While the country is facing economic challenges like rising crude prices and issues regarding bond yields, the banking space looks attractive, says Abhimanyu Sofat, Head of Research at IIFL Securities.
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Speaking to CNBC-TV18, Sofat shared his reading and outlook on markets, specific stocks and sectors.
"We are clearly seeing a lot of money coming into the market from passive funds, and that is leading to this rally in the market despite the kind of economic challenges that we are facing as a country - with crude going up to $68 per barrel or the issue with the bond yield which the RBI is trying to correct with its Operation Twist. From our perspective, in the banking space whether it is Axis Bank or ICICI Bank, these two banks will be on the top of our list. The third would be HDFC Bank and then State Bank of India. We feel that because of the change in the economic scenario, we are going to see significant recoveries going forward," he said.
On BPCL he said, "From the asset value perspective, the stock continues to look quite good to us. Probably strategic sale may not happen till March-end. If it doesn't happen then fiscal of the government will go for a toss. We are already staring at more than 10 percent fiscal deficit number if you include the states as well as the public sector undertaking. So, the divestment of BPCL is very critical. The refinery margins are improving a bit over the last couple of months, so from that perspective and overall demand scenario perspective, we do feel that the risk-reward at the current level for BPCL is not that bad."
According to Sofat, Bharti Airtel is relatively stronger than Vodafone. "If you look at Reliance Jio, it also has been increasing pricing, I think Bharti is expected to do pretty well going forward. We do believe there is a significant scope of deleveraging of the balance sheet on the part of Bharti. With regards to AGR issue, I think discussions with the government will continue. Till the final payment is made you will keep on having a lot of news. Structurally I think telecom prices are going to go up," he added.
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Disclosure: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.