Positive on markets; Media, Financial Services look good: Quantum Securities

Sanjay Dutt, Director, Quantum Securities feels that while there may be a pullback in the short term, the longer term outlook is still positive. He also feels that there is a considerable amount of money that can be absorbed by forthcoming IPOs as the demand for such paper exists. Read on for the full text of the interview with ET Now:

How would you characterise the current market, on a monthly basis we are getting about billion dollar, one and a half billion dollar plus?
I think there are four important metrics that any investor who has little bit of a longer time frame is looking at the markets and those metrics primarily are fundamentals, technicals, structural and psychology. These are the metrics I look at. In terms of fundamentals and technicals definitely the outlook is positive. The structural outlook for a longer term is also positive. The psychology at this point of time still continues to be sceptical at large where people are saying that the markets have run up quite a bit. So, given the backdrop, you have got three positive marks in terms of fundamental, technical and structural strength of the market, the structural outlook of the market and the psychology being sceptical. I think the momentum continues to be positive, I would continue to remain positive in the markets. Yes, we may have a short-term pullback which may take us down about 3-5% on the indices, but, I think the risk-reward continues to be in favour of being optimistic and bullish in this market.

The last time when we interacted on this forum you were buying media, you were bullish on beta stocks, do you still own them; are you still buying media/beta stocks?
Yes, from a longer time frame I continue to be positive on media and in addition to that I continue to be very positive on financial services. With the talk about insurance, talk about the expansion of banking and the all inclusion of people who are not covered by the financial sector, I see a tremendous run up and I see tremendous new finds coming out of the financial services sector primarily in the NBFC sector besides some of the small cap and midcap banks which would turn out to be quite big over the next 2 to 5 years. So media, financial services continue to be good, yes some of the beta stocks which still have not moved over the last few weeks and are consolidating I think there is an upside there too.

We are speaking about beta spaces; one space in focus clearly is real estate. So while QIP has happened we have heard news about three high profile big ticket IPOs also coming in, would that be an indication that interest is slowly coming back to real estate and would these does merit some kind of look in at current valuations?
See I would not want to buy some of the secondary market stocks of the real estate at this point of time because they have run up quite a bit. If you look at the DLF, Unitech���s and all the others of the business, but, on the whole I am positive on the sector, I am more positive on real estate per se rather than real estate stocks. That���s because I think real estate particularly residential real estate has more or less bottomed out and one is already seeing it up-tick in prices, the demand is starting to look good, both because of the fact that the Indian consumer is not as hurt as the consumer overseas is plus because easy financing has come into the system where housing is quite easy for actual users to get today.

So this would definitely translate to better fundamentals of the company over the next 6 to 12 months, but, in the immediate short term may not be. Extending this argument a little further on the initial offerings, lot of people are little sceptical about too much of new paper coming in and particularly from the real estate side. I would like to draw attention to what is happening in the region - if you look at the entire region including China, Hong Kong etc. there are billions of dollars that have been raised in primary offerings over the last two to three months and 85% to 90% of these offerings had been out of China and Hong Kong and it does not include India anywhere. So we need not worry because even if we look at $2 or $3 billion of offerings which are probably bunched in over the next two to three months, maybe maximum of $4 billion including the real estate companies, there is a huge appetite because as much as about $55 to $60 billion has already gone into new offerings in the region and there is an appetite for more. India has just been about $5-$8 billion probably over the last nine months. So I do not think that you need to worry that too much of papers coming into the market. There is demand for good paper, yes the investors are going to be selective but all this new paper would be absorbed over the next few months.

How does one look at the power space in general and probably even the new paper coming in particular?
I would like to break this in two category of investors, if you are a retail or HNI investor and you are an institutional investor. If you are a retail or an HNI investor, if you want exposure to the power sector for a longer term - not for the short term because the short term you are not going to make too much of money in it - you take a secondary market exposure straightaway.

Go ahead and buy an NTPC, NHPC or a Reliance Power, but, if you are an institutional investor you have no choice because the fact is that you were looking to deploy $100 million-$200 million or minimum $50 million and you cannot do that in the secondary market without really affecting the price. So, therefore you are really left with no choice but to subscribe to the offerings that come in or the QIPs of the companies are doing.

Entertainment and media stocks are buzzing - HT Media, Zee, Deccan Chronicle, etc. Which of these counters really look attractively priced on a valuation parameter right now?
I think the television space looks pretty good. In fact personally I think the best place to take exposure. I generally do not talk about individual stocks but I would make an exception here, you know, a stock like Network 18 which is a holding company of the entire Television 18 Group has got diverse media assets, that particularly looks good over the two to three years. I think it will turn out to be a reasonably large conglomerate as the model is panning out. It is well funded, it has got money that has come in right now and similarly I think I would even rate NDTV because there is a talk about de-merger that���s in the pipeline right now. I would like to really mention upfront I have vested interest in both these stocks and I have invested in this space quite heavily.

Yes, in the short term there are challenges things like carriage fees slowdown etc. etc. Over a longer period of time I think this space holds a lot of potential because if you look at from a global comparison and if you put together all of the media companies that we have particularly the television companies we have right now even if it includes Zee, I think the consolidated market cap of all these companies or even the EV would not be in excess of $2.5 billion to $3 billion whereas a single company in the US would be two or three times there or in fact maybe five times of that valuation.