ET NowIn a chat with ET Now, P Phani Sekhar, Fund Manager-PMS, Angel Broking, shares his market outlook. Excerpts:
ET Now: We saw quite a bit of conviction coming in, but do you think that the underlying momentum of the market remains strong and what do you think is going to be the next big trigger? Could it possibly be the RBI policy or even the way the earnings season is panning out?
P Phani Sekhar: I broadly agree with the points made. Even though the market closed at an all-time high, there is not enough confidence that is being inspired. The reason for that is 30% weight occupied by banking, which is really struggling, whether you talk about private banks or public sector banks, although private happened to be better than public sector banks.
IT, which is something that we have been recommending aggressively to our investors, has started doing better because of the quality aspect and the valuations being relatively more attractive. Since banking with the 30% weight is really struggling and if you actually analyse the private sector bank results, there are three things that are happening. Credit growth is not going anywhere, fee income which is an indicator of the robustness of corporate activity is markedly down for many of the private banks and the asset quality is not improving. In fact, in many cases it is where it was one year back or in some cases it has deteriorated.
These three factors are contrary to the popular assumption that many investors have made that things will improve dramatically which led to the re-rating of the market. Once these basic assumptions are being called into question, the market will naturally struggle at these levels.
ET Now: For the moment, which is the best large cap stock one should buy where you think a 15-20% upside is quite reasonable in the next six to eight months?
P Phani Sekhar: Large cap IT seems a safe place and within that I am pretty positive on Wipro because along with Infosys it was going through its business transition process and that transition seems to be bearing fruit.
There are a lot of low-hanging productivity fruits that are available for Wipro which was the case with Infosys. So I guess things will improve out there over the next three to four quarters, and 650 to 660 something is quite possible over the next quarter.
ET Now: We saw quite a bit of conviction coming in, but do you think that the underlying momentum of the market remains strong and what do you think is going to be the next big trigger? Could it possibly be the RBI policy or even the way the earnings season is panning out?
P Phani Sekhar: I broadly agree with the points made. Even though the market closed at an all-time high, there is not enough confidence that is being inspired. The reason for that is 30% weight occupied by banking, which is really struggling, whether you talk about private banks or public sector banks, although private happened to be better than public sector banks.
IT, which is something that we have been recommending aggressively to our investors, has started doing better because of the quality aspect and the valuations being relatively more attractive. Since banking with the 30% weight is really struggling and if you actually analyse the private sector bank results, there are three things that are happening. Credit growth is not going anywhere, fee income which is an indicator of the robustness of corporate activity is markedly down for many of the private banks and the asset quality is not improving. In fact, in many cases it is where it was one year back or in some cases it has deteriorated.
These three factors are contrary to the popular assumption that many investors have made that things will improve dramatically which led to the re-rating of the market. Once these basic assumptions are being called into question, the market will naturally struggle at these levels.
ET Now: For the moment, which is the best large cap stock one should buy where you think a 15-20% upside is quite reasonable in the next six to eight months?
P Phani Sekhar: Large cap IT seems a safe place and within that I am pretty positive on Wipro because along with Infosys it was going through its business transition process and that transition seems to be bearing fruit.
There are a lot of low-hanging productivity fruits that are available for Wipro which was the case with Infosys. So I guess things will improve out there over the next three to four quarters, and 650 to 660 something is quite possible over the next quarter.
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