ET NowIn a chat with ET Now, Dipen Shah, Senior Vice President-Private Client Group Research of Kotak Securities, shares his views on the market and some stocks. Excerpts:
ET Now: Do you believe that we are going to see a period of range-bound consolidation in the near term? What are the cues investors should be looking out for?
Dipen Shah: In the near to medium term, markets will be dictated by events such as monsoon and geopolitical tensions which are not abating, etc. In addition to this, we will be looking at the quarterly results very closely - at least in the near term over the next 15 to 20 days. These are the things that will guide the markets.
As far as the quarterly results are concerned, we have seen in the last one week or so that they have been slightly lower than expectations. That is also one of the reasons we have seen sentiment being impacted across the markets.
We will be positive over the medium to long term because we expect growth to improve and also, six to nine months down the line, valuations will start looking more attractive, which can attract further funds.
Hence, in the immediate term, markets will remain range bound and may oscillate in a narrow band because of factors mentioned, and we expect the markets to trend higher over the medium to long term.
ET Now: HUL clearly stood out as an outperformer, posting a very strong set of numbers which exceeded all market expectations by a wide margin. Do you think it is an indication their period of underperformance is over and it is time to start adding chips to quality consumption staples or would you further wait for a quarter or two to see this earnings strength to really pick up?
Dipen Shah: As far as the consumption theme is concerned, HUL delivered a good set of numbers, but when we heard from the management, they have clearly indicated that the sector as a whole has not seen any significant demand improvement and probably it has gained market share in a sector where the demand or volume growth is still lacklustre as a whole.
Thus, yes, probably this was a good quarter. We beat estimates for Hindustan Lever, but if we have to look at the sector as a whole, we believe that it will take one or two quarters more for the demand to pick up for the sector and that is when we can actually start having a more positive view on the sector.
It is not that companies are not decent enough, but the valuations are not very attractive at this point of time and that is the main reason we are currently not recommending too many stocks in the consumption theme. The only stock which we like as of now is Dabur, which is trading at relatively better valuations.
ET Now: Apart from consumer companies, what are the other picks that you would like to share with us today?
Dipen Shah: According to us, there are several midcap stocks - apart from the large caps - which are still looking decent at this point in time, say stocks like Engineers India. We have got Petronet LNG also from the oil and gas space, which is still looking good. We have got Kansai Nerolac Paints which came up with results just a couple of days back and these were decent numbers. We have got stocks like Voltas, which we think is still a good bet at current levels.
These are various stocks in the domestic side. On the export side or maybe on the IT side, we like KPIT Cummins and Geometric which have declared numbers and which we think should do very well over the next couple of quarters.
ET Now: Do you believe that we are going to see a period of range-bound consolidation in the near term? What are the cues investors should be looking out for?
Dipen Shah: In the near to medium term, markets will be dictated by events such as monsoon and geopolitical tensions which are not abating, etc. In addition to this, we will be looking at the quarterly results very closely - at least in the near term over the next 15 to 20 days. These are the things that will guide the markets.
As far as the quarterly results are concerned, we have seen in the last one week or so that they have been slightly lower than expectations. That is also one of the reasons we have seen sentiment being impacted across the markets.
We will be positive over the medium to long term because we expect growth to improve and also, six to nine months down the line, valuations will start looking more attractive, which can attract further funds.
Hence, in the immediate term, markets will remain range bound and may oscillate in a narrow band because of factors mentioned, and we expect the markets to trend higher over the medium to long term.
ET Now: HUL clearly stood out as an outperformer, posting a very strong set of numbers which exceeded all market expectations by a wide margin. Do you think it is an indication their period of underperformance is over and it is time to start adding chips to quality consumption staples or would you further wait for a quarter or two to see this earnings strength to really pick up?
Dipen Shah: As far as the consumption theme is concerned, HUL delivered a good set of numbers, but when we heard from the management, they have clearly indicated that the sector as a whole has not seen any significant demand improvement and probably it has gained market share in a sector where the demand or volume growth is still lacklustre as a whole.
Thus, yes, probably this was a good quarter. We beat estimates for Hindustan Lever, but if we have to look at the sector as a whole, we believe that it will take one or two quarters more for the demand to pick up for the sector and that is when we can actually start having a more positive view on the sector.
It is not that companies are not decent enough, but the valuations are not very attractive at this point of time and that is the main reason we are currently not recommending too many stocks in the consumption theme. The only stock which we like as of now is Dabur, which is trading at relatively better valuations.
ET Now: Apart from consumer companies, what are the other picks that you would like to share with us today?
Dipen Shah: According to us, there are several midcap stocks - apart from the large caps - which are still looking decent at this point in time, say stocks like Engineers India. We have got Petronet LNG also from the oil and gas space, which is still looking good. We have got Kansai Nerolac Paints which came up with results just a couple of days back and these were decent numbers. We have got stocks like Voltas, which we think is still a good bet at current levels.
These are various stocks in the domestic side. On the export side or maybe on the IT side, we like KPIT Cummins and Geometric which have declared numbers and which we think should do very well over the next couple of quarters.
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