I would bet on banks, auto in the current mkt: Jagannadham Thunuguntla

Interview with Strategist & Head (Research), SMC Global Securities

The recently announced reforms by the government have created a positive mood, and the Sensex can touch 23,000, says Jagannadham Thunuguntla, strategist and head of research, SMC Global Securities in an interview with Jinsy Mathew. Edited excerpts:

How upbeat are you on equities considering that we have seen a decent upmove?
I expect the markets to continue its upward journey, at least till the US elections are over. Also, the global liquidity along with the various reforms announced by the government will keep the sentiment positive.

There are revised year-end targets of 23,000 for the Sensex. Do you think this is far-fetched?
Sensex at 23,000 is possible since the market momentum is positive. Everything seems to be going right with the reforms coming in and the expectation of some more. Also, there is enough money on the sidelines. We have nearly Rs 60 lakh crore in bank deposits as of now. I expect some of this money to come into equities. And if that happens, Sensex will surely hit 23,000, if not more.

What are the factors that can dampen the current mood?
Currently, it is widely expected the reforms stance taken by the government will continue. And, for the next one month markets, too, are in for the benefit of doubt. But, in such a case, if the government fails to follow up with other measures, we may see some gains being surrendered.

Do you think its the time for high beta stocks to be in the limelight?
At this juncture, I consider power as a great contra bet. So is the case with infrastructure. In the coming days, we may see the government clearing several road projects which will help boost the infra space.

Other than this, any other pockets you would like to recommend?
I would bet on banks and auto in the current market. Fast moving consumer goods and pharma should be avoided as the best days for these are behind us.

Do you expect some fireworks in the coming earnings season? Is earning upgrades a possibility?
The market expectations are low for the upcoming earnings season. So, even a small positive surprise will be amplified. I believe with the September quarter, earnings will have bottomed out. The impact of the recent announcement on the balance sheet will start becoming visible only in the next quarter. Taking into account all these, the probability of an earnings upgrade looks quite possible at this point in time.

Do you see capital expenditure improving in the current financial year?
I don’t see any major capital expenditure improvement this year. It’s only by the start of 2013 that we can see companies coming up with expansion plans.