Metal stocks could rally for sometime: Keynote Capital

According to Nitin Khandkar, Head of Research, Keynote Capital, metal prices and stocks could rally for sometime.

Let's translate the JSW Steel into what it means for the metal sector. JSW Steel news has valued JSW Steel at 20 times which is much more than what the benchmark PE for metal sector is, what is to your mind is the benchmark PE multiple for metals and where do you think the PE multiple stabilise?

I would say in the range of eight to 10 times is my benchmark.

So broadly speaking how would you see metal stocks moving from these levels, metal has sceptically has come down significantly from the days?

Well the metal prices as you would have been tracking they have corrected big time last year and they have on uptick again so whatever rise we are seeing now is mainly kind of tracking the metal prices. So as long as China remains a mute kind of spectator we could see other rally in the metal prices and stocks could rally for sometime.

And aside steel what else you are you telling your clients to buy?

See we are bullish on infrastructure, we are bullish on education, we are bullish on food related sectors like sugar, tea, and even rice for the matter.

How much downside you see in the market in the foreseeable near future?

See we expect the earnings growth to kind of slowdown in FY11..

To slow down because the general sense is that earnings for FY11 would be about Rs 1000 plus?

Yes, but what we had looked at for (3:23) or something in the range of Rs 900 for the Sensex and what we are looking for the current year FY10 is around Rs 1100. So we would be looking at 20% plus growth in the current year but in FY11 we expect it to slowdown to Rs 1250 which is around 13% growth or 14% growth.

So you think that markets at these levels they need to come down and perhaps the upside thing is to be kept?

I would say, yes, the upside is kept to around 10% from the current levels because market is still finding direction we are seeing certain dip in volumes couple of days, the markets were not so sure of what trend they would look at.