Stock Market

See Nifty at 12-13k in 2 yrs; media, realty top picks: Porinju

India is in a structural bull market currently, feels Porinju Veliyath of Equity Intelligence India. He expects Nifty to touch 12,000-13,000 levels over the next two years, although there are challenges in the global arena.


Veliyath expects India to add USD 1 trillion in market capitalisation in the next 3-4 years.


He says lot of midcap companies are positioned to do well in the future with media sector having the scope to give 20-25 percent compounded returns and finds Sun T V  Network  being at reasonable valuations currently. He expects Fortis Healthcare to give decent returns too.


He is also bullish on realty companies like Oberoi Realty , Sobha Developers and Godrej Properties as they are commercially well managed with healthy balance sheets and are currently available at attractive valuations.  


Veliyath is also positive on Multi Commodity Exchange  (MCX) stock as volumes are likely to increase benefiting it. MCX is a leader with 83 percent market share and well managed company with good shareholders, so purely on business model it looks attractive, he says.  


Ashwani Gujral of ashwanigujral.com, however, feels while the next rally will take the Nifty beyond the 200-day moving-average of about 7900 decisively, risk-reward still looks favourable only if the market trips below 7750 level before its next up move.


Gujral also shared his view on specific stocks.

Below is the transcript of Porinju Veliyath and Ashwani Gujral’s interview with CNBC-TV18’s Reema Tendulkar and Anuj Singhal.

Reema: Markets have retraced a bit after going to levels of 8000 on the Nifty, what lies ahead?

Veliyath: We have long way to go in the markets. We are in a structural bull market, there is no doubt about that and there is no change. The volatility what we see in the index 100-200 points up and down is normal activity. One cannot take change the stand, change the conviction like that.

Investors should always look at India with conviction from a long term investing perspective. There is no better place than India going forward. We can discuss many global issues, uncertainties, economic slowdown, that is all true, there is no doubt that there are challenges especially in the global arena.

It is true that nobody has any idea of how the world will look like in next five years time. However I can say we have reasonably good visibility of how will India look like in the next five years time. That is the most bullish aspect of India and our economy. So, investors have to be bullish. There can be small corrections in the market otherwise I am looking at Nifty moving to 12000-13000 going forward.

Anuj: What do you think is going to lead this market to 12000-13000. The market is struggling for leadership. We have seen private banks seeing short covering rally may be but Reliance is not providing leadership, ITC at times has been a laggard. IT except for Infosys we haven’t seen much of. What do you think could take the Nifty towards 12000-13000, what would be the triggers?

Veliyath: Even that is not an aggressive target. I am looking at later Nifty moving to 15000 and 20000, that is the real big picture on Indian economy and Indian stock market from a long term investors perspective.

In January 2008 we were something like 6300 Nifty and if you adjust to the inflation we are 15 percent down today adjusted to the inflation and dividends perhaps on the positive side. That shows our markets haven’t moved anywhere and there were many challenges and many negatives, political mismanagement was the biggest one of them – corruptions and the scams. Now things are getting better. Then came the two years of drought. So, this will be an ongoing thing – the negatives and positives. However what is the ultimate thing for this country? From that perspective I am telling you we are at a very low end of GDP and we are at a very low market capitalisation. So I am looking at India adding another trillion dollar to the market cap may be in the next 3-4 years time. It can happen in even 2-3 years time if our politicians manage the economy reasonably well.

Reema: Right at the 200-day moving average is where the Nifty has ended for the week, your thoughts on how the coming week is likely to be?

Gujral: For the moment the Nifty is correcting and for most people the most valuable thing is to buy on correction and to buy when the risk reward is good.

I believe next time when we rally we will cross the 200-DMA very decisively. However for me risk reward is only below 7750. So, there are two ways of looking at this, can the market go up without going to 7750? It sure can. My sense is I would like to see some more crashing of prices, some more coming towards the mean, towards equilibrium before strong buying comes back and before you can take this 8000 level out. So, I would be much more happier if we start this rally from 7700 than from current levels. I believe today second half although you saw a pullback that doesn’t mean a fresh move has started. It was just a correction of the last two days down move. So, chances are more correction is there, probably week to ten days and then we should restart our up move going into the monsoon.

Anuj: What was the other interesting point this week. Was the divergence in the Bank Nifty. The big outperformers of last year again outperforming, names like YES Bank, IndusInd Bank hit lifetime highs. Kotak Mahindra Bank is nearly there, HDFC Bank did remarkably well. On the other hand the dogs of the last 3-4 months before a short covering bounce. The ICICI Bank, Axis Bank, State Bank of India (SBI) they were again falling. What do you make of this divergence?

Gujral: Obviously some banks are doing better than others and the ones which are doing better than others are the ones people should focus on. So, instead of ICICI Bank you will move to IndusInd Bank. Instead of Axis Bank maybe you will move to YES Bank. Clearly there is money shifting from these banks to these midcap turning large cap kind of banks. So, the market is telling you which way to bet but definitely not buy IndusInd Bank after this huge 25 percent rally. Wait for a correction but the market is giving you stocks where even on the next rally it could outperform.

Anuj: MCX, why do you like this stock and what are the triggers going forward?

Veliyath: I don\’t know any particular triggers coming up. Of course there are talks about the options and being allowed and institutions can take part in the features and options of the commodity trading. So, this is something like the leader with around 83 percent market share and very professionally managed as on today. All its past problems are over. And very good shareholders including Kotak and kind of people and we have seen the worst of commodity trading perhaps. Even though I am not an expert on commodity trading I am seeing it as a business model and this can go long way.

When we say Rs 4,500 crore market cap utilisation for a company in this country with 83 percent market share and there are apprehensions and some thoughts that NSE and BSE may all start commodity trading and that also has affected the stock in the recent past. But I feel it is a bit exaggeration and it is always the leader that takes away most of the market share even going forward and such established system when traders are accustomed to this and commodity prices are turning around and India, the kind of a dynamic economy like ours we will see much more maybe 2-4 times kind of volumes going forward in the next 2-3 years time. So, this is a direct beneficiary and when we look at the global peers in the same system as a commodity exchange an 83 percent market share company at Rs 4,400 crore, that makes sense. It can give you 20-25 percent kind of risk compounding for next many years. That is what I believe.

Reema: Real estate stocks have seen some interest in this month itself. Indiabulls Real Estate has rallied 20 percent in April. Godrej Properties has seen a rally of 15 percent. Which real estate stock would you bet on?

Veliyath: I would be betting on not so high quality and not so low quality kind of managements within the space. But when I advice for investors I always look at companies like Godrej Properties or maybe Oberoi Realty or maybe a company like Sobha Developers, very professionally managed with clean and healthy balance sheet and this industry has been going through bad times in the last many years. And the investor sentiment has been very low. So, all this put together you are getting these companies with immense future prospects at a very attractive levels. So, if somebody really want to look at safety and decent return I would say Godrej Properties as the best among the lot. They are the leaders basically in the real estate market in India and they have got a long way to go. Now it is around Rs 7,000 crore market cap. It can grow to Rs 20,000-25,000 crore market cap in the next two or three years time.

Anuj: What was the other interesting point this week. Was the divergence in the Bank Nifty. The big outperformers of last year again outperforming, names like YES Bank , IndusInd Bank hit lifetime highs. Kotak Mahindra Bank is nearly there, HDFC Bank did remarkably well. On the other hand the dogs of the last 3-4 months before a short covering bounce. The ICICI Bank , Axis Bank , State Bank of India (SBI) they were again falling. What do you make of this divergence?

Gujral: Obviously some banks are doing better than others and the ones which are doing better than others are the ones people should focus on. So, instead of ICICI Bank you will move to IndusInd Bank. Instead of Axis Bank maybe you will move to YES Bank. Clearly there is money shifting from these banks to these midcap turning large cap kind of banks. So, the market is telling you which way to bet but definitely not buy IndusInd Bank after this huge 25 percent rally. Wait for a correction but the market is giving you stocks where even on the next rally it could outperform.

Anuj: MCX, why do you like this stock and what are the triggers going forward?

Veliyath: I don\’t know any particular triggers coming up. Of course there are talks about the options and being allowed and institutions can take part in the features and options of the commodity trading. So, this is something like the leader with around 83 percent market share and very professionally managed as on today. All its past problems are over. And very good shareholders including Kotak and kind of people and we have seen the worst of commodity trading perhaps. Even though I am not an expert on commodity trading I am seeing it as a business model and this can go long way.

When we say Rs 4,500 crore market cap utilisation for a company in this country with 83 percent market share and there are apprehensions and some thoughts that NSE and BSE may all start commodity trading and that also has affected the stock in the recent past. But I feel it is a bit exaggeration and it is always the leader that takes away most of the market share even going forward and such established system when traders are accustomed to this and commodity prices are turning around and India, the kind of a dynamic economy like ours we will see much more maybe 2-4 times kind of volumes going forward in the next 2-3 years time. So, this is a direct beneficiary and when we look at the global peers in the same system as a commodity exchange an 83 percent market share company at Rs 4,400 crore, that makes sense. It can give you 20-25 percent kind of risk compounding for next many years. That is what I believe.

Reema: Real estate stocks have seen some interest in this month itself. Indiabulls Real Estate has rallied 20 percent in April. Godrej Properties has seen a rally of 15 percent. Which real estate stock would you bet on?

Veliyath: I would be betting on not so high quality and not so low quality kind of managements within the space. But when I advice for investors I always look at companies like Godrej Properties or maybe Oberoi Realty or maybe a company like Sobha Developers, very professionally managed with clean and healthy balance sheet and this industry has been going through bad times in the last many years. And the investor sentiment has been very low. So, all this put together you are getting these companies with immense future prospects at a very attractive levels. So, if somebody really want to look at safety and decent return I would say Godrej Properties as the best among the lot. They are the leaders basically in the real estate market in India and they have got a long way to go. Now it is around Rs 7,000 crore market cap. It can grow to Rs 20,000-25,000 crore market cap in the next two or three years time.

Anuj: What are your stock ideas for next week’s trade?

Gujral: I believe that the monsoon stocks are now beginning to strongly outperform and possibly as we head into the monsoon you will see further gains on these stocks. So, I am looking at UPL with a target of  Rs 650 over a period of  time, these are medium term targets. SKS Micro is now outperforming in this microfinance space, Rs 850 looks like a decent target. Bata also a target of Rs 850 in the next 2-3 months could be possible.

Reema:  HCL Tech has lost nearly 11 percent this week. What should a long term investor do in HCL Tech now?

Gujral: These are all over owned styled stocks. I don’t think these sort of stocks are going to make a lot of money for  people. So, for the near term next one year, I don’t see much happening. While there may not be great downside, there does not look to be great upside as well. It needs to get past possibly Rs 890-900 before anything great starts to happen. I would ignore the stock at best.

Long term, very long term players probably this is the right time to get in but then you shouldn’t be expecting returns in next 6-12 months.

Anuj: Fortis – what is your story here? Are you excited by the way Dr Lal has done, Thyrocare kind of subscription we have seen. This stock has been interesting, it does well in patches but from here on what do you think could lead to a rerating kind of story for Fortis?

Veliyath: The biggest problem for Fortis Healthcare was that it has been a listed company. Suppose they came out with IPO recently it also would have fetched at least 100 percent more than today’s valuations. Generally we have a tendency in India that the listed companies, the reason that they are listed is a bad news. They always fetch something like 40-50 percent of the valuation of a similar unlisted company which is coming out with an IPO or they make an private equity placement kind of things. This has been going on for some time. I find next 2-3 years it can reverse.

Listed companies are well liquid, people can buy and sell any time, they can exit, enter, so that should be a positive from the investor point of view. We will see a comparable kind of valuations for the listed companies also.

If the listed companies get a valuation like new IPOs that already can make our market capitalisation higher by USD 1 trillion. Especially in the midcap segment there are lot of leadership companies ignored by the large investors, some of them are industry leaders. In a growing economy like India especially considering our demography of 1.3 billion people I feel these companies have a great role to play going forward. Currently there could be some challenges.

In the case of Fortis Healthcare which is a listed company in the healthcare space, there are some concerns about the management, among lot of investors but still I think these all companies can change for much better from the management perspective and from industry environment.

So, I find that around Rs 8000 crore market capitalisation, Fortis Healthcare can give a decent return. I am not talking as a multi-bagger kind of thing. It is a very large midcap, one of the leaders in India in a very important futuristic industry.

Reema: You believe that media space is looking interesting now, which stocks are attractively priced?

Veliyath: Media as an industry has a long way to go from the market capitalisation point of view. However we have only selected few companies and stock picking is a challenge, it is not very easy. When you look at reasonable or attractive valuations, I find SUN TV looks good even though there is some overhang about the management issues and all. However these things may not affect  the core activity, operations of the company. They have a got a very large market share in south. They have a very high profit margin too. There are some issues like new competition coming up, new strong channels are coming up but inspite of all those things it is a very reasonable market capitalisation – Rs 13000-14000 crore kind of a market cap. It is available at below 10 PE.

Again there was some controversy about accounting  in Eros International. It is another company available around Rs 1700 crore market capitalisation. I am not telling about particular companies, investors can search. This is a very important industry in a country with 1.3 billion people.  The movies, the film industry is the biggest portion of the entertainment industry in India. There is a growth projected something like 15 percent for next 5-15 years time. That is a huge growth in today’s global environment in a particular economic segment of a country. I believe investors can make big money very cautiously  perhaps and in a conservative way if you look at the listed space. Many of the companies may come to get listed again. So, I think that space as such can grow very big. It can give 20-25 percent kind of a compounding return for investors.

Anuj: A word on the metal sector, is the rally over. We are seeing signs of breakdown in stocks like Hindalco , Tata Steel , Jindal Steel of course was news driven, but still your take on that?

Gujral: These guys have gone up so much that a mild correction will sometimes look like a breakdown. The metal index – CNX Nifty Metal is about 2000, it can easily come down to 1850 and still it will be only a correction. It has crossed its 200-DMA, that is the line for long term uptrend and now on any correction even if we go down to 1850 I think will be just a correction. We have run up so much in two months, now we need to correct in several of these sectors like metal, like private banks etc before a sustainable rally starts. You can have a pullback  in the second half on any day but big money will come in once you have a decent correction and from lower levels they are able to pickup cheap stocks.