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Expect markets to trade rangebound: Deven Choksey

Aastha Agnihotri/Mumbai 20 Nov 12 | 11:45 AM

Deven Choksey, managing director, K R Choksey Securities spoke to Aastha Agnihotri on winter session of the Parliament, sectors outlook and market strategy

Parliament’s winter session is round the corner and “fiscal cliff" uncertainty in the US still looms large. How do you see the global markets, including ours, panning out over the next few months?

The “fiscal cliff" issue would be resolved by the year-end as we have consensus building between the Democrats and Republicans over taxing the rich. Though there are some concerns on how to reduce the expenditure, but that, I feel, will be taken care of. Overall, we expect a positive outcome.

This will greatly benefit Indian rupee as Dollar is expected to see some weakness post US fiscal resolution and that will benefit rupee and help bring down current account deficit (CAD) and fiscal deficit. Back home, reforms uncertainty is there till we see some positive outcome from Parliament winter session. The government is expected to revenue from stake sale in select public sector (PSUs) companies, which will again narrow down CAD.

What is your current market strategy?

It's a buy on dips market. I expect market to trade range-bound ahead of key events outcome such as US fiscal talks and Parliament session. My target for Nifty is 5,900 – 6,000 but the timing is uncertain. Nifty can surge to these levels by year-end also and by March-end too depending on how the events unfold.
 
Do you expect the pace of fund flows to slow down over the next few quarters? Why / why not?


The pace of fund flows will be sustainable and may improve if US is able to resolve its taxation issue; and if the government is able to gain support on reforms in Parliament session. Stronger rupee will also boost inflows.

Which stocks, according to you, still offer value from a medium-term perspective? Are you still bullish on any FMCG, Healthcare stocks despite the recent run-up?

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One can buy Glenmark Pharma in healthcare space. In the non-banking financial companies (NBFCs) space, IDFC and REC looks good; while in media, Network18 and TV 18 are attractive.

Telecom stocks have been in focus recently given the 2G spectrum auction. What is your assessment of the outcome and how should one play this space?

Relative short-covering rally has lifted telecom shares but that doesn't give comfortable opportunity to buy telecom right now and I'm not gung-ho about it. The sector concerns seem to be over after 2G auction but I will be cautious for now.

How should one approach the financial sector space – PSU banks, private banks and the NBFCs? Are there any stocks that make it to your investment list despite the concerns and valuations these stocks are available at?

I expect the Reserve Bank of India (RBI) to focus on two things in its policy. First is the output from agriculture side. If we see softening agri-prices, which in turn would lower food prices. In such a scenario, the RBI may be keen on lowering interest rates. Second thing is the rupee trend. If the Rupee rises on back of positive flows, then the central bank RBI will be more than willing to cut rates but do not expect any chance in stance until December. Overall I expect 25-50 basis points rate cut in this fiscal.

Given all this, I am positive on financial space which includes banks such as SBI, ICICI Bank as they will benefit from a rate cut that will happen in next two – three months for sure. Also non-durables such as Auto space, particularly Tata Motors looks good.

Would you be a buyer in consumption driven themes such as Bata India, TTK Prestige etc? Why / why not? What about SKS Microfinance that has seen a lot of investor interest off-late?

The valuations are very expensive for these stocks so I would wait for some more time to invest in this space.

Sensex

Company Price Gain (%)
Bharti Airtel353.254.81
Reliance Inds.1,030.803.35
H D F C1,040.702.93
TCS2,531.052.71
Hindalco Inds.188.252.62

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