In an interview with CNBC-TV18, Mehrab Irani, Investment Manager at Tata Investment Corporation, gave his views on sugar stocks, Bharti Airtel and markets.
Here is a verbatim transcript of an exclusive interview with Mehrab Irani on CNBC-TV18. Also watch the accompanying video.
Q: What do you make out of this 5,300, we are hearing 5,500-5,600. What are the chances that you got to keep in mind of a blow out, if there is any? If you are going with the trading play then the stop loss is equally importantly to play.
A: The Nifty made a bottom of around 2,540 in March 2009. From there, it has been consistently rising above an upward support trend line and it has not violated it. It touched 5,182 in October 2009. Once in a correction, it had taken support in July 2009 at around 3,950. During a correction in August, it has taken a support over there at around 4,400. However, during the correction of October 2009, which was very sharp and fast, it violated and went below that. However, it immediately recovered above that. It then crossed another downward moving resistance trend line and it also formed a hammer on the weekly candle stick charts at around 4,700.
If we look at the Classical Dow Theory, it has continuously made higher tops and bottoms. It has not shown any signs of weakness. There is no point predicting the top, unless the market actually signals it. So I feel that once this 5,182 high in October 2009 has been taken out, the markets are heading higher maybe around 5,600-5,650 over the next one or two months. Analysts have been cautioning us about the valuations.
However, over the long-term, earning markets are moving in line with the earnings in two-three-four-five years. Over the short period, which is two to six months, the markets move in line with the price earnings. Only looking at the price-earnings (PE) ratio may not be right. We should also compare it with interest rates because that is another very important variable in the economy. This is because the interest rate affects the bottomline of companies through the finance and interest costs. It also affects the valuations through discount rate.
Q: Which of the sugar stocks do you prefer? Is Bajaj Hindusthan the best of the pack or are other sugar stocks equally attractive at this point?
A: Overall, I am quite bullish on the sugar stocks. Technically, Bajaj Hindusthan made a bottom of around Rs 38 in October 2008. It again tested that bottom of Rs 38 in March 2009. In August 1994, 15 years back, it was the first time it had touched that level. During the bull market in June, 2006, it had consolidated at around that level. So that was a very important level. It bounced back from there. A new bull market started in there from about those levels. It was then consolidated between Rs 185 and Rs 220 levels over the last two weeks. A fresh move might be begin and we might see targets close to Rs 300 over the next few months.
Q: Bharti Airtel has been a beleaguered stock. Are you calling a buy there?
A: Not really. Bharti today is at Rs 280, which was the level when the Sensex was around 8,000 levels. It has also fallen 45% from its high. However, it is not showing any signs of bottoming out. It may go to around Rs 240-250 levels and become a good buy. Bharti is a stock which is a leader in the telecom sector. It is currently going under problems. It has the strongest balance sheet in the sector and also some cash on his books. So if we buy a stock at depressed valuations in a sector, which is currently going through a problem and which is a leader, we will not loose money on it over the long-term. So Rs 240-250 level might be a good level to buy it for a long-term.
Sourcemoneycontrol.com
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