India's benchmark indices traded lower for the third straight day Monday after witnessing a sharp pre-Budget rally in which the Sensex gained over 700 points in just four trading sessions. Manishi Raychaudhuri, Head of Research at BNP Paribas Securities (India) told NDTV Profit that markets are likely to shed 7-8% in the next 1-2 months though the second half of April could witness some buying opportunity.
"Markets rallied in January- February on 'buy on expectation' theory," he said.
Raychaudhuri was not positive on the Budget. "There were certain expectations about Indian growth and policy environment reviving and also expectations on cyclical variations like interest rates, which have not been met," he said.
Edited transcript:
Budget:
Apprehensive about the fiscal deficit target. Expect acceleration in inflation due to hike in Excise & Service tax. RBI rate cut action in April might get delayed. Fiscal consolidation measures in the budget were a letdown.
Strategy:
It is back to tracking corporate earnings, corporate balance sheet and see if execution picks up or not in certain areas. The government has to focus on how infra projects get off the ground and how resources for these projects are made available.
Growth:
GDP growth is likely to be 7-7.5% in FY13. Industrial growth is likely to revive slightly on the back of lower base. A small revival in the capex cycle is likely.
Stock picks:
Stick to domestic cyclicals, be stock specific.
Auto: Look for stocks with visibility on revenue and cash flow like Hero MotoCorp and Bajaj Auto.
M&M: Can buy because the stock has underperformed and there has been no Excise duty on diesel vehicles contrary to expectations.
Telecom: Domestic tariff competition is behind us.
Capital goods and Infra: L&T, IRB infra will benefit because of expected upturn in capex cycle and higher allocation of funds for highway construction.
Banking stocks: NIMs are likely to remains stable, credit growth will accelerate in second half of FY13.
IT stocks: underweight.
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