Profit-taking and hedging are the key objective of FIIs: K Subramanyam

Interview with Co-Head Equity Advisory, Altamount Capital

In a conversation with Surabhi Roy, K Subramanyam, Co-Head Equity Advisory, Altamount Capital shared his views on market behavior, outlook on select sectors and corporate earnings.

The plunge in Chinese stocks led to a sell-off in domestic shares with both the Sensex and Nifty hitting their 52-week lows. What strategy would you advise investors especially with regards to large-caps after the sharp correction?

The correction or sell off could see values further eroding as results season approaches. Even IT and pharma sectors are having challenges which could result in volatility. However, with budget approaching, banking counters could be kept on radar as some sops for parking funds in banks could see further relaxation as they get ready to increase provisions which could dent the bottomline.

How do you see the December quarter earnings for corporate India panning out?

The market has already started taking note of this and quiet accumulation is seen in paints, OMCs and other related sectors. December quarter results could see pockets of improvement like paints, oil & gas, select FMCG stocks, specialty chemicals, airlines, etc.

Airline stocks touched multi-year highs last Friday, on the back of a 10% cut in the price of jet fuel. What is your outlook for the industry going forward and advice to investors who are holding the stocks?

At current levels, the momentum is still in their favour with falling ATF prices. The stocks have run up ahead of their results. To be on the safe side partial booking of profits could be considered.

What is your take on metal stocks in the backdrop of weak economic data from China, the world's largest consumer?

In the absence of demand from China, India is the only country which attracts huge demand. Prices have fallen quite drastically. Very soon production cuts could be seen as it becomes more and more unviable. While this balancing goes on the efficient ones will continue to thrive though bottomline pressure will be there. While short term correction could continue, one could take advantage of this and accumulate the leaders.

How do you see the trend of foreign fund inflows in 2016?

At the current juncture, the FII mood seems to be cautious and profit-taking and hedging seems to be the objective. This trend reversal will depend upon the reforms particularly the GST and also on the Union Budget and the approach of the Govt to tackle the current slowdown.

While selling is seen in the year 2015, midcaps witnessed stupendous buying demand with the S&P BSE Mid-cap index touching all time high. Do you think the rally among broader markets will fizzle out? Can you suggest three stocks from the mid-cap pack that can be bought/sold at current levels from a medium-term perspective?

Several mid cap stocks saw buying based on attractive valuations. The result season needs to vindicate this sharp rise. Till then partial booking of profits could be considered. Stocks which look attractive are Tata Coffee which could head towards Rs 125, Raj TV which could see levels of Rs 80 and MCX which could be a clear long term bet for target price of Rs 1,250.