There could be correction in Jan: M Stanley

There could be correction in Jan: M Stanley

italic;"> Sridhar Sivaram , ED, Morgan Stanley.


It is very interesting to see that Morgan Stanley is actually negative on PSU banks and positive on private sector banks. What would the logic out there be?

Well, our view is that we could see a tightening cycle coming very soon, may be in January itself. Typically what we have seen in the past is that when we have a tightening cycle, the PSU banks tend to underperform this sector and market in general because broadly they are seen as a bond proxy. Some of that may have changed, so we would go by that view and we think in a volatile interest rates environment, the private sector banks are better positioned as opposed to the PSU banks.

So you would not get tempted to buy into the PSU banks simply because they are just so much cheaper?

Well, as I just said we are broadly underweight the PSU banks, so I would not say that within the PSU basket, there would not be banks, which may look attractive at various points of time but you have to keep in mind that PSU banks as a basket have always traded cheaper to the private sector banks. So to that extent, the discount would always be there.

The question obviously comes that there is a possibility of the earnings moving up because of deposit re-pricing and stuff like that but what we understand is that this is already known in the market and there is nothing special about this but what could come as a surprise is the accent of the CRR hike, the extent of the tightening cycle going forward. We do not where the inflation currently is because this data is not being shared right now, but, our own internal estimate is that inflation could be closer to 7.5-8% by March, which basically would mean that we would have to tighten with GDP at 7.9%, IIP double-digit growth. These are all ingredient for a tightening cycle to come much faster than what the market expects.

In light of the fact that yes, there could be a bit of tightening if you will. What about some other interest rate sensitive? Say for example, real estate, there are lot of IPOs also in the pipeline currently, one has opened today. How would you view this space?

Well, I would not comment on specific stocks but as a sector, we would be underweight the sector. Again with the same view that we would like to stay underweight interest rate sensitive as much as possible, so real estate is obviously one of them because of the tightening cycle and obviously as you mentioned, there is enough paper coming in the market, so there will be enough movement within stocks because people who already own may want to look at some of the other stocks. So we would be underweight the real estate sector also.

Consumer discretionary, which is autos would also be the other sector, which we would want to stay underweight, especially the passenger vehicle market. The two-wheeler market is less sensitive to interest rates, so broadly as you would understand what interest rate sensitive sectors and stocks are. We would broadly be underweight those sectors, and we will see how things pan out from thereon.

There could be a correction in January if interest rates actually go up but if growth continues, markets could continue to move up, say

Click to see Morgan Stanley's view on the current market.

1|2|3|4|5|Next >

Src: Economictimes.Indiatimes

Heard on the street

Heard on the street

Punters zoom in on Time Technoplast Shares of Time Technoplast, a firm specialising in polymer products, witnessed a flurry of activity on Tuesday. On the National Stock Exchange (NSE), the stock rose 13.3% to close at Rs 43.05, with around 58 lakh shares changing hands. This included a bulk deal of 50 lakh shares, with Deutsche Equity Fund being the seller, according to the disclosure on the NSE website. No details of the buyer(s) were revealed. Market talk is that a clutch of mutual funds picked up the block on offer, with Reliable Mutual Fund accounting for a sizeable chunk. The company reported an earnings per share (EPS) of Rs 3.30 for FY09, and the EPS for the first half of the current financial year has not been spectacular at Rs 2.16. Talk is that the fund has been aggressively buying mid-cap stocks recently in anticipation of the next wave of bull run in the segment. MF distributors may again be left out in the cold The mutual fund industry, which is still to come to turns with the no-load regime, has been in the news of late following a debate over the need for a no-objection certificate (NoC) from an investor seeking to change distributors. With the market regulator clearly displeased with what it views as a restrictive trade practice, the industry and, in particular, the asset management companies and distributors have come under the regulatory scanner for following a practice which is against investor interest. The buzz on the street is that the AMFI-appointed committee (comprising 2-3 fund houses) has put forward the results of its analysis to Sebi. Initial feedback indicates that the requirement for an NoC will be done away with but the new distributor will not get trail commissions. The news has evoked mixed reactions from the distributor community. Most of them feel that without the trail fees there will be no incentive for a distributor to service his client. The ball is now in Sebi’s court. Motilal Oswal sales head joins to Abu Dhabi fund Jayesh Parekh, a former top institutional sales official at Motilal Oswal Financial Services, is believed to have joined Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund owned by Abu Dhabi. However, ET could not confirm the role of Parekh, who was rated the top salesperson for India in the AsiaMoney Brokers poll recently, in ADIA. Earlier, ADIA had roped in Mihir Vora, equities head of HSBC Asset Management, as a fund manager. (Contributed by Santosh Nair, Deeptha Rajkumar & Nishanth Vasudevan)

****************************************

	Two attractive mid cap picks Sanjay Chhabria
	Polaris Software Labs: Buy at CMP Rs177 Nirmal Bang
	Cipla: Healthy growth going forward Punam Choudhary
	Technical Picks: Havells, Power Finance Corp HDFC Sec

*******************************************

Src:Economictimes, Valenotes