Indian Financial Markets: IT, telecom, aviation: Is this right time to bet on them?

Mon, Aug 06, 2012 at 09:34

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IT, telecom, aviation: Is this right time to bet on them?In an interview to CNBC-TV18 Rajat Rajgharia, head of research at Motilal Oswal Securities shared views on stocks across various sectors. He also citied outlook for sectors like telecom, aviation, IT and others. . Share . Email . Print . A+A- Rajat Rajgarhia, HoR, Motilal Oswal Sec

In an interview to CNBC-TV18 Rajat Rajgharia, head of research at Motilal Oswal Securities shared views on stocks across various sectors. He also citied outlook for sectors like telecom, aviation, IT and others.

Given the kind of news flow, he expects investors to remain low on the telecom. "This sector continues to be quite badly impacted. With the reserve price at Rs 14,000 crore, you will see companies being less aggressive while bidding," he elaborated.

From the IT space, he is bullish on stocks like Mahindra Satyam , Hexaware and HCL Tech . "We follow a very bottom-up approach on each of these midcap IT companies. Some of them have reported fairly good numbers and that is getting reflected in their stock price."

Further, he pointed out that aviation sector is getting structurally favourable for stronger players like Jet Airways and SpiceJet on the back anticipation of foreign funds flowing the sector anytime. He suggested that one can look at these stocks from a trading perspective, but they may not necessarily be suited for investment.

Below is the edited transcript of Rajgharia's interview with CNBC-TV18.

Q: The week ends with SBI' s numbers. After looking at what other public sector banks have done where are you pegging your expectations?

A: On the public sector banks we think SBI should still be one of the best banks from a numbers point of view this quarter. Because their net interest margins (NIM) continue to be very strong and second, I think while they will still add NPLs this quarter, the fourth quarter was an aberration. The net increase in the slippages will be much lower than what as a trend we have seen in the rest of the banks.

The numbers for SBI should be reasonably good. Our profit estimates are closer to Rs 3,400-3,500 crore, which will almost be the second highest profit after the last quarter profit that they reported. So, SBI should have reasonably okay numbers for June quarter.

Q: What did you make of the telecom spectrum reserve price and how would you approach these stocks now?

A: This sector continues to be quite badly impacted by all these things that we keep on hearing. Now with the reserve price at Rs 14,000 crore will surely reduce the number of circles that some of the companies may look to bid. This is because the ability to incur this amount of capex is not there in the system.

Secondly, if you look at the return ratios for the sector - probably the top three companies continue to earn very low return ratios and most of the sector is bleeding. So, you will see companies being less aggressive when they come up for bidding.

Things relating to what would be the policy on excess of contracted spectrum will be more important from an incumbent’s point of view. As of now, investors will remain low on telecom till the time they do not see changes being made, what new pricing policies will come up and what would be the total impact on each company in the sector.

Q: A lot of midcap IT companies have done better than their large cap peers in this quarter, Mahindra Satyam being the latest one. Have you upgraded any of these companies or have you changed the mix around in your IT portfolio?

A: Large cap ITs have always been in allocation gain. The difference between large cap and IT market caps are so huge that for investors to replace any one company with other is just not possible. We follow a very bottom-up approach on each of these midcap IT companies. Some of the companies like Mahindra Satyam, Hexaware etc. have reported fairly good numbers and that is also getting reflected in the way these stocks are trading.