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  • Prakash Diwan - Director, Altamount Capital Management

    Prakash Diwan

    Director, Altamount Capital Management

    DATE: February 04, 2016, 12:00 PM

    SUBJECT: December quarter corporate results analysis




    Hello and welcome for a webchat with Prakash Diwan, Director, Altamount Capital Management on December quarter corporate results analysis


    Hello and welcome!

  • R


    what are the broad themes you picked up from the December quarter results?


    The common thread running through the recent earnings is - good businesses have managed to improve BOTTOMLINES even without commensurate improvement in TOPLINE. Particularly the beneficiaries of softer commodities - Chemicals, Paints, Plastics, quasi-Pharma are a distinct beat over estimates. CONSUMPTION is yet to pick up and maybe the 7th Pay Commission will provide the trigger going forward. Businesses that are dependent upon global demand have suffered and will continue to be under stress (2 Wheelers, Engg Cos, etc.)

  • R


    Markets seem to punish those with weak Q3 corporate earnings and reward those with good set of numbers. Do you see consolidation in the benchmark indices before making an up move or is there further downside from current levels?


    Yes, I do expect a downside; albeit more on account of global factors - what is likely to happen is the underlying improvement in our corporate earnings profile may go unnoticed by the rest of the world due to the smoke-screen created by the 4 Cs - China, Commodities, Crude & Currencies...this could last for a few weeks more....and it is the Union Budget that could make enough noise and catch attention from the early adaptors amongst global investors...which means that money will start getting directed into our markets post the budget and we may not have the usual pre-budget rally that we expect. ...The consolidation process could well spill to the March-end quarter and the rally that possibly gets triggered on 1st March may gain more strength as the quarterly earnings come through in mid-April...the downside, prior to that could be deep...almost to gut-wrenching levels of 7100 on the NIFTY!

  • S


    Some banks continue to report higher NPAs. Do you see further downside in the banking space from current levels. What is your call on private sector banks?


    I expect BANKING as a sector to reel under pressure for another 2 quarters - things are likely to remain stressed for most banks, esp PSU players till about June-July. The pvt sector players esp the smaller ones may get out of the stressed out zone earlier - KOTAKBK and LVB are my favorites at this stage given the quality of assets and the resilience to cost of funds that both these banks offer.

  • P


    In the aviation sector a lot of activity has been seen in shares of SpiceJet while Indigo has come of its highs. What is your take on both the stocks at current prices?


    SPICEJET is a tad too small and hence vulnerable to any shifts in the industry parameters - occupancy rates, fuel costs, operational efficiencies, etc. INDIGO was always high priced and hence the fall. AVOID both. If you HAVE to buy something within this space compulsorily, JET is better.

  • S


    Has the downward trend in capital goods shares bottomed out? What is your call on Crompton Greaves after the sharp correction in the previous session? Which would be the mid-cap capital goods stocks looking attractive at current levels?


    CG still needs to do things right to get the conviction back. Don't get caught into the downward spiral just because it has corrected. The trend is still mixed in this space - some smaller and mid sized co's look promising - ELECON, TRF and TIL particularly offer very good risk-reward at these levels.

  • P


    I wish to expand my portfolio by including mid-cap pharma shares. Which would be your top picks for the long term and what is your take on Sun Pharma at current levels?


    Be careful while adding mid cap PHARMA coz the impact of any regulatory reprimands can be significant in these co's - I prefer co's that are more into APIs and not branded generics. CORAL LABS for instance that I had recommended a few months back continues to offer value. MAKERS LAB, another smaller player has the makings of a frontline play in a year or two. UNICHEM is a safe bet in that space. Sun Pharma seems to have got over the USFDA issues particularly related to the RANBAXY integration and could see growing interest from FIIs once they return to Indian markets - looks good from a near term perspective.

  • V


    The Midcap FMCG segment seems to witness action. What is your call on Dabur, Godrej Consumer and Marico at current levels?


    Godrej Consumer, with its well balanced portfolio of brands - both offshore and domestic has held up quite well in this phase where we have seen rural consumption slow down and could offer a superior degree of risk-reward at current entry levels. DABUR is likely to face stiffer competition from the other players, esp ITC in the F&B segment and may run out of steam for a while. Avoid MARICO is a co that has been busy acquiring various brands and is now in the process of consolidating - post that it should become a stronger bet - may take a couple of quarters to bloom. HOLD

  • V


    Paint companies have seen sharp surged as fall in raw material prices has boosted margins. Which would be your top two picks at current levels?



  • R


    Reliance Industries seems to be facing selling pressure above Rs 1,000. What is your take on the index heavyweight in the backdrop of falling crude oil prices?


    Yes, I agree, the momentum in RIL seems to have temporarily halted...but with crude more likely to go UP than DOWN from current levels, things should continue being +ve for RIL. The petchem business too is likely to provide strong support to earnings momentum. THe stock could scale up once the overall market mood improves by March and scale newer highs

  • A


    Auto companies have started wooing customers by launch of new models. Which would be your preferred pick in the passenger car segment and the two-wheeler segment at current levels?


    TATA MOTORS could see a potential comeback in the PV segment, esp since MARUTI is likely to struggle a bit. From amongst the 2 wheelers, TVS could surprise with its aggressive launches in the premium segment and the potential rub off from the BMW stable in this year. HEROMOTO too is strongly poised if you buy into it at current levels

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