Bullish on ITC among largecaps, Tata Elxsi in midcap IT and Eicher Motors in auto, Rahul Shah, Motilal Oswal Financial Services, tells ET Now.
Edited excerpts:
What changed in November that made Nifty rally 800-900 points?
We have seen the dollar. We have seen oil. We have seen bond yields. So all three things put together pushed up the market. It should continue till the time all the macros have been taken care of.
I do not see any reason for the market to correct near term. For more than a month and a half we have not heard anything negative. We have seen the RBI operations — OMOs as well as policy matters being taken up. So they have been in sync with market requirement.
Now the only thing people are questioning is the result of the assembly elections. That is a week ahead. If macros are placed well, I do not think any other things are going to bother the markets much in the near term.
What is the sense that you get in terms of flows? Do you think that FII flows are turning positive?
As I said, if the macros improve, flows can improve. FIIs have been sellers since last six-eight months and we have seen a huge outflow but things have started improving. Obviously, there is some kind of money to be invested at this point of time and a lot of opportunities. In terms of valuations, a lot of stocks look attractive.
We have seen flows coming in. FMCG and tech which are doing well are where they are focusing. There is no reason for FIIs not to put in money as of now.
The IT sector did particularly well this week. TCS was up almost 8-9%. What is your call on that sector?
We have seen a fantastic runup in last one year and all IT stocks have done quite well and obviously they are backed by good numbers that should continue. This quarter, the results are also good for IT. By and large, the management commentary is in line with what they predict. In my view, the IT results were good.
Going forward, I do not think there should be any problem. There will be more conviction in sectors with earnings visibility. The IT pack is least affected by any other noise that we hear other than the marco and political factor. IT will continue to do well. Largecap IT remains a sweet spot still. My view is TCS, Infy amd HCL Tech should all do well, going forward from here also.
Week after week, Airtel or Idea have been coming in the top losers list. This week is not different despite markets doing pretty well. What is your view on the telecom pack? Could you even include Reliance in that list?
I would stay away from this underperforming sector. These two stocks have been underperforming for the last two years. I would avoid Bharti and Idea. Reliance looks interesting and should be give another 15% to 20% return for positional traders.
How important will this RBI meet be?
Whenever RBI comes, there are a lot of questions in peoples mind about what is going to happen next, whether a rate cut can be expected. Inflations are under control, bond yields have cooled off and some action in terms of rate cut can be expected.
The markets have been rallying and in case of a rate cut, we can expect the markets to rally more. It is important for investors and as well as traders to understand what RBI has to say.
What will be your call on the real estate pack? Should one start to look at real estate names selectively?
I would still avoid. There is enough opportunity in the markets in the other sectors rather than playing in sectors which have underperformed for quite some time. In the bull market also, real estate stocks did not perform. I am not so keen on them and I do not recommend any of the real estate stocks to add at this current level.
Any picks for our viewers?
In largecap space, in the FMCG pack, ITC looks very convincing in terms of valuations. A 10% move from here could be a positional trade.
One should look at tech stocks also. Midcap IT has underperformed for quite some time now. Tata Elxsi from that pack looks convincing. In auto space, Eicher Motors is one which has also underperformed. So these are the few ideas which I feel could be good bets at current market levels.
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