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PSU banks may gain in 2015, ranged mkt till Budget: Dalton

The market is unlikely to fall much ahead of the Budget, says UR Bhatt of Dalton Capital Advisors. In an interview to CNBC-TV18’s Latha Venkatesh and Sonia Shenoy, he says the Nifty could move in a range of 7900-8300 till Budget.

Bhatt sees 7900 as a strong support level for the Nifty. He expects shares of cement and engineering companies to be good buying opportunities post-Budget, as new projects take shape.

He expects consolidation in the PSU banks space and feels these banks could be the surprise winners of 2015.

Bhatt feels the RBI may wait for the currency to stabilise before cutting interest rates. He sees spectrum auction as an important trigger in the telecom sector, and expects the next one year to be an uncertain one for telecom companies because of regulatory disruptions. His advice to clients for 2015 is to invest 50 percent in equities and the rest in debt.

Bhatt sees long term debt doing well in 2015.

Also read: Mkt headed for good times in 2015 but for volatility, say pros

Below is the transcript of UR Bhat’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: What is it looking like? Do you think that having done 35 percent gain in one year, we will be more like the US markets were in 2014 after a gigantic 2013, they did only about 15-13 percent in 2014? Is that likely to be the trend in 2015 or can we have two good years on the trot?

A: We can have two good years but probably not as good as 2014. Everything depends on some movement forward on the policy front. That probably would get known in the budget. Budget is going to be very big determinant because for last budget there was not enough time for the government to put its stamp on it but this Budget has to be dramatically different. All that they said they would do has to come out in the Budget. So I think Budget is a very big event. If that is something that suits the markets’ orientation, 2015 could be a reasonably good year.

Latha: One trend of the government is apparently becoming clear. There is not that much privatisation and marketisation, they have called a sitting of PSU bankers, no one is talking privatisation as well in the railways, the prime minister has clearly said that he is not looking at privatisation, it is efficiency related gains that they maybe looking at and of course the market can always cyclically move. Do you think even without any dramatic labour or privatisation kind of moves, which the markets could be expecting, there can be a big cyclical upturn with a mix of good governance and a mix of rate cuts?

A: Absolutely. That is quite possible because privatisation is not the only prescription that is there.

Latha: But they are even not talking about big labour reforms, there is no dramatic reform that is being spoken about?

A: Nothing dramatic but Rajasthan model would get transplanted elsewhere but if you see his record in Gujarat also, he has turnaround quite a lot of the PSU companies through better management, better efficiency, better direction, more freedom. So more latitude for the management. I think that is probably the model that would get translated even on the national scale. But I think the market is concerned about efficiency, about capital productivity and if that comes about even in the public sector that the market will draw out.

Sonia: What is the range for the Nifty from now until the Budget for the next couple of months?

A: I don’t think the market will fall dramatically. The last fall was just sort of below 8,000 but I think 7,900 or thereabouts should be a very good support but the run up to the Budget there might be a lot of expectations and market would probably grow either to the recent highs but that is quite a wide range but I think the run up will probably happen in the expectations to the Budget sometime late January early February but till then there is nothing much to take the market up dramatically. The market would be till about third week of January it should be around these levels, 8,000-8,200-8,300 that would be the region. That would be the range till about third week of January.

Sonia: This year in 2014, if you had put your money in two spaces, private banks and in autos, you would have made the most amount of returns, what do you think could be the big sectoral news in 2015?

A: 2015 if the government gets it right in the public sector banks, it would be a big surprise. It may not happen immediately but the next couple of quarters if they address the issues of capital there, the NPAs just get at least the top level functional, that could be a big game changer. So public sector banks is one.

Plus also if they turnaround the economy because as you see the credit growth has been dismal, it is worst in probably 15-16 years or something which means that there is not so much of a new investments happening. So first of all, they should get the stalled projects moving and then only people will start thinking in terms of new projects. So they would probably be a lull for about a year when the new projects are just in the drawing board and implementation should take time. So with the hope that new projects will start taking shape probably post the budget, I think things like cement, engineering, they will also start doing well.

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