Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities spoke to Jinsy Mathew on the markets.

Do you think that the markets can move up from the current levels?

 

I think the run-up seen in the Nifty is fading. After the 400 point gain since the low the Nifty had hit in December, there are signs of tiredness now. In order to see any significant gains from the current levels, there has to be some fresh news. The developments in the Euro-zone, especially the downgrades, have been factored in. So one can expect some profit booking around the current levels.

 

What is your assessment as regards the foreign institutional investors (FIIs)? Will they be net investors in 2012?

 

At the start of every year, there are new allocations to be made by fund houses. Since Indian markets looked attractive at that particular point, we saw some buying happening. But will this sustain is the something to watch out for.

The maintenance of this trend is completely upon the Indian economics. If the Government gets its act together and some significant steps towards fiscal consolidation is carried out, we are sure to see more FIIs coming back to India.

 

What is your view about the information technology (IT) space given the quarterly results declared by the frontline companies?

 

On the basis of the numbers declared, there are some chances that the IT space may underperform in the current year. The first signs of these were visible as the frontline companies projected some tiredness in their business potential. In this quarter, we had rupee depreciation giving them an edge but one cannot bet on the rupee volatility.

 

What’s your take on the aviation stocks given the recent developments in this space?

 

Just a 49 per cent foreign direct investment (FDI) in aviation cannot be considered as a game changer. Bank loans and FDI can only act as a temporary help. The main issue is business viability. The pricing capacity of an airline is the biggest differentiating factor given the Indian conditions where there is no brand loyalty. So, the recent uptick seen in the stock prices are just knee-jerk reactions.

 

What are your expectations from the RBI’s monetary policy later this month?

 

Well I think there won’t be any dramatic rate cuts in January. By March maybe we can hope for the first signs of rate cuts.

 

Which are some the stocks that you like in the current scenario?

 

Midcap public sector (PSU) banks like Syndicate and UCO Bank look attractive at the current levels. Also on account of bank recapitalisation, there will be some significant moves here. Some of the other names like Escorts, Voltas, Sintex, and Crompton Greaves which are beaten out of shape will stage a strong comeback as the tide turns. Rate sensitives like Auto stocks too will be a good buy.

 

The one space to keep away from would be...

 

I think that would be FMCG as many of these stocks are trading at extremely high valuations. Last year, market participants took shelter in this space so the prices ran uphill. Now, given the change in the market conditions, this sector is set to underperform in 2012.