Sreesankar of IL&FS Investsmart believe that the weakness in the markets across the globe will continue to have an impact.
Sreesankar recommends the automobile pack and stocks like Tata Teleservices and ONGC as good buys.
He also adds that the oil price hike would reduce the amount of losses that oil companies are incurring.
Excerpts From Cnbc - Tv18's Exclusive Interview With Sreesankar:
What would you expect to happen in the domestic market?
It is hard to say where the markets are headed right now but we continue to believe that the weakness we see across the globe will continue to have an impact. It is very difficult to estimate where we will see a sudden turnaround in the market or buying from institutional investors etc, because markets are falling everywhere and valuations are becoming cheaper.
So, I think PE ratios will continue to contract and most of the hit will be taken by the midcaps. In smaller and midcap companies, smaller selling can have larger losses because there are no buyers out there.
How do you battle the damp sentiment on the markets?
That is what results in a price earning multiple expansion or contraction. Today what we are seeing is a price earning contraction.
Normally, in the market if the liquidity continues to be buoyant, if the fundamentals are right, the technical suggests liquidity will continue to increase, we tend to see an expansion in the price earnings multiple.
If the price earning multiple in 2003 was around 12, it moved out to 16, 17, or 18 by the time market reached 12,600. Now, we are seeing the reversal of that trend and I think we have to go through the cycle.
Which stocks do you recommend as good buys despite the fact that the market could go lower? Do you have any picks in the frontline or midcap space?
We like the automobile pack, we like Tata Teleservices; the stocks have corrected so much. Tata Tele had cash profit in the last quarter. I think there are some values emerging. But the key question here is that how far this selling is going to happen and will we be seeing buyers coming back into the market right now.
What is your perspective about the petroleum pack?
We think marketing and refining companies will be underperformers. What we like in this pack is ONGC. Our analysts believe that price hike is only to reduce the amount of losses these companies are incurring. That is not going to make these companies profitable. We continue to believe that it is better to have an underweight scenario in this sector.Sensex Rise and Fall: Complete Coverage
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