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Below is the edited transcript of Bhavin Shah’s interview with CNBC-TV18

Q: Would you trade Infosys ahead of its earnings, would you buy. How would you look at it?

A: Ten days back we came out with a note suggesting switching of our preference from Infosys to Tata Consultancy Services (TCS). TCS is one of our top 2014 pick. I am not too much into trading for next two days, but we do know that Infosys will show margin improvement in December and March quarter. However, the real question is going to be revenue growth and how some of these departures will affect the ability of the company to show revenue growth coming back to industry rates.

Q: What the sense you are getting the market has priced in? Is it pricing in that with the slue of changes that Mr. Narayana Murthy has announced, he could also surprise the market with an improved guidance?

A: The improved guidance perhaps is not so surprising in the sense that if we look at what they have achieved in June and September quarters, doesn’t required a big quarter on quarter (QoQ) growth for Infosys to get to 11-12 percent growth for the year. So, in that respect with only one quarter left for the year that itself won’t be a sufficient trigger for the market. It is about whether or not Infosys can consistently grow closer to industry rate and what early signs of that are.

Q: Yesterday Nasscom told us that FY15 will be better than FY14 though no numbers came out they come normally in February, is that also factored in, will that statement per se have a positive hue on IT stocks?

A: That is not fully factored in because we still have 15 months to complete FY15, so there will be some more surprise appreciation on the back of better growth that is now expected in FY15. Signs have been there for few months now in terms of improving spending environment and also stronger offshore intent. That is going to continue to play out in to FY15.

Q: When we last spoke to you, you were gung-ho on Sun Pharmaceutical Industries. Are you going to continue because it has moved up a goodish bit or is there any other pharma pick that you are eyeing?

A: We continue to like Sun Pharma. It is one of our top four picks for 2014. We have initiated coverage on Alembic Pharmaceuticals and see much bigger upside in it compared to rest of the pharmaceutical stocks. It has transformed itself on multiple fronts. We see an upside to Rs 280 on March ’15 basis because we expect 500 bps margin expansions between FY14-16 and 40 percent earnings compound annual growth rate (CAGR) between FY14-16.

From being purely a domestic play, it is becoming now an international generic play and is coming up with a lot of limited competition products. Overall, it is becoming a focused company; it has increased investments in research and development (R&D) and is beginning to show results. The stock has been a great performer in 2013 but we think there is lot more to come in 2014 as well.

Q: How would you approach something like Coal India and National Mineral Development Corporation (NMDC)? For the last two days they have been moving with strength on the back of expectations of a strong special dividend, do you think we are good for more, would you buy them at current levels?

A: They look good on the dividend yield and any kind of cash flow based measures. The only issue is that if they are required to buy shares of other companies then the positive impact of dividend increase may be off set by those factors. It is slightly difficult to say. Though valuation wise they look reasonably valued right now.

Q: What is your view on the banking space? Last time you told us that you like a small bank names City Union Bank and that was one of your picks for 2014. How are you looking at the rest of the banking space?

A: It is a case of being very selective given there is still more pain that is going to come in the sector. We still have somewhat limited coverage, but within that the other stocks that we continue like in public sector is Jammu and Kashmir Bank; it has been the strong performer over the last couple of years and we think that it is going to continue. On larger private banks, we have initiated on IndusInd Bank and we do like the fundamentals there.

Q: Any midcap that you would recommend at the start of 2014?

A: We have started to see a lot of positive news flow in that space. We like companies like Ashoka Buildcon and Sadbhav Engineering. KSK Energy Ventures from the power space is going to see a lot of improvement in fundamentals. Its operational capacity, which is currently at 1,500 to go to 4.5 Mega Watts and that will result in earnings going from Rs 4 per share in FY15 to Rs 40 per share in FY16. Over the time it is going to give tremendous upside, however if one takes 12 month perspective also, we see more improvement in the utilisation of its second unit and that will flow into the share price. We see the stock going up to at least around Rs 100 within next 12 months.

Q: Any other stock you are watching for 2014?

A: We have come out with short rating on Havells India. We see significant downside. We believe that the premiums segment that they have successfully build their position in, is not going to see a growth revival for sometime. They are now trying to enter some of the more economy segments in the electrical products and that is where they face lot of competition including the new products from the original promoters of Anchor. We also feel that from cash flow generation perspective, they continue to invest in Sylvania, the overseas acquisition they did and we do not see any positive free cash flow from Sylvania. Therefore, compared to 24 percent earnings growth from FY07 to FY13, we see much lower growth. So, we see significant downside on that.