Present correction good for markets, will spur buying going forward: Devang Mehta, Anand Rathi Financial Services

In an interview with ET Now, Devang Mehta, Senior VP & Head Equities-Sales, Anand Rathi Financial Services, shares his views on the market and some stocks. Excerpts:

ET Now: It has been fairly listless for the markets and this has been the trend for the past many days. What do you think is leading to this nervous approach?

Devang Mehta: There are a couple of reasons which can be attributed to the current nervousness. The market was getting prepared for specific events, and now those events are out of the way. Besides, probably the run-up in the market had been too sharp. So this correction and consolidation happening in the market, currently in stocks as well as in sectors, were perhaps in order.

It will in fact give a lot of strength to the markets. Currently, a lot of inquires are being made by the participants who are sitting on the sidelines, or had missed the bus earlier. So, at every level going forward, there would be buying coming in. I guess that for two or three more days, there can still be a little bit of nervousness, as there is lack of volumes as well participation at the current point.

But this augurs well for the market overall when we consider that it will only impart strength in the long haul.

ET Now: The NPP has brought more drugs under the price control regime. We saw some counters from the pharma space taking a big knock yesterday. Do you see more pressure building up in this space?

Devang Mehta: The pharma space, in the last few days barring yesterday, had also run up quite a bit. This is true of some of the stocks which were not performing earlier when the cyclicals were doing well. Some of the stocks had started to perform well during the last three-four days when there was some correction in the market.

So, yes again, probably defensives would tend to be slightly on the lower side in the coming days, and banks as well as cyclicals will start doing well. Probably pharma is one space where there is a lot of uncertainty at this time. So, new buyers can stay away from the sector at this point.

ET Now: It clearly seems that recapitalisation is a hot topic when it comes to some of the PSU banks. We are seeing a little bit of steam in the space as well. What is your sense when it comes to the PSUs vis-à-vis the private banking names? Which are the banking stocks that you like?

Devang Mehta: In the PSU banks space, we have started to like a couple of large cap names. SBI and BOB would top our list. We feel that the price differential between private large cap banks and PSU banks is still huge. Bank of Baroda is slated to do very well given the numbers that it posted last time. There is an improving trajectory from SBI as well.

ET Now: In IT, some select midcap stocks are doing very well. The result season is just starting. What are you watching out for? Give us one top large cap IT name in terms of results, and one top midcap IT name.

Devang Mehta: Probably TCS would be the top pick over here in the large cap space. The way the company has performed over the past 10-12 quarters has been amazing. The consistency has been superb. So, TCS would be our top pick here, though it is a little bit expensive on the valuation front.

Among midcaps, Tech Mahindra and MindTree come to the mind. If there is only one stock to pick, then I would go for Tech Mahindra. With the improving trajectory that the company has shown in the past few quarters, we find no reason why the stock would not continue to perform well. So we feel that Tech Mahindra would be qualifying as our top pick in terms of a large-sized midcap stock.