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Autos, banking, financials to lead eco in 2015: C Jayaram

In an interview to CNBC-TV18, C Jayaram of Kotak Mahindra Bank  shared their outlook on various stock specific bets and where the markets are headed hereon.

According to him, even as global risks advance domestic risks, domestic market will start to look up again post FIIs return and once the Budget kicks off. Furthermore, although earnings are looking better, a lot of it is dependant on the interest rates.

If the economy gets into the next gear, the leading indicators would include autos, banking and financials, he adds.

Heading into the next calendar year, he feels GST rollout will be one of the most potential gains of the year.

Below is the verbatim transcript of the interview:

Q: From a retail investors point of view, the million dollar question is that is it a good time to enter now? We had a 7-8 percent correction, the market has stabilised today but from a medium to long-term perspective would this be a good time to enter?

A: From a retail investors perspective you shouldn’t worry that much about exact entry point. However, at a broad level the belief is that we are still in a bull market. There has been some temporary sort of correction maybe for the rest of the year, the month of December with very little action from FIIs it is likely to consolidate around these levels. However, once the next set of triggers emerge which should hopefully be around the Budget time if not earlier, you will start to see the markets look up again.

Q: In that case do you expect in the month of January once FIIs are back from the vacation a bit of pre-Budget rally to play out? We will have earnings seasons as well in January, do you expect a pre-Budget rally, an earnings rally and the markets to go back to all time highs; is that a possibility?

A: It is a clear possibility because the belief at least for this point of time is that this government will make the Budget statement of their intention and in a sense try to address some of the complains which have been that there hasn’t been too much movement forward on the reforms path in the last few months. So, if that is the expectation then prior to that there will be some rally, some build up. So, my sense is that the early month of the year 2015 should be good for the markets.

Q: In that case, what would your portfolio look like from hereon – even from balanced portfolio point of view which sectors would have slightly overweight positions?

A: The belief is that if the economy has to get into the next year, you have what typically are referred to as lead indicators of the economy and you classically have sectors like auto, auto ancillaries, banking, financials as sort of typically leading the sort of rallies. So, much of that I agree has already happened during the current year but I would expect a little more of the same at least in the early part of 2015.

Q: Banks is interesting because we have seen quite a bit of rally even in the fall except for one day the banks were holding out. Do you have any preference in terms of private versus PSU banks because there is a bit of contra play right now about the PSU banks for last few days? Would you play that or would you be rather staying with the more comfortable private banks?

A: There is always a contra play in the context of PSU banks but it is more of a philosophical view that you have to take whether many of the problems which PSU banks have are factored into their price, whether are you talking about NPL, whether you are talking about their ability to grow quicker. There are some people who like that sort of statement and say that most of it is already seen in the price and you will start to see that. Personally I prefer to broadly stay with the private banking sector because there is a little more comfort with the balance sheets and probably less chances of surprises in that pack.

Q: What about metals, which has seen quite a bit of recovery today?

A: Commodities, overall I wouldn’t be that optimistic in the current scenario and to that extent I am not so sure that one would be overweight that sector.

Q: What do you asses could be the potential for gains in 2015? You spoke of some triggers, the next set of triggers in the Budget next year what is it that you are specifically expecting will be articulated?

A: Two parts to that – one, specifically in the Budget and sometimes we make too much of the Budget itself but I think around that period pre-Budget, post Budget – what expectations are and what would trigger some fairly significant moves would be if some of the bills which the government currently seems to be taking fairly seriously actually reach a culmination.

The biggest example would be GST. GST would be a single biggest example in my opinion. The Finance Minister has worked very hard in a sense going over board to bring all the states under his broad umbrella and if that can now pass on to actually getting that two third majority in the Rajya Sabha and actually going through to me that would be the single biggest trigger.

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