ET NowIn a chat with ET Now, Devesh Kumar, managing director and country head, CIMB Securities (India) Pvt. Ltd, shares his views on the Infosys results and some other sectors. Excerpts:
ET Now: Infosys seemed to have changed the sentiment by kicking off the earnings season on a positive note. Do you think that the worst is over for the IT major?
Devesh Kumar: Yes. The initiatives Infosys took are working now. It seems that the change in the strategy is working, the adjustment period is over, and the worst is over for the IT firm.
ET Now: Hindustan Unilever (HUL) and Asian Paints are two star performers this week. These two stocks helped the BSE FMCG index remain among the two sectoral indices that gained smartly this week. What is driving the sector?
Devesh Kumar: As far as FMCG sector is concerned, the macroeconomic environment is becoming favourable. As you look forward, with inflation under control and oil prices coming down, it seems that the money in hand of consumers is going to rise.
The sector will continue to do well. In fact, many a time what happens is, when valuation-wise the sector looks overvalued, investors tend to make a switch. But at current juncture, the earnings of this sector looks firm. Therefore, we believe that this sector will not disappoint this year.
Although for bigger gains, there could be some other opportunities where investors are quite negative. Investors have not got yet convinced that things are changing. There would be areas out there where you may get better returns.
ET Now: Let us talk about the oil sector. What is your stance on ONGC particularly? The government seems to be working and trying to improve valuations by reworking the subsidy formula. What is your call on that stock?
Devesh Kumar: Certainly. We see the outlook for the oil & gas segment turning positive. Other than refining companies, which may see some pressure on the refining margins front, the upstream and oil marketing companies (OMCs) will be benefited.
The biggest positive will be the improvement in the working capital cycle of OMCS. Hence, these companies may do well. At present, the government has an opportunity to address all the problems caused by subsidy. We feel that in this sector, refining companies are the ones where definitely there is a problem, but otherwise things look up.
ET Now: Which are the sectors you are bullish on for 2015?
Devesh Kumar: We feel that the financial services sector is one where there could be a lot of upside. As far as the PSU banks are concerned, their recapitalisation will be done, various management issues will be addressed, and governance part would be improve, which may help investors get superior return from PSU banks.
There will be concerns such as at what price recapitalisation takes place. But if you look at the overall impact, then the fact is that the balance sheets of PSU banks are likely to improve because of the bottoming out of non-performign assets (NPAs) and recapitalisation.
Financial inclusion approach will also create a lot of NBFCs and payment banks. So overall, we feel that there is good opportunity.
Other than this, we feel that construction material sector could see an upside because once these road construction contracts are awarded and activity begins, there will be demand for cement, there will be demand for steel and the overall demand will pick up.
So, on the materials side, one may make good money. But picking the right stocks will be of key importance this year and that is where one has to focus on. Here, one has to apply a lot of judgment to pick the right bets
ET Now: Infosys seemed to have changed the sentiment by kicking off the earnings season on a positive note. Do you think that the worst is over for the IT major?
Devesh Kumar: Yes. The initiatives Infosys took are working now. It seems that the change in the strategy is working, the adjustment period is over, and the worst is over for the IT firm.
ET Now: Hindustan Unilever (HUL) and Asian Paints are two star performers this week. These two stocks helped the BSE FMCG index remain among the two sectoral indices that gained smartly this week. What is driving the sector?
Devesh Kumar: As far as FMCG sector is concerned, the macroeconomic environment is becoming favourable. As you look forward, with inflation under control and oil prices coming down, it seems that the money in hand of consumers is going to rise.
The sector will continue to do well. In fact, many a time what happens is, when valuation-wise the sector looks overvalued, investors tend to make a switch. But at current juncture, the earnings of this sector looks firm. Therefore, we believe that this sector will not disappoint this year.
Although for bigger gains, there could be some other opportunities where investors are quite negative. Investors have not got yet convinced that things are changing. There would be areas out there where you may get better returns.
ET Now: Let us talk about the oil sector. What is your stance on ONGC particularly? The government seems to be working and trying to improve valuations by reworking the subsidy formula. What is your call on that stock?
Devesh Kumar: Certainly. We see the outlook for the oil & gas segment turning positive. Other than refining companies, which may see some pressure on the refining margins front, the upstream and oil marketing companies (OMCs) will be benefited.
The biggest positive will be the improvement in the working capital cycle of OMCS. Hence, these companies may do well. At present, the government has an opportunity to address all the problems caused by subsidy. We feel that in this sector, refining companies are the ones where definitely there is a problem, but otherwise things look up.
ET Now: Which are the sectors you are bullish on for 2015?
Devesh Kumar: We feel that the financial services sector is one where there could be a lot of upside. As far as the PSU banks are concerned, their recapitalisation will be done, various management issues will be addressed, and governance part would be improve, which may help investors get superior return from PSU banks.
There will be concerns such as at what price recapitalisation takes place. But if you look at the overall impact, then the fact is that the balance sheets of PSU banks are likely to improve because of the bottoming out of non-performign assets (NPAs) and recapitalisation.
Financial inclusion approach will also create a lot of NBFCs and payment banks. So overall, we feel that there is good opportunity.
Other than this, we feel that construction material sector could see an upside because once these road construction contracts are awarded and activity begins, there will be demand for cement, there will be demand for steel and the overall demand will pick up.
So, on the materials side, one may make good money. But picking the right stocks will be of key importance this year and that is where one has to focus on. Here, one has to apply a lot of judgment to pick the right bets
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