Bullish on these two sectors: Mahantesh Sabarad, SBI Cap Securities

Talking to ET Now, Mahantesh Sabarad, Head-Retail Research, SBI Cap Securities, says betting on PSU banks and consumer discretionary spaces.

Edited excerpts:

Would you give a bull call on ONGC primarily on account of the crude trade?

No, not necessarily because you never know where the crude trade will really end and there is also the elephant in the room in the form of subsidies. Thus far, we know that the current government is actually staying away from subsidies but if fiscal arithmetic is going to worsen there is going to be a stimulus provided and therefore if you are going to have lower fuel prices this would mean that the government may have to sort of shell out certain subsidies.

If ONGC ends up paying that kind of subsidy that is an outside risk that we perceive. Ao ONGC is not the stock to fall back on just merely because you have rising crude prices. It is a little problematic if you notice that over a period of time, the business model is quite rigid and there is virtually no growth in production of crude oil. There is no expansion into newer territories in terms of oil blocks abroad or even in India so we would generally stay away from ONGC.

What are the sectors you are bullish about?
Stock specific what we really are following is this BFSI space that is the banking space as well as the NBFC space. We think there is a lot more action that is going to happen in that space. There is a recapitalisation that is going to happen. Particularly for PSU banks, NPA resolution is round the corner. There will be huge divestment of non-core assets held by a lot of banks and banking groups so that is going to aid some bit in terms of generation of useful book value or addition to the book value. There is going to be credit recovery as well.

The second space that we are still sort of bullish about is the consumer discretionary space which includes automobiles, which includes household appliances and we think there is going to be substantial growth to be had in terms of volumes out there. GST is obviously is beneficial and going to aid margin expansion out there. These are the sectors that we would really look at but a word of caution here some of these companies will have large FII holdings so generally it is better avoided if you have large FII holding kind of stocks.