Ashok Jainani is a head of Research and Market Strategy team at 70-years old firm Khandwala Securities, Mumbai. He has over 22 years experience in financial services industry and has worked with leading financial institutions earlier. He holds master`s degree in finance with specialization in financial markets. Besides developing in-house proprietary trading tools, under his leadership, Khandwala Research endeavors to provide profitable ideas ahead of time to its clients.
In an exclusive interview with Ashwini Kunder of Myiris.com, he provided insights on the current market scenario and market outlook.
Which sectors are looking good at the current levels? Do you think realty may emerge stronger in the near term?
At current levels, stocks in most sectors are trading above market benchmark and factor in high growth projections, which appear tricky in the wake of rising inflation and commodities prices. Cement, Metals, Telecom, IT and PSU Banks are trading at discount to market which could, on correction, be attractive profit bets for medium to long term. Realty sector stock still seem over priced relative to NAVs which are not factoring in correction in real estate prices on prevailing supply glut.
What is your view on the current market scenario? Is the market overvalued? Where do you see the Sensex by December 2009?
In the short run, stock prices are leading earnings on the assumption that companies` profit margin expansion would compensate for growth. After six months` rally that has doubled the Sensex and more than trebled many stocks, surely, the market is looking for proof of earnings growth, to resume further upward journey. Though there are many optimists, considering the inflation scare and rise in commodities prices, earnings growth might take some time to resume. Not all can put a Sensex number on a fixed date, I may say, short term, market seems sideways with downward bias.
Since May 2009, FIIs have pumped in over Rs 600 billion in the equity markets. Do you think the trend is likely to continue?
Like any other investor, FIIs too invest with profit motive. Appreciation in stock values and rupee, the dollar returns for FIIs over the last six months are higher. One should not be surprised if they sell, just like they did this time last year to book profit. Especially, if the Dow starts attracting more flows and the dollar-carry trade unwinding begins.
What is your expectation on Q2 earnings performance?
Flat to negative, in aggregate. Banks, autos, cement telecom might turn in good numbers; real estate, oil and gas, metals, IT, transportation would be laggards.
What should the retail investors do in the prevailing market conditions?
The uptrend clearly seems vitiated by doubts over resumption of growth coupled with inflation fears and slowdown in banks` credit offtake. However, charts do not seem to have generated trend reversal signal as yet. The market, therefore, might continue sideways short term, about two-four weeks. Sensex around 15,925 and Nifty around 4,810 seems probable short term support where some buying could emerge.