Banks will have to lead Nifty surge to 8000: Dipan Mehta, BSE & NSE

In a chat with ET Now, Dipan Mehta, Member, BSE & NSE, says in case of a rate cut, interest rate sensitive sectors which will benefit include automobiles and real estate


ET Now: 8000 on Nifty! Why are you optimistic? I thought global concerns are not over yet?

Dipan Mehta: It is good that there is no consensus and that gives confidence that may be the markets could move up because whenever there is consensus, the market tends to move on the opposite direction. Three factors are responsible for our optimism: a) the possibility of a cut by the Reserve Bank of India; b) favourable monsoon trends. It would give a big boost to rural spending; c) global markets seem to have settled down -- be it the commodity markets or the Chinese markets or the US markets. Once we are done with this round of meeting of the various central bankers -- it is over in Japan and Europe and US we will come to know later tonight. The RBI meet is in April. So once we are done with this round of meeting of the central banks, markets will stabilise globally and that always is very positive for India because then you would have the expectation of a risk off trade which will be very beneficial for India. That way, more and more foreign investors could come into India and that is always positive for our markets.

ET Now: So what is going to lead us all the way up to 8000? Will it be one individual sector as has been the case from the budget up until now? Where have you seen leadership from banks generally and in particular from PSBs? Do you think it is going to be an across the sector, across the board kind of move?

Dipan Mehta: Banks will have to lead. They have the highest weightage in the Sensex and the Nifty and the way the private sector banks with their market capitalisations are reaching the levels, they should be the leaders going forward and an RBI cut in interest rates will certainly benefit the banking sector. Some other interest rate sensitive sectors which will benefit like automobiles and real estate. Overall, consumer demand may also pick up. These are the broad sectors which would do well domestically. There is pharma also but there are a few concerns.



ET Now: Has HDFC Ltd, the bluest of the blue chip company, lost its sheen?

Dipan Mehta: Growth rates are certainly worrying investors and if you compare the last couple of quarters with other housing finance companies, the growth rates have been on the lower side and valuation still remains quite rich. Not all the valuation of the subsidiaries is being captured. So to that extent, investors are going slightly underweight in HDFC.

ET Now: Eicher Motors it is an expensive stock. Yet it continues to surprise us. Growth is strong and the momentum remains intact?

Dipan Mehta: It is a one-of-its kind stock and the kind of growth rates which the company has achieved and the market which is still available domestically as well as overseas, makes it a very interesting story. Clearly it is a play on rising urban consumption and with the commercial vehicle cycle also picking up, Eicher Motors will be a key beneficiary over there. Having said that, it is a company in which we and our clients have invested as a matter of disclosure. So we remain extremely positive on Eicher Motors over the long term.

ET Now: What is your position when it comes to the pure passenger vehicle segment? In Tata Motors, it seems the China concerns are ebbing off and even the domestic vertical is coming up with a new battery of passenger vehicles and extremely competitive at that. We have all heard how well the new Breeza is doing in the market already. The launch has been extremely well received by the customers and when it comes to Maruti, how would you pick between Maruti and Tata Motors? Or would it be a 50-50 weightage to both?

Dipan Mehta: Both stocks have their merit. While Tata Motors benefits from newer models which have come through to JLR and hope that there could be earnings PE multiple rerating on the upward side, in case of Maruti, it is the entire premiumisation strategy which is playing out brilliantly for the company and new models are being very well accepted. In order to maintain their market share, there could be some hits on account of Yen fluctuation and may be marginal increases in raw material cost going forward but by and large these are great long-term stories. Apart from these two, Hero MotoCorp -- which had been outside the radar of investors for a long time -- can be considered now given its excellent performance in the December quarters. The overseas strategy as well as launch of scooters in domestic market are key growth drivers for the company. If monsoons are good and rural demand picks up, then Hero MotoCorp will be a major beneficiary. Having said that, we have investments in all the three companies and so do our clients as a matter of disclosure.

ET Now: I am not asking you for your investment idea on Anuh Pharma. If you were an investor and a stock has fallen 10 per cent on a particular news, the management is clarifying that it is just a 3 per cent impact on top line and bottom line. Would that comfort you if you were an investor?

Dipan Mehta: Absolutely. They should have clarified yesterday itself when this news broke out. These businesses like pharmaceuticals are extremely complex and sometimes the headline news does tend to confuse but as you go deeper, the impact may not be as much as has been noticed. We have seen a similar situation in Cadila as well as Aurobindo Pharma. Whenever there is some USFDA action, immediately the investors or traders look for exit in the stock and when you go down the line and dig a little deeper, the problem is not as much as it turned out to be in the first place. Of course, there are companies with serious issues and those who need to be avoided at all cost but by and large, Indian pharmaceuticals exporters have done a fabulous job in terms of getting approvals for new products and maintaining their plants as completely USFDA compliant.