In an interview with CNBC-TV18, Amnish Aggarwal, head of research, Prabhudas Lilladher says that the markets have rallied backed by the foreign institutional investor (FII) inflow and improved chances of the National Democratic Alliance (NDA) coming back to power. However, rising crude and ongoing elections still pose an element of uncertainty. Edited Excerpts:
Markets are already factoring in the political outcome. Why are the investors jittery?
Markets have rallied backed by the FII inflow and improved chances of the NDA coming back to power. However, rising crude and ongoing elections still pose an element of uncertainty given that NDA lost unexpectedly in the 2004 Lok Sabha elections.
Is the earnings season faring as per your expectations? What are the top stocks you are watching out for?
So far the earnings season has not given any negative surprises. However, it is too early and the next 15 days will give more clarity on the likely performance.
Given the fair amount of correction that has taken place in most sectors, are you comfortable with the valuations?
Valuations are a premium to LTA (last traded amount) and a number of sectors are trading at quite high valuations. Given the recent run-up in the markets, one should be very selective in buying stocks at this juncture.
Which are the sectors you would avoid?
We would rather be very stock specific and not industry specific. However, we would tend to avoid real estate, power, infra in general.
What are the factors at play in the rupee market currently?
Crude prices will be a key determinant to the INR-USD movement in the near term. Any spike in crude prices beyond USD75 can further weaken INR.
Except for financials, which sectors are you betting on this earnings season?
We remain positive on FMCG, auto companies and oil marketing companies at this point of time. We believe that consumption levels will increase irrespective of whichever government comes to power at the center.
After elections, what themes would the market focus on?
Domestic consumption will be the first one to catch up. Capex cycle will take time to revive, however, select private sector banks would be the best way to play the revival in economy and capex.
What are your Nifty and Sensex targets if the Bharatiya Janata Party (BJP) wins the elections?
BJP majority on its own can result in another 10 percent rally in the markets to 13,000 levels.
With Jet in trouble, should one exit the airline segment? Or do you have a pick in the sector?
With Jet out of the picture, both SpiceJet and Indigo will gain in the near term. We are positive on both the names, however, post recent run-up Indigo seems better given its strong balance sheet. However, a lot depends upon the Jet Airways' resolution and whether it gets sold and a deal transpires. Given sharp run-up in stock prices, returns might be slightly back ended from hereon.
The Vodafone rights issue has sailed through. What does it mean for the stock and also for Bharti Airtel?
Telecom companies remain under pressure due to heightened competition from Jio and weak pricing environment. We see sustained competitive intensity with Vodafone completing rights issue and Airtel also looking at raising ~Rs 250 billion. We believe that Telecom and data market is in for a major transformation and its integration with home cable, entertainment and broadband will add different dimensions in the coming years. Although telecom stocks are going cheap, investors will need the patience to make money in this sector.
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