Rahul Arora, CEO of Nirmal Bang Institutional Equities, spoke to CNBC-TV18 about market fundamentals as well as specific stocks and sectors.
Speaking about the markets, Arora said, “Now I think you are in a bit of a dichotomy where the economy is in real trouble but at the other side if you look at what the European Central Bank (ECB) has done overnight and the kind of noises that the US President is making about where he wants to see interest rates by the end of the year as he gets into the election year so I think it is very possible that once again you get into a situation where liquidity overrides fundamentals and is possible that the market continues to inch higher not run away higher.”
On the auto stocks, he said, “The damage was so excessive, as a case in point if you look at where Eicher Motors was at its 52 week high there were still most of the people had buy recommendations on Eicher. Even Maruti Suzuki at Rs 11,000 it was pretty much a consensus buy so the price damage that has been done is akin to pharma. It is good that it has happened, I think a lot of it was fuelled by some remarks given by the transportation minister about GST and the presentation he had made to the finance minister and just a couple of days back the auto stocks were on fire subsequent to that. However, there is enough value more in the markets outside the auto sector where you can probably take a reasonable bet on earnings. They may not be cheap but you may not have the risk of losing principle which I think is still existent in the auto stocks.”
With regards to the largecap stocks, he said, “It is all contingent about how the liquidity cycle plays out from here. USD 20 billion a month is a no mean feat by the ECB and if the US decides to respond to that and India follows suit then the game changes. Ceteris paribus as we stand today I think we are probably better off playing the largecaps. There is still a little more predictability in names like maybe an ICICI Bank, or some of the larger pharma names like Cipla or Aurobindo Pharma where I will probably have a little more comfort.”
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