How will you play metals in the coming week?
Metals will continue to do well especially with the weaker dollar. We have seen the dollar declining over the last four days. Overall, aluminium will outperform the ferrous side. For aluminium, there is a short supply globally and that will help our pricing as well. On the ferrous side the only risk is that the steel prices are too high. Will the government take any measures to reduce the trade barriers on the steel pricing to help the domestic industry? There is a lot of noise from the domestic industry on the ferrous pricing, but overall our companies are placed well and they should do well this year on the metal pack.
What would your picks be for the new week, what is on your radar?
I think PSUs will do well going into the budget. But then, post budget, there is normally a disappointment so I will be cautious on that front. I agree fully on the Bank Nifty. The top private sector banks, the top five will be the best plays for the next week.
We have had a few major IT results, what are your key learnings? Infosys at the front of the pack and then Mindtree to a certain extent proving to be a bit of a disappointment. Is that a trend that you will have to watch out for – stick with the blue chip names and be a little wary of the midcap names?
We are in the part of the market cycle now where three things are very important – one is tightening happening on the global monetary policy front. Today, Bank of Korea took interest rates back to the pre-pandemic level. Clearly there is a tightening on and that means that high growth, low profit portions of the market will get impacted plus the discount rate for future profits is going up.
The second part then follows – How good are the earnings holding up and as you said the large cap IT we saw pretty good results. I did not see much trouble even in the Mindtree results. I think it was selling the fact that happened in Mindtree otherwise if you look at their constant currency numbers they seemed pretty robust. Overall, IT will remain a sweet spot for this year.
Accenture numbers had set the stage and Indian IT players had already run up so we might see this pattern where even after results we see some kind of a selloff in IT stocks. But quality IT – be it large cap or midcap – I would be a buyer.
The three big themes we have to keep in mind are that clearly there is a rotation on the basis of policy tightening, second there would not be valuation expansion, it will be more earnings driven rise in prices and maybe the PEs will come down globally. And third, for India is the policy so at least till Feb 1st the markets will run up based on optimism for the policy. Post that, a lot will depend on the UP election. There could be some kind of a sideways market post February 1st especially if the Budget does not have much which the market likes then you could see a bit of a soft market in India as well. Right now we are running on the third leg which is the policy.