Indian markets to attract a lot more liquidity and will move up over 6-9 months: Sudip Bandyopadhyay, Inditrade
“If agriculture is good in the next season and the next year we will see a lot of consumption pickup.”
After consolidation, is the market gearing up for next pre-election rally?
Definitely, the market has a positive bias. The way the liquidity position is shaping up both in the global markets as well as to an extent in the domestic market, we are reasonably confident that it will attract a lot more liquidity in the coming days. I would say that people are waiting and watching.
One trigger is, of course, results and we are seeing it getting played out. TCS results were excellent and it started attracting more money. Infosys did not perform that well relatively. Whereas TCS margins are improving, Infosys is reducing margin guidance. We have seen money moving today also. We believe that will be the case for the next 15-20 days where corporate results will continue to drive the markets. Post that, the election result and the speculation around that will gain currency and we will have to be very careful during that period. That will be a period of extreme volatility. But overall, Indian markets will attract a lot more liquidity and will move up over the next six to nine months.
With crude hovering above $70 mark levels, are you concerned about OMCs?
I have been extremely cautious on OMCs for some time and I maintain my cautious view. We have seen how oil prices are moving up. The entire country is in turmoil. Libya is a significant exporter and their production is completely uncertain and it will become more uncertain going forward. Under these circumstances, there will be anatural tendency for the oil prices to move up. Under these circumstances, we have to be careful.
OMCs today are still okay but if oil prices start moving up, the government will not be in a position to pass on any incremental petrol or diesel price hike to the consumers till the elections are over. We have seen it being played out in different elections, in state elections and others. I will be very careful. The OMCs may start hurting very soon. Stay away from OMCs at this stage till the elections are over at least.
TCS has moved miles ahead of Infy. But what do you do with Infy?
I will probably wait. I will not rush to sell Infy. Yes, there is a significant concern. TCS has been, as I was mentioning, increasing the margins on a quarter-on-quarter basis and they are very confident about maintaining and increasing the margin whereas Infosys has guided to a lower margin and that is a matter of concern. But having said that, if I am an Infy investor, I will look at the positive side of it as well.
Infy had not been really fighting for big clients. In the recent past, that has changed. They have shown significant traction in acquiring new clients. I suspect that apart from the wage hikes and visa cost increase, there is a significant amount of margin pressure while they are going and bidding for new clients. This was not what Infy was doing earlier. They were not compromising on the margin and they were suffering on the business side.
I think a pragmatic stand has been taken whereby they are going after the clients and letting go incremental margins. It is a good trend for the long term. There is some pain in the short term and that is what is getting played out. I will not rush to exit the stock. Yes, it is taking a beating but I will wait and watch for maybe one more quarter before I exit. There is some pain but eventually things may improve for Infy and I will give it another three months.
Would you be willing to dip into Tata Motors just yet? A lot of global chartists have been calling it the year of rebound when it comes to global auto stocks and allocating 40% upside to Tata Motors. So you believe the fundamentals can carry it through?
Well not really. I do not think the fundamentals are there for us to go and back Tata Motors at current levels. In fact, there are multiple problems as far as Tata Motors is concerned. The China JLR sales slowing down had a huge impact on Tata Motors consolidated P&L. About 95% of the profits used to come from JLR and the biggest engine of JLR was in China sales and that is slowing down.
Also the structural issue in Tata Motors is that they have not invested as much as they should have for the newer generation vehicles -- whether it is electric vehicles or self driving vehicles -- and the competitors have moved ahead quite a bit. They need to find a structural solution to JLR, and that is in place, it will be extremely risky from a fundamental point of view to get into the stock.
There are a lot of sectors that are heavily contingent on the forecast for monsoon. IMD is saying that the 2019 southwest monsoon is near normal and no severe impact of El Nino can be seen this time around. How are you reading into the agri theme?
I think a couple of things; if the monsoon is good obviously that is a great news for agriculture. Also, I heard IMD saying that the spread of monsoon will be good and normal. That is extremely important. We have years when the monsoon is normal but the spread is bad and agriculture suffers. So if the spread is good, that is good for agriculture.
As far as the other issues plaguing agriculture is concerned, whatever government comes post the elections, there has to be a great focus on agriculture and we are expecting that that will be the case and again that augurs well for agriculture. India is still a predominantly agrarian economy, and about 65% people depend on agriculture one way or the other for their livelihood.
So, focussing on agriculture is critical and that does have a positive impact on multiple other sectors including consumption in a big way. So focus on agriculture good monsoon, augurs well for agriculture sector. If agriculture is good in the next season and the next year we will see a lot of consumption pickup. Rural consumption pickup has not happened as was anticipated and that has been plaguing the FMCG companies and the consumer durable companies in a big way. If consumption picks up, we will get to hear good stories from all these sectors.