In an interview to CNBC-TV18, Prakash Diwan of prakashdiwan.in shared his readings and outlook on specific stocks and sectors.
Below is the transcript of Prakash Diwan’s interview with Sonia Shenoy & Anuj Singhal.
Anuj: Let us start with the obvious ones, Tata Motors and Motherson Sumi Systems. Tata Motors recovered quite a bit on Friday of course intraday. How would you approach both of these stocks now?
A: Motherson Sumi is going to be more interesting. Tata Motors, in my view, will definitely have a lot of headwinds in the form of currency fluctuations. The currency is going to upset that because they have UK as a manufacturing and a design base. It is not just a market for them. It is actually a manufacturing base unlike some of the other companies that just export to the UK or to the European Union (EU). Now, given the fact that Tata Motors the DNA of Jaguar Land Rover (JLR) actually stems from the UK market, means that any upsetting plans out there in terms of expansion, in terms of affordability, in terms of cost control will impact the entire company especially on the global side of the JLR sales. So, my sense is Tata Motors will get impacted.
What sets it off is the potential improvement in sales numbers that we have seen in the US market. Now, globally when things are looking bad, I am more worried about the Chinese devaluation as well which is going to impact Tata Motors. So, things are going to be very tough going forward for them, not only as a market, but also as a manufacturing base.
However, coming to Motherson Sumi, the difference is that they have buyers in the form of more German car manufacturers. They have buyers in the form of US based German manufacturers. So, it is not something which gets directly impacted. So, it is like, it is housed in a bad neighbourhood but it has a market which is much bigger, much better, much far off. So, Motherson Sumi, while the sentiment is down, it would probably offer much more value if it goes down. Tata Motors will take a longer time correction to improve from whatever losses it faces. It could still get beaten down a bit once people digest the numbers. But Motherson Sumi definitely does not deserve to be punished so much, as much as we have already seen or probably could continue seeing it. But that is a value buy at lower levels.
Sonia: So, you would not buy Tata Motors now?
A: Not yet.
Sonia: I wanted to get your views in on Maruti Suzuki. Would you buy it after the dip or are you concerned about the yen?
A: The yen seems to be on a very strong footing and along with the dollar it does offer that safe haven parking opportunity for people, so I do not think Maruti is out of the woods from that perspective, till as Mr Bhargava was explaining, the exports start matching some sort of so still a far way to go on the yen. So, it is an avoid at this point.
Anuj: IT stocks, we have seen a bit of a comeback for midcap IT, but from here on, any stocks that you like? It has been a bit of a forgotten sector, except Infosys, but from here on?
A: The ones that are distinctly predicated on the US market for their growth, particularly like Firstsource Solutions (FSL), Oracle Financial Services Software (OFSS), I do not see any reason. And, then there are some interesting plays that are coming up with new products, particularly on the development side. You have a company called Nucleus Software, which is completely into the last mile payment mechanism for the small banks which is a huge growing area for them. So, I would definitely believe it is pocket to dip into and at these times, you will probably find some very good opportunity with the US dollar firming. It is also going to be a secularly positive and favourable environment for these midcaps.
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