FII sentiment on India still continues to be very negative: Radhika Gupta, Forefront Capital Management

In an interview with ET Now, Radhika Gupta, Director, Forefront Capital Management, talks about the market. Excerpts:

ET Now: What would you attribute the kind of upmove that we have seen in the month of June to? Would it purely be on technical factors, and do you expect this movement to sustain for the month of July?

Radhika Gupta: The movement is partly because of technical factors -- the fact that we had a very sharp cut -- and partly because of fundamental factors, with some respite coming out of the European Summit and positivity about the PM taking over as FM. Potential implications of things like GAAR are also being seen as a very big positive. As to whether the upmove will sustain, it is really unclear as of now because all the policy talks have to actually translate into action. Also, corporate earnings depend on how July pans out in terms of numbers.

ET Now: So if you look at the Q1 tax payments, which weren’t the best, does that give you the impression that may be Q1 corporate performance is not going to be as good as may be people may have expected earlier?

Radhika Gupta: I do not think the Q1 corporate performance is going to be good by any measure. Q4 was just okay, and there were a couple of large names that disappointed, while others like SBI were just about okay. Looking at the tax numbers for Q1, it is likely to be a weak quarter... particularly for guys who have taken a large debt burden on their books, including some capital goods majors and some infra majors. From the looks of it, it is going to be another tough quarter of earnings.

ET Now: What do you think the impact will be of the monsoon, which has been below deficit levels?

Radhika Gupta: Before taking a call on the monsoon, we need to see how July pans out. It is a little early to make a sentiment as far as June goes. However, if it is a tough monsoon and things continue status quo in July, you will see continued pressure on food inflation -- which could be very worrisome. The RBI has already made it pretty clear about not doing any rate cut, till the inflation situation improves.

ET Now: So the full impact of a weak monsoon -- if ever it will be that -- has not yet played out, but even now would you be a little cautious on some of the counters that are very rural focused? If we picked out a Hero MotoCorp or some of the FMCG counters, would you be a little cautious on those counters?

Radhika Gupta: It is actually very stock specific. For instance, the amount of rural dependence that Hero MotoCorp has is pretty limited. For some of the agricultural names, yes, I would be a little bit wary. That being said, if you look at two years ago, we had a pretty tough monsoon, but some of these names sailed through pretty well.

ET Now: The general view right now is that most of the stocks which are very dependent on government action and policy action should be avoided right now. Would you concur with that view?

Radhika Gupta: That is a tough view to take because there are a number of sectors that are very dependent on government action -- you have telecom, you have financials to a certain extent -- and those are the stocks where the valuations are very attractive. If you take the example of banking and financials, since they are very dependent on government and RBI action, they have fallen substantially. So there are trading at very good valuation numbers. Hence, it is a little bit of a tough stance to take.