper because of the BMC blacklisting but they get more orders from MMRDA, they do not execute orders for BMC and that is why it is bouncing back. You have Ashoka Buildcon, you have HCC, all of them are going to be in the reckoning for much more.

Q: One more word on L&T?

A: I would not go much into the transition part because that has already priced in but about nine months back, came up with a report on L&T saying that we are expecting weaker numbers and I remember that very clearly because when the Ind-AS came in, it was such a big shake off for L&T. It has so many subsidiaries and to get that into a – nobody could price it well. So it languished for so long, things haven't changed much but the price has got rerated. So I think it is pricing in a lot of good stuff and the government orders do not go to L&T typically now. Surprisingly, Bharat Bijlee which I mentioned the other day, is pitching for all elevators, escalators and Schindeler.

Schindeler’s elevators are so sensitive that if you have huge crowds on the railway station -- this modernisation of airports and railways is a big thing because earlier we never used to have even electric connectivity in most of these stations that you could operate these things. It was not more capex, it was about eco system and that is changing. There are so many companies, which will start participating in this and which are still available at decent valuations because nobody is looking at it.

Look at AIA Engineering, this is again something which is off the regular government spending kind of a radar.

For full interview, watch accompanying videos...