Lots of activities have taken place throughout the week but for the markets in general, that trigger to drive the markets going forward was missing. What will the market look out for next?
A major trigger — either on the upside or on the downside — was missing in th emarket last week. So the market, at close to all-time highs, kept on moving sideways. It was a bit of consolidation. At higher levels, we did see some amount of profit taking and at a slightly lower level, fresh buying was coming. That is a healthy sign for the market. Having said that, the next trigger which the market will wait for will come from the corporate results for the next quarter and also the government policies which may or may not get announced.
There was a lot of excitement regarding some expected relief for the beleaguered telecom sector, particularly in the context of Vodafone. Since the government has very clearly said that no relief can be company specific, the entire sector was excited. Also, one thing is becoming more and more clear with the recovery gaining momentum is that BFSI as a sector, had been beaten down by the market mercilessly and these stocks deserve a better valuation; that is what is pretty much getting reflected. Of course, there will be themes around China’s action and inaction and so the metals is another area. The FII flows and also these specific sectors like textiles or speciality chemicals, which can benefit either from some government policies and action or inaction in China, are driving the market.
The festival season has started with Ganesh Chaturthi. Kotak Mahindra Bank has announced the lowest ever interest rate on home loans for a very limited time. Do you expect this to be in focus this new week and even after that?
There are couple of things. In the banking sector, there is premium for those banks which are growing. Asset quality has been on top of our mind for quite some time and once the asset quality issue has stabilised, people are focussed on growth and that is why , and to an extent, Axis and even SBI are moving, whereas Kotak was not really moving. The same was the case with HDFC. Because in spite of excellent asset quality, there was not really much growth. I think that is why these banks are trying to bring focus back on growth and the only way for them to grow at this stage is probably to lower the interest rate on housing loan.
Kotak being Kotak, they are very conservative and they want to play through housing loans which is probably the safest sector from asset quality point of view. They need to be aggressive and they are trying to be aggressive. Overall, I think housing finance is an interesting sector and there are lots of housing finance companies which are doing well and would continue to do well.
From a more longer term perspective what would you recommend to viewers at the current juncture?
One sector we like is textiles. The government policy announced last week will benefit a whole host of sectors. Apart from that, some of the companies are getting excellent traction in international markets. This is also on account of China going out of favour and the procurements are more and more coming close to India. Welspun India is one company where we have been bullish and we believe that with the price target of about Rs 175, one can buy this stock and hold for 9 to 12 months.
The other area which we believe will benefit from economic recovery is the hotel industry, particularly the high-end hotel industry. So as well as Indian Hotels definitely can be looked at current level for 30% to 40% upside.
The last sector which I would like to mention here is the construction material and in that cement comes to our mind first. Post monsoon, the usual cement recovery and, of course, the housing for all construction boom as well as infrastructure spend by the government should ensure that cement demand remains robust. So, UltraTech, one of the leading cement companies, should do well going forward and one can look at buying UltraTech as well.=
