Do you think there is an investment opportunity in SBI considering it is available cheap?
Unfortunately, SBI has done nothing. Sure, the stock is up from Rs 150 to Rs 200, and as a disclosure, we have some quantity of it around Rs 173 level but we are not chasing it. We want the banking space to settle down. We would rather be with ICICI Bank and Axis Bank which have raised money recently and which gives them a good buffer. If you are looking at SBI for the next one year, then it becomes a no-brainer given that their liability is at 3% saving deposits and that is the lowest ever; their CASA has improved considerably given that most people want to be in fixed deposits. The access to money for SBI is a no-brainer, it is just that the market’s pessimism on PSUs is unfounded. A fair value for me for State Bank should be at least Rs 250. We prefer to buy it at around Rs 185 and exit around Rs 205. At these prices, if we want to put our neck out, we would rather be with ICICI and Axis which have had access to raise capital. They offer a better risk reward.
Would you stick to specific stocks right now are still bullish on a trend?
Firstly, we are hedged on the market. We have short positions on Nifty and Bank Nifty. We think there is an inadvertent selloff coming in the second half of August, so be watchful. But we are invested in some stocks. Ashok Leyland has been our top pick; Federal Bank, IDFC First, DCB Bank, Havells, Godrej and NBCC are the stocks we are long on. We thought that the bad news on the results is priced in but I am again not ruling out a 500-point correction on the Nifty. So, we are hedged on the Nifty on the short side for our clients.
Do you buy into the view that we might see a consistent improvement going forward? A lot of corporates are saying that things already picking up and will reflect further strength by the festive season. Do you feel that is a little optimistic?
It is all priced in. The optimism is there but at 11,300 there is greed written across the screen. I am not bearish but there is a 500-point correction waiting to happen and that will differentiate the men from the boys and that is what we will again utilise to buy. The fundamentals will start to play out but do not expect wonders on the numbers. We have already seen auto being one of the best performers. From Rs 1,600, Hero is now at Rs 2,800; Mahindra has doubled. So, a large part of the stock or the performance which the corporates are saying is in the price. All we are saying is the process of correction is inevitable and it will be very healthy for the market.