Market Voice: J Thunuguntla, SMC Global Securities

'Rising crude can be a downside trigger for the mkts'

While the markets may have been subdued on account of the holiday season for the foreign institutional investors (FIIs), the fourth quarter of the year is all set for action, Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities, tells Puneet Wadhwa in an interview. Edited Excerpts:

How long do you think the rangebound movement will continue?
The markets have been subdued due to the lack of FII participation, this being a holiday season for them. Even the local players have not shown much action. However, the fourth quarter may witness some action as a higher fund allocation is expected to take place.

Do you believe the markets have factored in the current quarter’s performance of India Inc?
Current valuations suggest that the markets have not only factored in December quarter results in the prices, but there isn’t any scope for unpleasant surprises from the result season, starting January. So, in case the results fall short of expectations, one can look forward to a correction from the current levels.

Which sectors are likely to report a good performance in this quarter? Which sectors would be laggards?
One can expect good results from sectors like information technology (IT), banking, consumer durables, FMCG and automobiles. The PSU oil & gas sector shall be the biggest laggard due to increasing under-recoveries, thanks to rising crude prices.

Going into the New Year, what are the upside triggers and the downside risks for the market?
The upside triggers for the market shall be a reduction in inflation and better economic data from the US and the Eurozone. The downside triggers can be the rising crude prices and an expected interest rate hike by the Reserve Bank of India in its January policy meet.

Would you recommend investing in mid-caps in the current market conditions? Any stock/ sectors you are bullish on?
Punjab & Sind Bank (decent size of loan book, healthy margins and reasonable valuation), TVS Motors (third largest two-wheeler company, a healthy market share and the latest product offerings) and Indraprastha Gas (sole supplier of CNG in NCR, strong positioning in the retail gas distribution /CNG supplies) are some stocks to look out for.

Banking, automobiles and healthcare are also set to perform in 2011.