Reform measures, Greece to dominate markets this week: Manish Sonthalia, Motilal Oswal AMC-PMS

ET Now: So what is it that you have made of Reliance’s earnings? Does it seem like the buyback price of Rs 700 or an average is going to act as a flow for the stock?

Manish Sonthalia: Some of these large caps have now entered a phase where irrespective of bad news, there does not seem to be too much of selling happening. We have seen that in the case of Infosys, where numbers were not good at all, in fact they were quite bad and the guidance was very bad. Still you did not manage to break the stock price below 2200.

Similar is the case with Reliance, where valuations are becoming very supportive, irrespective of what came out of the results. In a way the results are in line. But there were some disappointments in the petchem side where margins are quite low at 8% EBIT margins.

But the outlook on E&P for the next three-four years provided by them is quite good. The ball now lies in the government’s court as to what sort of approvals the company gets because they have said that the FDV plans etc would be filed on the second quarter and the third quarter of fiscal 2013.

The company says that if the approvals were to come about expeditially, then you will see a ramping up of KG D6 volumes to 60 mmcmd. So, you are looking at a company with 11%-12% ROE, currently trading at 10-11 PE irrespective, of all the bad news coming out of KG D6.

All the volume issues are being negativity priced into the stock. So, I do not think, from a valuation perspective, there is anything wrong with Reliance being bought. You have a book value comfort at around Rs. 640. So you do not see too much of a downside.

Similar is the case with Maruti. With all the negatives coming in, I do not think you should see the stock price collapsing below Rs 1000 in any case.

May be some of these large caps have now become classic value stocks. If you were to buy into them, you would need some patience to make some decent money in the medium to long term. Downside comfort is clearly coming out in many of these large cap names.

ET Now: So can I read in between lines here, can I safely assume that at these levels you are buying Maruti and Reliance?

Manish Sonthalia: We do have Reliance Industries one of our portfolios. Maruti is also there in some of the portfolios. Yes, we are comfortable buying into these names at current prices.

ET Now: You also have a large exposure to ITC. At what price point do you think you would want to trim your exposure to ITC?

Manish Sonthalia: We have taken a call on ITC for the long term. But for the near term, prices are more or less there as far as valuation comfort is concerned.