With the ruling government now able to head the states that went to poll recently, there is optimism among investors over stability in the political environment and governance going forward, believes Vineet Bhatnagar, MD, PhillipCapital .
With regards to market, he says in a scenario where liquidity is good but there is a bit of uncertainty on interest rates and on how the rupee is likely to behave, the market could trade in a band of 8600 on the downside and 9600-9800 on the higher side in the next 3-6 months.
Speaking about telecom space and Idea-Voda merger, he says consolidation in telecom industry is a good sign, which could help sustain growth for the larger players.
Latha: Nifty at an all time high or very close to that. Does this look sustainable to you?
A: It is sustainable to the extent that there are several uncertainties around the format of the government at the state level. However, it is looking clear now. There is a predominant feeling among the investor community to accelerate as to how stable the political environment will be and the governance structure will be for the next four-five years. I guess that is the reason why there is good amount of optimism now.
Anuj: What is the floor and ceiling for this market for the next three-six months?
A: A lot is to do with the liquidity, as we keep talking about. There is a lag effect in terms of validation of the valuation as far as the earnings are concerned. Everyone is going to keep a close eye on how the quarterly results will come out. There is some sense in terms of how the interest rate cycle or the interest rate movement will be for the rest of the year. There is also some level of understanding about how range bound to stronger rupee could be between now and December. Therefore, looking at all of these into account, I would imagine that the range for Nifty works out to as much as about 8,600 on the downside to even as high as 9,600 to 9,800.
Sonia: We have seen a lot of participation from Reliance Industries, HDFC Bank, Kotak Mahindra Bank in the past but here on where do you see leadership emerge from amongst the heavyweights?
A: I think it has already been demonstrated. Reliance Industries has done well. We have also seen that if the cyclicality of capital goods were to come back then there will be push on names like Larsen and Toubro (L&T). One is also looking at the banking sector with equal amount of optimism and therefore the heavyweights in the private sector and some of the top ones in the public sector undertaking (PSU) could also be the leaders and drivers.
Latha: Between Reliance, HDFC and ITC - that's way we are seeing the money come from FIIs - where is the outperformance coming?
A: I think RIL has already done extremely well. Hereafter there should still be optimism around names like RIL and names like HDFC Bank, ICICI Bank. There could be some amount of rerating that could happen in the IT sector which could propel some good movement behind the heavyweights in the IT. However, fast moving consumer goods (FMCG) whether demonstrated through ITC or other names, could always remain as a company with strong mote, always supporting deep domestic demand remaining robust.
Anuj: What is the call on telecom after the big mega merger between Vodafone and Idea Cellular?
A: The consolidation in this industry which has already demonstrated immense amount of penetration as far as the retail numbers are concerned in the last five-ten years is a good sign. I would imagine that stronger, larger consolidated companies have got better chance at, not only sustainable growth but also product innovation and pricing structure.
(Disclosure: Network 18, which publishes moneycontrol.com, is a part of the Reliance Group.)
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