AK Prabhakar, Senior Vice President (Equity Research), Anand Rathi spoke to Puneet Wadhwa on the markets

The markets have seen a good up move yet again this week. Is it time to book profits? What are you advising your clients in the current market conditions?

 

The Nifty has broken out of the range and we feel that it is mainly a liquidity driven rally. These kinds of rallies also give very fast corrections. As it is difficult to time them, we are advising investors to invest in growth stocks that will perform well from a two-year time horizon.

 

The markets have gained ground on hopes of a rate cut by the Reserve Bank of India (RBI) amid softening inflation. Do you think that the central bank will cut rates in the next policy review?

 

With lacklustre growth in the gross domestic product (GDP), index of industrial production (IIP) and exports, we feel that this should lead to aggressive monetary easing in the next six months.

 

HSBC has downgraded RIL, while Goldman Sachs has downgraded Maruti. Should investors stay away from these two stocks? What are your views?

 

Reliance Industries (RIL) expects the output from the D6 field in the Krishna-Godavari (KG) basin would slide to about 22.6 mcmd (million cubic metres per day) by 2013-14. The company has projected a production of 27.6 mcmd from the block in 2012-13 from existing 34.5 mcmd.
This shows that the outlook regarding the gas production is very uncertain and this declining trend is a major concern. We have been maintaining a cautious stance on the same from a long time now. We maintain one-year target of Rs 650 for the stock.
As regards Maruti Suzuki, we feel that most of the negatives of the stock are priced in, though short term concerns still exist, they may fade off in coming quarters.

 

MCX has announced a price band of Rs 860 – 1,032. Do you think that the pricing is a little too aggressive? Should one subscribe?

 

MCX is the first exchange to be listed in India. Globally listed exchanges trade at an average PE of 18x. If we take the upper band for MCX, the pricing comes in the same range of global valuations. Therefore, we feel that due the market leadership that enjoys with over 82% of the overall traded turnover, the outlook for the issue looks positive. One can subscribe to the issue.

 

What are your top three BUYS and SELLS at the current market level?

-BUY – Cairn India, Cummins, BEML
-SELL – Coal India, RIL and PNB

 

How should traders position themselves as regards realty and metal stocks are concerned? Do you like any stock from a near-to-medium term perspective from these two spaces?

 
Realty: We have been playing on realty stocks. Most of the stocks from this space were beaten down badly in the past year. Therefore, when the market started its journey north, these stocks were the first ones to perform. We still like Indiabulls Real Estate, HDIL and Oberoi Realty from this space.
Metal: Metal stocks are a mixed bag. We like selective stocks like SAIL, Sesa Goa, NMDC and Prakash Industries from a short-to-medium term perspective.