Cement, oil, auto, IT sectors likely to do well in next one year: Nirmal Jain

| October 27 2014 15 : 15 IST | Economic Times
In a chat with ET Now, Nirmal Jain - Chairman, IIFL Group, shares his views on what lies ahead for the markets. Excerpts:
In a chat with ET Now, Nirmal Jain - Chairman, IIFL Group, shares his views on what lies ahead for the markets. Excerpts:
ET Now: The index has generated 26.5 per cent return so far this year. Will going will be as profitable in the year ahead or do you think money will made but with a lot of effort?
Nirmal Jain: I think money will be made with a lot of effort, but you can make a lot of money than getting 26.5 per cent return in the year ahead. All the positive factors seem to be converging at this point in time. After a long time, we are seeing a Samvat year where there is lot of optimism and enthusiasm. Commodity prices, global crude oil are down after a long time. We are seeing the reforms now after state elections, a lot of decisive actions have been made and in fact a lot more are in the offing. The budget is expected to be significantly reform-oriented. So, all the cues are pointing towards a good market. Nonetheless, there will be corrections, there will be intermittent jitters, some events here and there, but if investors can buy equity and hold on to it, then the next year and maybe next three to five years will be very good. What kind of returns we make will obviously depend on the stocks, but whatever returns we have seen in the past and future can be much brighter. It can give you much better returns.
ET Now: For the next 12 months, what do you think will do well? Will some of the distressed names now start making a comeback because of reforms or do you believe those are the stocks that will actually do well over the next 12 months?
Nirmal Jain: What has changed in the last one year is that a year ago cyclicals were very cheap, the valuation was very attractive. That has been corrected a little bit. So this is a time when you should make relatively broader portfolio. So do not stick to just one sector or one theme. I would say that, among cyclicals, again cyclical is a very large generic broader category where you also have your domestic cyclicals like cement and auto. They are doing very well and you have metals there. One has to be little cautious because of lot of global factors and global economies are not doing well. So, global commodity prices are down. Within defensives also, IT is doing very well. Some of the stock valuations are attractive. Pharma again is a very diverse sector. Some stocks are doing very well whereas others are not. In FMCGalso, there has been a bit of correction in terms of underperformance relative to rest of the market. So there can be some stock picking there, but still you can put your larger weight in cement, auto, oil, some of the private banks and maybe the IT sector and slightly lower weight in say FMCG and pharma. Rest of the sectors you can avoid for the time being
ET Now: Since you talked about IT, let me come to that because we have seen most large earnings actually come out. Wipro was a bit of disappointment. You are seeing the stock already down 4 per cent. Generally it is not really the case in muhurat session with any of the Nifty names. We have seen Infy come out with a good performance but has not been replicated by an HCL or for that matter TCS. With names actually already giving you so many returns, how do you now make that fresh allocation? What should be the deciding factor so to speak when it comes to the IT names?
Nirmal Jain: All the companies that we are seeing in IT, they perform in different sectors and different geographies, different kind of client sets and different verticals. So, one has to be selective. I would say that one should look at Tech Mahindra results and that can be one medium to long-term bet. Even stocks like TCS or Wipro, if they correct, one should watch out because in fact maybe one quarter was not that good. Market is very bipolar at this point in time. The event based reaction always happens. So you can watch out, but again IT is one sector where you have to be very selective. You have to be very stock specific, but then if you look at a two-three-year horizon, then I would say it is a good hedge.
ET Now: I know every year while you are hesitant to give out stock recommendations for obvious reasons, you make it an exception on the Diwali Day. You started off by giving us a large cap idea in Tech Mahindra. Now let us try and figure out what you guys as a house are recommending in the midcap space? One top midcap recommendation from you and why do like it?Nirmal Jain: Amongst midcap, maybe instead of one name, I can give you few more. I mean two-three names that will be easier for you. One is Bajaj Finance. It is an NBFC that is doing very well. Performance has been extremely good and the sector also looks very promising. Then you can also look at stocks like Motherson Sumi in the auto ancillary sector or you can look at Havells India. Amongst large cap or midcaps, you can look at companies like Hero Honda, Maruti Suzuki in auto or in cement, you can look at JK Lakshmi or even UltraTech Cement. So I am giving you lots of names so that at least you can make a portfolio with this. So these are the sectors and I have given you some top names and quality names. One can build portfolio with these kind of stocks.
ET Now: Any last thoughts on how do you expect the next 12 months to be for the index at large and I am just being a bit greedy, you have given us some safe names as well. Any company that you have looked at in the past which you thought that this could be a big hidden gem, waiting to be unearthed, and could actually give multi-bagger returns?
Nirmal Jain: I think a stock like BPCL is one stock. If you have medium to long-term horizon, then that is a great stock in the PSU sector. 
Source: The Economic Times

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