We are still wary of bottom-fishing at this moment: Harendra Kumar

Q&A with managing director - institutional equities at Elara Capital

Harendra Kumar, managing director – institutional equities at Elara Capital tells Manu Kaushik why he believes the Sensex will touch 24,000 by 2014 end. He also picks top stocks for high returns.

What is your interpretation of the Q3 earnings season so far? What are the sectors/stocks that are likely to be re-rated post results?

The results seem to be a reason for cheer. Among sectors - Information Technology (IT) and Pharmaceuticals sectors - and in individual stocks Larsen and Toubro (L&T), ITC and Axis Bank have all reported in-line or marginally positive numbers. A continuing trend of Q3 will be seen in these sectors and stocks.

What is your 2014-end Sensex target?

The Sensex target is closer to 24,000 but is unlikely to rise from here on. We expect outflows of Foreign Institutional Investors (FIIs) to weigh on the markets.

With respect to latest inflation figures what do you expect from the RBI policy review on January 28?

The street is divided on the question of a rate hike. Our in-house view is that core inflation is sticky and that the RBI Governor will have to affect a 50 bps (basis point) hike before June 2014. That is the window that we have.

Will IT continue to dominate or do you see other sectors gaining going forward?

Yes, the IT sector will continue to drive markets higher on a relative and an absolute basis.

What is your take on power stocks given the flood of populist measures by state governments resulting in tariff cuts etc?

Essentially, it means that tariff hikes are pushed out for six months. But the reforms in this sector have moved well and we should see an improvement in valuations going ahead.

FIIs have now taken to small-caps and mid-cap companies and are raising their holdings there. Do you see a sentiment building in favour of broader market companies now? What will you advice investors on that front?

It is a small trickle and not a trend. Like I said earlier, we see a risk of outflows rather than inflows this year. We are still wary of bottom-fishing at this moment.

What are your top picks for maximum gains with a one-year perspective?

Some of the Tata companies like Tata Motors, TCS and Tata Global Beverages look good.