See good buying opportunity in select telecom stocks: Gautam Sinha Roy, Motilal Oswal Securities
"Whenever there has been correction because of some news flow concerns, we have used that opportunity for recommending buys for the (telecom) stocks."
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In an interview with ET Now, Gautam Sinha Roy, VP-Equity Strategy & Product, Motilal Oswal Securities Ltd, shares his views on the market and some sectors. Excerpts:
ET Now: What is it that this small upmove presents as an opportunity? Could this translate to further against for the expiry and may be going ahead or do you believe that it will largely get sold into?
Gautam Sinha Roy: Sentiment has changed for the better over the weekend with the Cyprus issue getting some hint of resolution. We have also seen that the diesel price hike has happened. So that also caters to the needs of investors in terms of reform process being carried through.
Overall sentimentally, we are in a much better space than Friday. So that should help the markets sustain. But we will wait for the expiry to see how things pan out for the next month. For now, we are comfortable and are looking at a more positive movement from the market this week.
ET Now: How would you view the telecom space, particularly Bharti Airtel, given the positive news flow because sources are indicating that there will be another bond issue between $200 and $300 million. How do you see this auguring and would it be your top bet in the basket?
Gautam Sinha Roy: Telecom is one sector we have been positive on, more from the fundamental perspective, because of improvement in voice tariffs expected to be carried out through FY14 and we do believe that voice tariffs have actually bottomed out. So we should see good improvement on the profitability front and competition should reduce going forward.
But lately, news flow has been choppy for this sector. We have had rounds of bad news coming in from regulatory intervention or some judicial issues, which have continued to be overhangs. But that has given us good buying opportunities in these stocks. So whenever there has been correction because of some news flow concerns, we have used that opportunity for recommending buys for these stocks.
ET Now: What is it that this small upmove presents as an opportunity? Could this translate to further against for the expiry and may be going ahead or do you believe that it will largely get sold into?
Gautam Sinha Roy: Sentiment has changed for the better over the weekend with the Cyprus issue getting some hint of resolution. We have also seen that the diesel price hike has happened. So that also caters to the needs of investors in terms of reform process being carried through.
Overall sentimentally, we are in a much better space than Friday. So that should help the markets sustain. But we will wait for the expiry to see how things pan out for the next month. For now, we are comfortable and are looking at a more positive movement from the market this week.
ET Now: How would you view the telecom space, particularly Bharti Airtel, given the positive news flow because sources are indicating that there will be another bond issue between $200 and $300 million. How do you see this auguring and would it be your top bet in the basket?
Gautam Sinha Roy: Telecom is one sector we have been positive on, more from the fundamental perspective, because of improvement in voice tariffs expected to be carried out through FY14 and we do believe that voice tariffs have actually bottomed out. So we should see good improvement on the profitability front and competition should reduce going forward.
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But lately, news flow has been choppy for this sector. We have had rounds of bad news coming in from regulatory intervention or some judicial issues, which have continued to be overhangs. But that has given us good buying opportunities in these stocks. So whenever there has been correction because of some news flow concerns, we have used that opportunity for recommending buys for these stocks.
Gautam Sinha Roy: Actually oil and gas is another sector that we continue to like and within that our preferred picks at the upstream PSU companies are ONGC and Oil India because we believe that the diesel price hikes that are being taken, along with the subsidiary reduction will definitely benefit these companies most from a balance sheet and cash flow perspective.
We also believe that the OMCs will be benefited but with a lag and the impact there would be more on the working capital side which should help them reduce their interest cost. So that impact will come in probably more in FY15. The upstream companies are more direct plays on this from a FY14 perspective.
We also like BPCL because of the exploration bit and they would be benefiting from the oil price hikes. The structural reform process is being carried through, we have seen three months of diesel price hikes. So that gives us a lot of comfort about whether the oil price reforms and subsidy reduction as promised will be carried out.
Cairn is another one that we have started liking a lot now because we believe that their guidance for output improvement from Rajasthan is positive. Also we should see them going after exploration assets in Rajasthan more aggressively in the coming three years so.
The key overhang there is the huge cash that is getting piled on in the balance sheet and what will be the ultimate use of that cash is an issue that still needs to see some resolution. But lately the news flow has been that they could use it to acquire some assets which will increase their exploration potential.
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