Wed, Jan 16, 2013 at 14:50
ICICI Sec eyes 6550 on Nifty by Dec; bullish on IT, cement
After the Sensex breached the psychological resistance of 20,000 on Tuesday and the Nifty found support around 6050, the bulls seem to be on the driving seat.
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“We are looking at a target of 6550, assuming we do not see a serious risk playing out on the political front in the second half. The primary drivers, in our view, would be the cement space, telecom and IT sectors where we were quite bullish,” explained Sivasankaran.
Besides, Sivasankaran opined that FY14 could see around 11 percent earnings growth, though he remains more optimistic about FY15.
As far as private banks are concerned, Sivasankaran maintains a neutral view. He also believes that the public sector banks are still plagued with non-performing assets (NPA) and therefore, they would like to stay away from this sector at the moment.
Here is the edited transcript of the interview on CNBC-TV18
Q: Could you elaborate with regards to what exactly would be your parameters which would see consolidation in 2013? Would it be just equities or maybe even extended to currencies? How exactly would you see the fiscal scenario panning out at the same time, that is Current Account Deficit (CAD) and fiscal deficit?
A: I think it will be a year of consolidation, largely driven by some kind of an improvement in GDP growth. It will probably not be a raging kind of recovery, but a moderate recovery, maybe to 6.2-6.3 percent levels next year and some inflation settling down below 7 percent and earnings growth being significantly better than what we had last year.
We believe those would be the primary drivers of a consolidation. Of course, we have other concerns which could impact the market as we go forward. Definitely, we are very worried about the currency. We are quite concerned about the fiscal situation as well and probably you would look at some kind of a risk on the political front in the second half. Those are the key concerns and if those concerns do not seriously play up, we could potentially look at the consolidation this year, somewhere around the end of the year.
Q: What are you expecting by way of earnings growth in FY13 and FY14?
A: As you are aware, the consensus number as well as ISEC number is largely for a 14 percent growth in FY14. Once again we believe, the downgrade cycle will continue and we are not very comfortable at this point in time with these estimates. We could potentially be looking at a 2 to 3 percent lower kind of a number.
We are working with 11 percent kind of a growth for FY14. FY15 definitely looks better and there is a lot of optimism too, but at this point in time it is going to be difficult to pin it down to say either it is going to be better than 14 percent, or maybe marginally weaker. We go with a more conservative marginally weaker scenario, maybe at 13 percent and based on that we are looking at a target of around 6550 by the end of this year assuming 14 times multiple for FY15. So that is our December target.
Q: What did you say about FY13?
A: It will be in single digit for FY13. I am talking more about the FY14 number of 11 percent and FY15 number of 13 percent kind of a growth
Q: What are your thoughts on Yes Bank and other private sector banks? Do you have a buy on this one?
A: No, we are more neutral on them, primarily because of the reasons you mentioned. They have done extremely well and the stocks have run up a lot. From that point of view, they probably are already reflecting most of the positives we are looking at and incrementally, we will be looking at some kind of a margin squeeze. If you look at a 25 to 50 basis points cut going forward in the near-term, that is a bit of a concern and there is not much of a scope in terms of a rerating. That is what we feel especially about the private sector banks. Public sector is another story anyway.
Q: What are your thoughts on the Public Sector Undertakings (PSU) banking space? We touched upon it briefly but are you expecting a negative surprise from the likes of SBI or do you think you would play SBI on the positive side ahead of its numbers this quarter?
A: Valuations are very, very comfortable. One way of looking at banking exposure would be with a bias towards looking at a PSU bank. Having said that, the Non-Performing Asset (NPA) concern is definitely big and it is most likely to look at a negative surprise. That is what we believe at this point in time. So that is a concern and we are not going big on public sector banks at this point in time.
Q: What are your expectations in terms of a high for the Sensex or the Nifty, whichever you track in 2013 and which will be the flag bearers of a rally if you are expecting one?
A: As I mentioned, we are looking at a target of 6550, assuming we do not see a serious risk playing out on the political front in the second half. The primary drivers, in our view, would be the cement space, telecom and IT sectors where we were quite bullish.
IT ran up quite a bit in a very short period of time. But, even then we would believe, if there is confirmation to the extent that discretionary is picking up, it could essentially give you a significant upside even from the current level. So these three sectors are the ones we are overweight on.
http://www.moneycontrol.com/news/market-outlook/icici-sec-eyes-6550nifty-by-dec-bullishit-cement_808622-1.html
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