In an interview to CNBC-TV18's Udayan Mukerjee and Mitali Mukerjee, Sanjay Dutt of
Quantum Securities shared strategies on how one should play the market ahead of the big event - election result on May 16.
Below are excerpts from the interview:
Udayan: How are you feeling approaching this big event, bullish or conservative?
A: Conservative because ran up quite a bit, uncertainty looms large because I don't think one can take the mandate for granted as what the market is believing it to be which is Narendra Modi led Bharatiya Janata Party (BJP) government. BJP would be the largest party. I want Narendra Modi to be the prime minister for the benefits of the markets, for the benefits of the business community at large as what is expected. But, there is going to be many a slip between the cup and the lip.
Udayan: Would you bet on some kind of disappoint for the markets post elections and would you be bracing yourself to buy that dip rather than seeing a massive explosion post elections?
A: Irrespective of what kind of a formation or what kind of a government comes in with Modi or without Modi, market is definitely on a higher trajectory that we would get a panic kind of a dip in case what I said comes true. But thereafter, we will once again start going up after a week or 10 days or maybe a month's break or so when market digest what has happened because to me more than what the outcome of the domestic elections global factors are going to play an important role particularly the money flow into the emerging markets, particularly the interest that's coming out, in fact the money that's coming out of the developed markets and how the developed markets are in the upper end of the range.
Emerging markets, as we have seen, in the last few weeks, last few months selectively have benefited a lot and Russia and China have got their own set of problems and Russia particularly after what's happened in Ukraine and particularly Russia also increased its interest rates just about a week ago. So, Russia has got its own set of problems, Russia is totally resource driven economy, China has got its major set of problems in terms of slowdown and managing, what it is dealing with.
India would get substantial flows in the next 12-18 month irrespective of the election outcome because in last four-five years valuations had turned attractive and we would attract capital because things are started to do better in the economy as compared to what they were about two years back, one year back.
Mitali: There has been a lot of analysis about the foreign institutional investors (FII) ownership issue and there are a lot of stocks look over owned or over crowded. When we just pick up three of them which at this point are under owned Reliance Industries Ltd ( RIL ), State Bank of India ( SBI ), Larsen and Toubro ( L&T ) which one would you have the highest conviction to buy right now?
A: Banks have been completely written off in India as something like what it was pre-Lehman or immediately post-Lehman in the US and I don't think the problem is as bad as what European banks and American banks have faced in that crisis. So State Bank of India (SBI) looks to be the best bet at this point in time.
I would bet on banks because to me Reliance would still have to live with the uncertainty plaguing it in terms of gas, in terms of other issues. So out of Reliance Industries Ltd (RIL), SBI and Larsen and Toubro (L&T), SBI would be the best bet.
Mitali: The one that has done well for itself as an umbrella space is the midcap space and the smallcap space below that. You have tracked many sectors like media, which has actually done quite well. Have you been buying anything over there or do you think better price points will come in somewhere in the second half of the year?
A: Better points will definitely come in because markets are going to be choppy, there will be opportunities. We should not feel that we have lost out 1,000 points or so. Individual sector, individual stocks would still give opportunities.
India will continue to be a roller coaster once in 6-9 months you get that panic for whatever reason and that's the good time to load up because thereafter three-five years are going to be pretty good for equity markets in India both from the standpoint even the main street will do well because company will start performing better, problem relating to economy will start getting solved irrespective of what the government formation is, the pace of fiscal monetary action, both policy action would be in the right direction and we have seen that.
Even in coalition government in the late 90s, I do remember that once BJP government got elected in the late 1990s and 2000 people were panicking as to what would BJP do and I do remember the India Shining and how people thought that they would come back and that's the best thing on the earth for India but when Congress came back and Manmohan Singh became the prime minister how things went on. So, India has got its own growth trajectory. The excesses of 2004-2008 have all got corrected and things are definitely looking much better than what they were about 6-9 months back.
Udayan: If your view is that it will not be a cakewalk for the NDA to get to more than 250. Do you see a buying opportunity below the previous high say 6,400 Nifty either in the run up to the election result in the next couple of weeks or immediately after that? Do you think that you will get an option to buy below 6,400 again?
A: Yes, definitely one would get in the next about 16 years or so for whatever reason, I don't know what the reason might be, I would buy and vice versa if suppose my predictions are wrong and we do have a Modi salute of 7,200 Nifty or 7,400 whatever that may be, I will be selling into because there is no magic wand that's available with any government that should justify another 10-15 percent rise from the current levels.
We would need to take a reality check on most of the Nifty companies. They have got their own set of problems in terms of debt, debt restructuring of companies. So, we must realize that the mountain of debt the companies are sitting on with issues related to earnings before interest, tax and amortization (EBITA) growth, those needs to be sorted out with fresh equity raising, with the selling of unproductive assets, we need massive corporate restructuring that needs to happen for all this to get solved.
