We will be closer to 5500 rather than 4600 by the year-end: Prime Wealth Management

ET Now spoke to TS Anantakrishnan, Head, Prime Wealth Management.


What's the sense really on the index because you are saying that we perhaps might cross 5500 before the year runs out and you are also talking about how the dollar index may show reversal? How will these two work in tandem? What will drive the market?

The way we look at it is the momentum is strong at this point. We have seen valuation per se is not cheap. At this point, we are fairly valued and just like last time, the dollar index itself is at its low at this time and continues to trend down lower, though you may have bouts of some resilience as far as the dollar goes but momentum at least till year-end from what we have seen from the rollovers plus from various stock movements, we are seeing that momentum is strong and we feel that we will be closer to 5500 rather than closer to 4600 by the yearend, that's our take but from valuation standpoint, it is a stock picker's market rather than macro market.

You seem to be a bit bullish on the sugar pack, would you recommend buying them at the current levels, Renuka Sugars and Balrampur Chini?

Yeah, I mean we were extremely bullish as far as the sugar sector goes. From a macro standpoint, there is a supply-demand mismatch. You are talking about prices, which have gone up to 32; in some markets up to Rs. 35 per kg barring a few issues in terms of FRP, which is kind of being an overhang on the overall sugar sector stocks. We see there is no new supply, which is coming in, so we see the prices going further up. From an earnings standpoint, Renuka, we think would do Rs. 30 EPS for next year; Balrampur would be closer to 20.

So from that standpoint, we have a target price of nearly close to 194 Balrampur and about 300 for Renuka, so we are extremely bullish and any dip in sugar prices would be a good buying opportunity.

What are you hearing on Aban Offshore?

I mean I think from the standpoint, the QIP that they done would help in their whole de-leveraging process. They had these bonds, which were coming due, so that would help in the process of paying off that. Overall the rig market has picked up.

Just a couple of days ago, Jindal Drilling also contracting, so there is a pick up in the rig market. They have about three more rigs, which are yet to be leased and I think that would be fairly done soon. So from that perspective, we think Aban is a great buy at these levels. We see an EPS of about 300 for the next fiscal and so from that standpoint, we think the stock can trade at least eight times, which will be 2400, that is the target that we have on the stock.

It is interesting that you are bearish on IT, Infosys and HCL Technology and the telecom space. IT was a concern out there right now given that the environment is changing for the majors and telecom, would you be a contrarian there because a lot of institutions actually accumulating telecom stocks given the long-term story?

From an IT perspective, I think there has been a marginal improvement in terms of the budgets per se and there is more of the discretionary spend, which may potentially come this year but our take is that has already been factored. You have the likes of Infosys who are trading more than 20 times forward earnings, so I see more the opportunity perhaps in the mid-cap IT if you really want to play but we have a neutral stance given the move that IT has already given and plus the headwinds in terms of we think the Indian rupee would appreciate, so that would effectively be a cap in terms of the earnings strategy that we see from the IT majors. As far as telecom goes, I think overall our take is Bharti.

There will be only about two or three players left and it will take about two years for this whole consolidation to happen. Perhaps the government would allow mergers within the same cycle but till then that is allowed, you are going to see a bit of bleeding in the sector. You are seeing the surprise for which is going on, so it has never any good to be a contrarian when there is surprise for which is going on. You would rather wait and see how it pans out before you actually invest in the sector.