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Bouyant macros aiding direction, equities underowned: Emkay

Sachin Shah, Fund Manager, Emkay Invst Managers gives an overview of the market while advising investors what to expect after taking into account the ground situation.

Anuj: How do you play the market now because quite clearly just when it looks like the market is getting a bit tired or is getting fatigued it keeps getting new triggers, the latest example being today’s rate cut. What is your advice to traders and investors for this market now?

A: Today was a big surprise and what it also means is that the RBI has given a thumbs up to the Union Budget presented by the Finance Minister just last week. So, I think that is a very good thing that we as an economy, as country we are moving in a right direction. I think the combination of the finance ministry and the RBI, the way it is moving ahead, it is very strong. So, directionally we are creating a very strong base for the economy.

From investors perspective and we have seen last five years where just before 2013 the equity markets had done very bad and because of that the under-ownership in equities is still very high. So, from that perspective on the next three to four years, the good time still is very much in as far as the equity investors are concerned.

On the very short-term I tend to agree with you little bit because if you see the Q3 results, they were not very encouraging. We have seen some kind of consumption slowdown or rather subdued demand. Even the private capex is not happening in a hurry. So, this rate cut and with the kind of allocation that we have seen from the Budget on the infrastructure side all that will happen and it will take some time before it will start showing down into numbers.

Of course the macro factors are still too much in favour of the Indian economy that is where we are seeing this undertone buoyancy. However, there is a possibility that markets may take some bit of breather at this level.

Ekta: Two stocks which are in news are Sun Pharma Advanced Research Company (SPARC) as well as  Sun Pharma – SPARC the research arm of Sun Pharma and that is on account of an new drug application (NDA) approval that SPARC has received from the USFDA for an antiepileptic drug and it is from the Halol facility of Sun Pharma. What did you make of that news and if you have studied it, any sort of valuation you could ascribe to SPARC as well?

A: Sun Pharma clearly, there was a bit of an overhang of the Halol facility with USFDA concerns. With this news if you read between the lines it seems that they have sorted out their issues with USFDA and the Halol facility will be pretty much operational and doing well for the US exports.

On SPARC, it is very approval based and the exact opportunity I am still not very sure of so I would not like to comment at this point in time.

Anuj: Any stocks that you would want to recommend at current price which you think still looks good?

A: I clearly believe that the way the power sector, a lot of reforms are happening, some of the power stocks should do very well. Couple of stocks that we own in our portfolio and which are our top picks one of them is Power Grid . We clearly like that business and with the interest rate cut I think there is another big benefit because it is a fixed RoE business.

We have seen that whenever the interest rates drop, the utilities with fixed RoEs do very well. Power Grid we are also seeing that there should be a 15-20 percent earnings growth for the next two or three years. So, that is one stock which clearly still looks very good.


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