'Mid caps across sectors are value buys'

In the market, it has been another bearish week with the Smart Portfolios benchmark index dropping over 3 per cent to 10.48 lakh from Rs 10.82 lakh in the preceding week. The S&P CNX 500, value is up 4.78 per cent since the start of Smart Portfolios on September 1, 2009.

Ajay Parmar and Amar Ambani have outperformed the benchmark with a wide margin, up 17.68 and 19.95 per cent, each. Phani Sekhar and Vinay Khattar’s returns stand at 3.44 and 4.98 per cent, respectively.

How do you go about identifying and picking up stocks?
We look for stocks where there is scope for valuation re-rating. This could be due to strong growth or operating or financial leverage plays. Our idea is to look at stocks that have potential to give over 25-30 per cent returns. At times, certain sectors appear attractively priced for such opportunities. At the core, we look at the bottom-up approach. Also, we have a strong thematical strategy as far as growth stocks are concerned. Currently, we like textiles, auto ancillaries and agriculture sectors.

Are Indian markets over valued? What are your expectations for 2010?
India as a market still represents one of the best bets amongst competing international economies based on growth parameters. Indian markets have had a strong run up in the recent past. We believe that the new trends would be decided based on the next set of results rather than expansion in the valuation multiples. Mid caps across various sectors represent value.

What sectors should one look at considering valuations and growth possibilities?
We would like to play the domestic consumption story and these include autos and auto ancillaries, textiles, retail and agriculture. Mid-cap stocks as a segment represent great value because of lower valuation, strong growth and significant operating and financial leverage.

VINAY KHATTAR Head – Research of WAIS, Edelweiss
Top Holdings	% of  assets	Cost  Price (Rs)	Current  Price (Rs)	Value (Rs lakh)
Aries Agro	5.17	5.17	83.10	0.54
Alok Inds	4.76	25.45	23.80	0.50
United Brew	4.71	155.55	179.65	0.49
Sadbhav Engg	4.09	1282.00	1225.30	0.43
Pratibha Inds	4.04	313.95	312.00	0.42
Total investments	59.26			6.22
Cash	40.74			4.28
Net worth				10.50
Returns (%)	4.98

Some market pundits talk of double dip recession in the US. What is your take?
Markets went through extreme pain in 2007-08 which warranted strong response by the governments world over including injection of liquidity and other fiscal and regulatory measures. With the world economy picking up, these measures may be reversed leading to higher volatility in the market. But given the strong fundamentals of Indian economy, this volatility should be used as an opportunity for value picking.

Crude oil prices have moved up 63 per cent from their lows while metals are up 37 per cent. What will be the impact of commodity prices on earnings numbers of companies?
At the macro level, any increase in commodity prices is detrimental for consuming countries as well as companies. In India, most companies have been able to pass on these hikes and maintain margins. We therefore believe increase in commodity prices would be far more indicative of strong demand and may have minimal negative impact.

How should investors look at the markets now?
Seek value and buy at regular intervals. The ongoing weakness provides one such opportunity.
 

AMAR AMBANI Vice President (Research), India Infoline
Top Holdings	% of  assets	Cost  Price (Rs)	Current  Price (Rs)	Value (Rs lakh)
Titan	4.21	1686.40	1682.65	0.50
United Spirits	4.14	1252.20	1241.80	0.50
Asian Paints	4.04	1960.00	1936.25	0.48
Educomp Sols	3.78	686.70	648.10	0.45
Reliance	3.68	982.25	981.70	0.44
Total investments	44.21			5.30
Cash	55.79			6.69
Net worth				11.99
Returns (%)	19.95

 

PHANI SEKHAR Fund Manager – PMS, Angel Broking
Top Holdings	% of  assets	Cost  Price (Rs)	Current  Price (Rs)	Value (Rs lakh)
eClerx	12.34	344.25	455.95	1.28