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Mkt to see 20-25% returns in 2015, banks to benefit: IIFL

| December 19 2014 10 : 15 IST | Moneycontrol

In an interview to CNBC-TV18, Nirmal Jain, Chairman, IIFL, said the correction is over for the time being but it will depend on the movement in global markets.

After deep cuts seen in last few days, the market opened with a loud roar on Thursday with support from global cues triggered by Fed meeting outcome. The Sensex opened up 396 points and the Nifty added over 100 points.
 
In an interview to CNBC-TV18, Nirmal Jain, Chairman, IIFL , said the correction is over for the time being but it will depend on the movement in global markets. He expects market to consolidate with everyone looking at rate increase in the US and feels it is a good time to invest for short-term. According to him, Nifty may find good support at around 8000.
 
Jain sees 2015 emerging as a good year for the market -- with around 20-25 percent returns -- backed by positive sentiments like falling crude and an upcycle in earnings. He sees banks as beneficiary to the upmove and likes, auto, IT and pharma space.
 
Below is the transcript of Nirmal Jain’s interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.

Latha: What is the mood you think at the moment the correction is over or do you think we are going to shed a little more?
A: For the time being correction shed should be over but it will depend on events that unfold Russia and the developed world. Russia has been passing through a crisis and one really needs to watch out whether it has impact on other parts of the world. For instances if there are some large European Banks and they have large debt to Russian companies or Russia as such and other get into trouble then that will have another round of impact.

However, market will consolidate because market will now watch out for rate increase in the US which may be advanced. Earlier most investors and analysts were expecting it to happen in the later part of 2015 but whatever indications we get it may happen early. One would like to see the impact of all those things. Having said this there is a long-term fundamental interest in India and that should always make sure that the corrections are short lived and again market reaches new high in every rally. 

So it is very difficult to take a call on a day-to-day or weekly movement of the market. However, if you are an equity investor and can invest with one to three year perspective then still it is a good market to invest.
 
Reema: We are at the mercy of the crisis in Russia which is an unfolding story. Every day we could get conflicting headlines coming out of Russia. So how does one play? What is the advice to a retail investor say for the next one month. Should they buy today at levels of 8,100 or your advice is that perhaps we could see some correction and 7,800 is also possible on the Nifty and that would throw up an attractive opportunity? They just have a one year time horizon.
A: If you are day-to-day trader then only you are at the mercy of these events. If you are an investor then you must not forget the fundamental principle of equity investing that you should monitor your portfolio on a day-to-day basis. We are invested in good companies, have faith and have patience and just wait.

Nobody can forecast, nobody can predict these events with any accuracy so do not even bother about it. If there is an event which takes the market down if you have more money then invest more or even if you have a temporary market loss just sit on it do not worry about it that is what we advice or investors.

Those who are intra day traders may keep away from the market in these volatile times. I am not an expert on that so I really can not advice them but they can take a call based on the technical levels of the market. At this point in time it looks like that 8,000 or levels around that should be a good support for the market.
 
Latha: The height of the bonhomie in May once again in October we heard targets of 10,000-11,000 floating for the Nifty itself. What is the realistic expectation if one is only looking at the Nifty? We got 30 percent this year most of it looks like it will preserved. How much can 2015 give?
A: I am an optimist; I would say 2015 can be a very good year. It may give you say 20-25 percent very easily and from the market perspective in optimistic scenario it can go up to 30 percent also. 

My reason is as follows that in 2014-2015 we have not seeing earnings rise but 2015-2016 is a year where we will see a combined impact of sentiment improvement, the crude oil prices coming down, the commodity prices being down which is raw material for many Indian companies, demand also picking up. All those things will converge. 2015-2016 will not be the best year because investment has not taken off, 2016-2017 will still be better. 

At least earnings up cycle will happen in many sectors and that should drive expectation. So, a year later you will be looking at 2016-2017 and if 2015-2016 has been better than optimism again takes over and people expect even netter things in 2016-2017 and they start discounting in year ahead. So, I would be very optimistic next year primarily because I am expecting a significant increase in earnings. Not only because of the stability on political front but also because of the crude oil and the commodity prices being going down and that being the raw material for most of the companies.
 
Latha: What will be the leaders of this 20-25 percent rally that you expect?
A: The banks will be one of the key primary drivers because this crude oil and inflation will have an impact on interest rates. So, whether the rate cuts happen in January or March that does not matter but the fact of the matter is that the lending rates as well as deposit rates are heading southwards so banks will be one beneficiary.

I would look at auto companies I would also look at IT and pharma pack because we may have our domestic strength but dollar is strengthening for different reasons and IT companies in terms of valuations still are not very expensive and in fact they are also good hedging bets in the portfolio. I would make a mix of cements, auto, IT, pharma and banks. 

Reema: What about consumer durable segments? Something like Havells , Bajaj Electrical  where the managements have been sounding out a cautious note about next year. Would that be the space you will avoid now for next year?
A: I would be cautious there because those stocks run up a lot much ahead of time, one. Secondly, they already had spare capacity so it is not that they have pricing power even if there is a demand revival. Finally, the demand revival also is little muted it is not something which is already happening. So, both these companies valuations are already rich and some of them have some other problems so I would stay away from that sector.
 
Reema: Only the management of Havells so far and perhaps little bit even Bajaj Electricals have sounded a little cautious. Any other companies in this segment where you think the demand is not going to be so good and there is spare capacity available. Which are the other stocks that we should watch out which could have a similar story?
A: May be one should watch out Voltas and Crompton Greaves these stocks although they are not durables. However, in durables I do not track them. There are stocks like IFB, Whirlpool but I have very little information on them.

Latha: Which stocks from the oil and gas sector have more upside left?
A: Oil and gas sector is negatively impacted by and large because crude oil prices are going down so Oil and Natural Gas Corporation ( ONGC  ) and Cairn India   will be negatively impacted. If you want to buy oil and gas I would say wait for December results because Bharat Petroleum Corporation Limited ( BPCL  ), Hindustan Petroleum Corporation Limited ( HPCL  ) they are good companies. However, they will have inventory losses in this quarter and their refining margin will also be under squeeze. So, once oil stabilizes, but on the positive side the subsidy burden will ease and their interest cost would also go down and also if there is a demand growth next year they will benefit. So, if you are the investor in oil and gas sector watch BPCL and HPCL but if you can wait for some time then wait for December results and in next quarter you can consider buying them. 

Disclosure: My investment are managed by the portfolio and I might have investments in any of these companies.
 
Top Read full interview: http://www.moneycontrol.com/news/market-outlook/mkt-to-see-20-25-returns2015-banks-to-benefit-iifl_1255769.html
 
 Source: http://www.moneycontrol.com/

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