Buy tech, banking, fertiliser stocks: Experts
Published on Monday, August 18th, 2008 at 4:19 PMAuthor: admin (5507 Articles)
From a trading perspective, Dipan Mehta, Member BSE and NSE said that the market is showing some amount of resilience. At the same time it does show a few areas of strength in the market; the banking index, which was trading earlier has recovered, he added. He believes that there is some semblance of stability coming into the market and at this point of time we are not seeing any major shorts opening up, or any panic selling coming in at these levels. He said that this market is drifting lower more on account of absence of follow up buying and a lot of fund mangers and investors are keen to buy but at lower levels.
According to Dipan Mehta, the news flow from oil, commodity markets has dried up and we are in a bit of a quite period and the market is just reflecting that situation. We have had a very highly volatile situation in the last several months and such sideways movement is more than welcome at this point of time, he added.
On Technology sector:
Dipan Mehta said that the dollar is strengthening and rupee has crossed beyond 43, so to that extent it benefits technology companies and we are seeing fresh trading positions being taken within that sector. From an investor’s point of view, he feels that it’s a sector one has to be more or less evenly or equal weighted. The reason for that is that on one hand we have the US economy, which is still under a bit of a cloud and the revenues from that geography could get impacted. There is always a fear that there could be some negative clients specific, vertical specific news flow coming out from that major market for software companies, he added. He feels that these companies are defensive in a sense that oil was ere to shoot back up and rupee was to depreciate further than this is one sector, where the investors could hide. He believes that this sector has got very little correlation with inflation and most of the software companies have cash on their balance sheet.
According to Dipan Mehta, if you have the view that the dollar is going to be appreciated and margins are going to improve then one should be taking more positions in software. He said that a good strategy would be to get selective within the sector. He believes that there are lots of mid-cap stocks within the sector, which are extremely attractive levels and within the large-cap preference would be for companies, which have got good visibility.
On Banking sector:
Dipan Mehta believes that on valuation basis the banking sector is extremely attractive; private sector bank as well as public sector banks. He said that the gains, which were coming from lower oil prices and the ripple effect over inflation and interest rates have got priced in. According to him, at present it’s a bit of a status quo there but if one has a 6-12 months view then the banking stocks are quite attractive and one could gradually increase the holding within that space. The preference over here is for the private sector banks which have demonstrated excellent track record in the past few years and even in this difficult period, he said. He feels that it’s a sector, which one needs to increase the weightage gradually and have a bit of a long-term view at least 6-12 months.
On Commodity:
According to Dipan Mehta, we have seen a top created in commodities and this correction may continue for a few more weeks and few more percentage points lower for most of the commodities. He feels that the reason for that is a lot of money is moving away from commodities into US equities and other equity stocks as well.
Dipan Mehta said that the basic fundamental reason why these commodity stocks were going up seems to be some changes especially with global GDP rates going down. There is automatic a question mark on the demand aspect of these commodities and the fact that they have rallied considerably over the past two-three years make a case for sharp correction within the commodity stocks and commodities by and large, he added.
Dipan Mehta said, “We expect commodities to correct further and inline with that stocks which are a play on commodities will under perform over the next few weeks to months.â€Â
On Aluminium and Steel:
Dipan Mehta said that these sectors should be avoided. According to him, aluminium on account of weakness in global prices and steel on account of the fact that still there is a lot of confusion will not be able to raise prices for the next few months in the domestic markets. So, both these sectors are an avoid at this point of time but then if there is some more correction from these levels, then steel would be the first sector that we would be keen to pick up stocks in, he added. He said that a lot of companies are coming out with huge expansions, which are going on stream, so even if the prices do not move up a lot of profit growth would come through increase in volumes.
On Fertilizer sector:
Dipan Mehta feels that fertilizer sector as a whole holds some promise. According to him, we are in a crisis situation as far as the industry is concerned and the government will act whenever it is in crisis. He feels that there is a scope for implementing the new fertilizer policy in true earnest and spirit. He said that the fertilizer policy will be extremely positive for fertilizer companies, which are able to expand their capacities quickly. He believes that as soon as they are more convinced on subsidy aspect because the situation is such that although they are eligible for subsidy, they are actually not getting the subsidy from the government and instead the government is offering them bonds, which in turn results in further losses for them.
According to Dipan Mehta, one could gradually start buying into fertilizer companies at these slightly lower levels. He said, “Go with the larger one’s, they are the safest one’s to play with the likes of Tata Chemical, Chambal, Zuari, Coromandel and stick to the larger one’s, which have demonstrated good scalable capacities and ability to write through all the kind of ups and downs the industry has seen. To sum up it’s a sector, which we are positive on. As soon as there is some political stability after the elections that is one sector, which we should see further reforms and implementation of new policy in true earnest.â€Â
Devangshu Dutta, Consulting Editor, Outlook sees a lot of support at the 4,330-4,350 levels and on the basis of what is being happening today he sees it at about 4,375-4,380. He feels that if this sort of pattern continues, you would probably have a certain amount of enthusiasm on the carryover front by Wednesday and even today we have seen some selective short covering in banks. He said, “You will have a little more in the way of bank short covering coming in. So, I see more of an upside from here than a downside.â€Â
Dipan Mehta’s Disclosure:
It is safe to assume that my clients and I may be interested in the stocks/sectors discussed today.
Devangshu Dutta’s General Disclosure:
It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.
Source : MoneyControl
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