Investors are really excited about India post election outcome, said Kirti Doshi of Antique Stock Broking. He feels the results of recent government steps will be visible in 6-9 months.
Speaking to CNBC-TV18 on the sidelines of Antique Investor Conference, both Doshi and Dharmesh Dalal, Co-Head, Equities, said the structural changes in the economy are seen at grassroots level and may start reflecting in earnings too in the next 2-3 quarters.
Among sectors Antique is positive on infra, capital goods and autos. It expects financials to continue to lead the market and sees SBI to be the biggest beneficiary of turnaround in economy. The broking firm is bullish on HDFC Bank , ICICI Bank and Canara Bank .
Below is the transcript of Dharmesh Dalal and Kirti Doshi’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What was the pulse of the foreign institutional investors (FIIs) and the corporates when you reached out to them? Is there still enthusiasm for India or do you think this result season is giving you a feeling that we have bought enough, now let us wait for action?
Doshi: When we approached them they were excited after the last election what has come out. They feel that that the time has come, they have started realising this and investing into the businesses plus they have started the act together that in next one year after because whatever the government is putting the effort we will start getting the fruit of that from next six to nine months. So, they all started putting their effort to be ready for the next boom of the economy.
Sonia: Your panel is extremely impressive; you have Dilip Shanghvi of Sun Pharma . Gautam Adani, Ashwin Dani of Asian Paints , Rana Kapoor, etc and the likes of Ashwin Dani don’t speak too much especially to media. What is the sense you are getting about how corporate earnings will pan out from hereon because in this quarter it has not been so impressive?
Dalal: Corporate earnings have not been encouraging but to a larger extent we are interacting with lots of people, we get a sense that structural changes at the grass root levels are happening and it is matter of time and you will see these getting reflected in the numbers as well.
Quite often we lose patience and we would like everything to happen on a quarterly basis but I am sure you will appreciate when it comes to nation building; it is a process which takes time. However, the fillers which I get, the fundamentals, the foundations are being done on a right perspective which will lead to fruits in two to three quarters from now.
Latha: You think the inflection point in earnings will be or improvement in earnings comes in two or three quarters that would be second half FY16?
Latha: What might be the leaders of the rally you think, when you put up a phrase ‘Build India New India’ which were the stocks you had in mind?
Dalal: What I would like to highlight here is first of all the rally which we saw in 2014 was largely led by counters which did not have impact on the economy to a large extent except for automobile, IT and pharma which led the rally were all dominated more by earnings abroad.
Considering the fact that the economy now is at a stage where you will see things improving. I would just like to highlight here, we have seen in India the cycles of business which rotates after every six years and what we see is that whenever you see a growth of four years below a trendline or above the trendline it moves up on the opposite direction once being sluggish over say three to four years.
We have seen this in the last four years cycle where the gross domestic product (GDP) growth was below the 5.3 percent mark and we as a house believe that we are at the cusp of witnessing this change where the trendline could be breaking up on the upward direction. Led to it the government action will fuel more which will lead to more demand and numbers getting shown up in two or three quarters from now.
Sonia: What are you advising clients attending your conference in terms of sector wise positioning now?
Doshi: Sector wise I think financial will always lead because any big movement in the economy, financial will be the biggest beneficiary. Then there is interest, people have now started revising in infrastructure also and capital goods plus automobiles which is also a part of the economy. Once this entire movement of coal mining, iron ore mining and all that will start will lead to the even the demand of the heavy commercial vehicle and all. So, led by financial, then infra and your automobile which will be the sector which we will prefer to recommend heavily to out clients.
Latha: When you say financial will you buy PSU banks, we saw that deep gashes coming in Punjab National Bank (PNB), Bank of Baroda (BoB), some of the biggest banks in the public sector space. Even ICICI Bank was not spared, what will you buy or what will you advice buying?
Doshi: I think mix of both. In the large public sector banks, State Bank India (SBI) will be the biggest beneficiary of the economy turning around and NPA coming down once this power and coal related problems get slowly addressed and all this will reflect into reducing in their NPA and may be because of even the G-Sec coming down will help them for their debt portfolio also. So, SBI will be the biggest beneficiary followed by Canara Bank which has shown little better result also.
No matter, everybody knows that the largest bank that is HDFC Bank and ICICI Bank, they are doing well. May be because of some issues with some of the infra and power related issues, ICICI Bank could have provided some NPAs but going forward that also will be addressed in next one or two quarters once the mining and iron related issue will get over. I think that also will start reflecting into lowering down the NPA and their performance will also improve from here.