Ambareesh Baliga, Vice President, Karvy Stock Broking talks to Puneet Wadhwa on markets post Budget, sector specific options and good bets among the mid-cap space.
 
Do you think that the post-Budget rally may be in the last leg?

We feel that the post-Budget move was a relief rally and not a fresh bull run. The caution and pessimism in the pre-Budget season seemed unfounded and the market gave a sigh of relief. The rally got compounded due to short covering and buying by FIIs who were sitting on the sidelines.
 
Did the Budget have ingredients to give a big boost for continued upward movement?

We don’t think so. The Economic Survey did reveal that infrastructure spend that includes roads as well as power sector haven’t met targets.  The GDP data announced post-Budget did not enthuse.
 
The inflation figures are still a concern and would continue to be so for the next few months. With the good news, or rather lack of bad news, digested, the best possible scenario would be that of being in a limbo and that’s exactly where we are now.
 
How do you see auto and realty sectors panning out in 2010 given the hints of stimulus withdrawal?
 
The gradual withdrawal of stimulus was a relief to the markets as the markets had discounted a complete withdrawal of the same and had corrected to a large extent before the Budget.
 
The auto sector was expecting a hike of 4% in excise and the announcement of 2% was met with an upward tick in most of the auto stocks.  The marginal increase in petro product prices didn’t dampen the sentiments as it is expected to be absorbed well by the consumers.
 
Companies have been churning out superb sales and that has resulted a number of large-cap stocks becoming multi-baggers in a year. The big question now is whether they would continue this momentum as the market has factored in this expectation.
 
Going ahead, the cost push increase in prices and hike in interest rates may not augur too well for this sector. We are cautious at this point and unless the demand continues to be robust in the next two months, we would continue with this view.
 
We expected sops for the realty sector especially in the budget housing space, both for the builders as well buyers. Lack of this and the continuing issues on excess inventory, stretched balance sheets and higher interest costs makes us wary of this sector.
 
What is the outlook for banking sector given the current economic situation? Any good bets in this space?
 
The Budget was moderately positive for Indian banks/NBFCs. Moderate level of fiscal deficit and lesser borrowings would ease pressure on bond yields. The capitalisation of public sector banks was another positive. The proposal to issue banking license re-kindled the interest in a prospective NBFCs though it would fructify in possibly 18 to 24 months.
 
We believe we are in a rising interest rate scenario and most of the banks would get into the deposit raising spree though the credit growth still remains tepid. The treasury income may not keep pace and with NIIMs getting squeezed over the next two-three quarters, things don’t augur well for this sector in the short-to-medium term.
 
Dips could be utilised for buying SBI, PNB, Corporation Bank and HDFC Bank for long-term investment.
 
Among the smaller private players one should look at Dhanalakshmi Bank, South Indian Bank and City Union Bank as candidates for take-over or mergers.
 
Which sectors and companies do you recommend for investment among mid-caps?
 
Increase in petro product prices in the Budget and further possible increase on implementation of Kirit Parikh Committee recommendations augurs well for Indraprastha Gas, Gujarat Gas and Everest Kanto Cylinders.
 
With the government providing fertiliser subsidies to farmers directly instead of the fertiliser firms, companies such as Bayer Cropscience and Jain Irrigation could benefit.
 
BEL, Rolta, Astra Micro, Avantel Software, KEC International, Crompton Greaves, GMR Infra, IRB Infrastructure and HCC are some other good options.