We are bullish on mid-cap stocks: Kishore Ostwal
In the backdrop of Infosys results and IIP numbers, Kishore Ostwal, CMD CNI Research, spoke to Abhishek Vasudev on markets.
Infosys has disappointed the Street with its June 2012 quarter results. The company also did not give out any guidance for the quarters ahead. Is this what you had expected from the results? Are there more negatives in store in the quarters ahead?
We had a negative view on the Infosys given slowdown in the order flows from their overseas clients. The management was also clear in saying that times are uncertain and it might take a lot more time than what was expected earlier for things to stabilise. We expect the stock to drift lower to Rs 2,000 levels in the days ahead.
What about TCS? From a valuations perspective, how is this stock placed compared to Wipro and Infosys?
We had expected the bottom-line to come in at Rs 3,500 crore. From a valuation perspective, TCS is a better bet as compared to both Infosys and Wipro. Having said that, I would like to mention the IT stocks are priced at very high valuations. Post the correction seen in Infosys on Thursday and Wipro that hit its seven-month low recently, both these stocks are still expensive. One can perhaps look at TCS on a correction.
The government announced the index of industrial production (IIP) numbers for the month of May, which came in at 2.4%. Do you expect reform process to pick up pace in order to boost the flagging economy?
The IIP figure of 2.4% was more or less in-line with our expectations. For the markets to move up from the current levels and economy to fall back on the right track, the government does need to take important reformist measures. It is high time for the Prime Minister to intervene and take up the matter on a priority basis.
According to the data, the capital goods output declined 7.7% in May, as against a growth of 6.2% in the same month last year. What is your outlook on this sector given these figures?
The decline in the growth in this sector has come in as a surprise for most analysts. For the sector to outperform going ahead, the Reserve Bank of India (RBI) needs to cut rates in the upcoming policy review. A rate cut, I feel, will help boost the sentiment across the board.
Given all the macro-economic and the other corporate developments, how do you see the markets panning out in the near-to-medium term? Are there any stocks or sectors that you would like to recommend at the current levels?
We certainly are not negative on the markets. However, we expect a rate cut by the RBI to boost the investor sentiment, and as a result, the investment cycle will also pick up. Currently, we have a stock-specific approach. Stocks from the mid-cap space look attractive as things stand. More specifically, Clariant Chemicals, Praj Industries and mid-cap banking stocks are some of the top picks right now.
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