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

The January series saw the Nifty regain 5,100 levels. How do you see the markets panning out in February?

 

The market, till Budget, can become very range-bound with the trading in a range of 4,800 – 5,350 as election process would start in February. The Nifty has rallied nearly 11% from 4,500 levels, and above 5,250 levels, the supply would be very high.

 

The results season would also weigh as the performance has been disappointing if we remove other income part. The result for 491 companies announced till now shows that the sales have increased 27.6% (yoy), while the net profit has dipped by 1%. The other income, however, has surged 61.5%.

 

 

Can you give us three stocks from the Nifty pack where one can take a long position?

 

Cairn India, Sail and Ambuja Cements are preferred picks in the Nifty pack.

 

Were the recent announcements by the Reserve Bank of India (RBI) during the review of the Monetary Policy in-line with your expectations? Have the markets factored in the growing fiscal deficit and lower growth?

 

The 50 basis point (bps) cut in the cash reserve ratio (CRR) has come with no rate change. However, the markets will factor in the fiscal deficit and lower growth close to the Union Budget in March, as more clarity would emerge on how the situation will pan out going ahead.

 

How should one play the interest rate sensitive stocks now? Is it a good time to start accumulating them?

 

Most of the interest sensitive stocks have run up in anticipation on a rate cut. We had a bullish view on these stocks, including infrastructure and realty, which has paid off well. IVRCL was up 85% in month of January 2012. NCC (up 64%), HDIL (up 55%), Uco Bank (up 50% per cent) and Reliance Infra (up 50%) have also done quite well.

 

What is your near-to-medium term outlook on the Rupee?

 

On rupee, we hold view of that it can touch 55-57 levels against the US dollar by October – December 2012.

 

RIL’s proposed buyback offer starts February 01. What should investors do?

 

Reliance Industries’ results were disappointing and the outlook remains very negative. The gross refining margins (GRM) came in below the Singapore GRMs after a long time, as RIL has lost discount of Iran crude.

 

The buyback is tricky as maximum price is Rs 875.We maintain target of around Rs 650 levels in the next six – eight months for the stock.

 

 

L&T surprised the Street with its Q3 numbers and the outlook. Would you say that the worst is behind the companies in the capital goods space?

 

L&T’s result were boosted by other income that came in 82% higher, while the margins were down to a disappointing 9.6%. However, if the mark-to-market (MTM) losses are removed, then the margin comes to around 12.3%.

 

The stock has rallied 33% in January, which caps more upside, while downside risk is high. I suggest that investors use a rally to reduce positions in this scrip. The stock can slip below Rs 900.