Macros, not politics will be more important now and on this correction, one should be looking at opportunities to buy, says Neeraj Dewan, Director, Quantum Securities, talking to ET Now.
Edited excerpts:
How are you looking at the market positioning right now? In which range would the markets move in lieu of what may come by on the political front with a slew of elections lined up and the market still awaiting the Karnataka verdict?
It was all building up — the kind of macros we had, rupee weakening, crude going up, yields rising. All this plus waiting for the election results, the markets were holding on till yesterday. Once the initial results have come, they were expectations that the market will correct because broader market was anyways correcting for almost a week now.
There were some large-cap names which were supporting the market or keeping the market on elevated levels. We have seen that selling, which was due, happening now. But I do not think this will be a deep correction. This could be a correction where one can look to buy on dips.
Karnataka finally will also matter a bit but not too much because the BJP has come out with a strong performance and that is a positive that can be taken from the elections. And who makes the government now will not have too much of a bearing on the market because I think that news more or less would have already played into the market. Macros will be more important and on this correction, one should be looking at opportunities to buy.
Where do you spot those opportunities?
I would say that a lot of these are in infrastructure related spaces and even capital good or pure infrastructure or related ancillary plays related to capital good. Even spaces like steel for that matter. All these sectors have corrected. Steel stocks also corrected a lot since the last peak we saw in the end of January. So, that is one space.
Another space which no one really wants to touch because of negative news around them are corporate banks. Whether it is private banks like ICICI Bank or PSU banks like State Bank or Indian Bank. We know the pain in these stocks and we know this is the peak pain that they would have seen and incrementally things will only improve for them. So, one should look at opportunities in some of the corporate banks also.
Another space would be the auto and auto ancillary sector. There will be a segment like Eicher which is still a 10% above what it was when the market hit the last high but there will be other stocks which have corrected a lot. Even Maruti has corrected almost 9% from those levels.
I continue to be positive on midcap IT. The results were very encouraging.
Would you say that PSU banks are a complete avoid or could there be a contrarian opportunity?
There is a contrarian opportunity there but one needs to be stock specific. I mentioned Indian Bank which took approximately Rs 4000 crore of provisioning and incrementally they will need only Rs 2000 crore more. So, you have to analyse the bank separately and among the PSU banks, you have to pick two or three better performers and stick to them. Out of the results which are already out is Indian Bank and Canara Bank would be the one, where one can take a contrarian call and invest for a medium to long term. For other banks like even State Bank, I will wait of the results to come out and then take a call.
How are you approaching the consumption space? Growth only seems to be favouring them and the debate in your head is whether or not you would pay that extra buck because that is what quality demands?
That is what has been happening with these stocks for the last couple of years. We have been looking at growth coming but growth has not actually come in. Growth comes only in the consumption space and so that is where people have been chasing and these stocks have turned more and more expensive.
I would rather see these stocks consolidating, I do not think they will correct because portfolios will be chasing these stocks and they will still give them the premium. But at these levels, I do not see too much of an upside in the short to medium term in these stocks.
How would you look at some of the expensive names in autos and consumption space? Should one book profits there and if so where would that money go?
In the auto space, you see stocks like Eicher Motor which also has been getting that premium valuation and there will be stocks like Maruti but tha thas corrected also. So, there will be stocks like a Maruti or there will be stocks which are into commercial vehicle space like Ashok Leyland where I feel that the stocks have corrected almost 10% from the peak that they saw end of January- February. These are the kind of stocks where I would look at opportunities to increase my positions as far as autos are concerned. There will be auto ancillary companies also which are more exposed to commercial vehicle space. That is one segment I am positive on.
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