Gajendra Nagpal, founder and CEO, Unicon Investment Solutions spoke to Abhishek Vasudev on what lies ahead for the markets, economy and the upcoming Budget.
Markets have been consolidating since quite some time now. How do you see them panning out from a medium-term perspective? Do you expect a pre-Budget rally?
The market is range bound, and with result season getting over the next trigger is the Union Budget. I do not expect a big pre-Budget rally at this juncture. The concerns like the rising prices of crude oil and lower GDP (gross domestic product) growth expectations would restrict market to move ahead. The IIP (index of industrial production) growth is also lower than expectation. The market participants will also keep a tab on inflation figures.
The government has reduced the growth forecast to 4.8 per cent for the December quarter. Do you think that the actual growth rate might come lower than this? How would the markets take to these revised lower growth figures?
The growth rate can also touch 4.5 per cent but most of it is discounted in the prices. However, the market is looking at the growth forecast for the next two years. Reforms and rising capex cycle would also be guiding factor for the market in the long term.
Which sectors are looking attractive at the current juncture for investment horizon of six months? Are there any stocks that you would like to mention?
Interest rate sensitive sectors look attractive. One should accumulate select public sector (PSU) banks, auto and financial services stocks on a decline. Mahindra and Mahindra, Allahabad Bank, ICICI Bank, ITC and Reliance Industries (RIL) are some of the stocks that can be bought.
How do you see the metal and capital goods spaces panning out in the near-term?
One should selectively pick stocks, as some of them are trading at compelling valuations. The moment capex cycle turns, stocks like BHEL and Cummins India can provide a good upside. In the metal sector, Tata Steel, Hindalco, Adhunik Metal in the mid-cap can be bought.
How has the December quarter earnings season panned out so far? Which were the companies that surprised on the positive/negative front?
As of February 8, 427 companies announced results, reporting a y-o-y growth of 16.14% in revenues and 66.31% growth in net profits on an aggregate basis. Large-cap stocks showed better quarterly as performance compared to Mid caps.
Oil & Gas has been the star performer with RIL showing good results in lieu of better operating margins. This was followed by Pharmaceuticals and Real estate where the bottom-line grew by 57% and 40%, respectively.
Infosys and Tech Mahindra in the IT space, Axis Bank and ICICI Bank in the private banking space along with Punjab National Bank (PNB) and Indian Bank in the PSU banking space surprised us on the positive front. Other good results were posted by Pharma companies such as Cipla (mainly due to export formulations), Emami, Adani Ports and Voltas among others.
On the negative front, were BHEL and Bharti Airtel. Mid-caps like Opto circuits and Jain Irrigation were also below our expectations.
What are your expectations from the upcoming Union Budget?
The Budget, I feel, would be investor friendly, reform oriented with focus on fiscal consolidation. The roadmap on implementation of GST (goods and services tax) and CST (Central Sales Tax) is expected to be spelled out. The infrastructure sector is also expected to get some incentives.
