Dipan Mehta, director of Elixir Equities, discussed his analysis on the fundamentals of the market as well as specific stocks and sectors in an interview with CNBC-TV18.
Talking about divestment in BPCL, Concor, SCI and BEML, Mehta said: “We have been hearing about this thing for a long time, every time the BJP [Bharatiya Janata Party] comes to power they think of this privatisation, but somehow it never goes through. It is not just disinvestment, it is giving up the power to control a sector or a company that is a bit difficult from a political perspective. Once you give up BPCL, it will change the dynamic of the entire oil distribution business and whether they are prepared for that.
"If you give up Concor it has ramifications across the board for the economy and for other PSUs as well. So it is not just the money, I think it is giving up of the control which I think is more difficult and if they are able to go through with that then I would say that is really a fantastic reform and you can start with tipping your toes in the water and see how it plays out.
"Look at smaller divestments and then look at big one. I would not buy any because we don’t know what leverage they will get sold off and who the new management will be, it could easily be that they will do inter-sale — what they have been doing.”
The auto sector has bore the brunt of the ongoing economic slowdown with most companies trading tepidly on the markets. Most automakers have drastically reduced prices to entice customers in the festive season. Mehta believes the sector is on the recovery road.
"I am convinced that the volumes may move up at the secondary and the primary level as the OEM [original equipment manufacturer] and registration is concerned but the way the discounting is happening that is what concerns me.
"If the average realisations are lower for the auto companies it is going to start impacting topline and more importantly the operating profit margins. But nonetheless, I think the fact that volumes are raving up is definitely positive for the industry and gradually these things tend to build up.
"With a good monsoon and expected pick up in rural spending I think this is the beginning of the first steps of revival in the auto industry. I don’t think we should pin our hopes too high that they go back to the double digit type of growth, but at least the process of turnaround in the sector has started and maybe 5-6 months down the line you could have better numbers and more importantly sustainable growth.”
He added: "The structural issues are less as far as two-wheelers are concerned so we are still remaining invested in Eicher Motors and maybe even buy Eicher Motors if we are convinced that the sales volumes have picked up and how their export strategy has played out.”
On Indiabulls Housing Finance stock, which tanked 34 percent on Monday, Mehta said: “This is not the first time Gagan Banga [vice-chairman of Indiabulls] has come out and spoken about their company. They have been extremely transparent as far as their affairs are concerned but yet the market continues to hammer the stock down.
"So specifically about Indiabulls Housing Finance I would still stay away at this point of time. If Indiabulls were to be impacted in any form if their rating were to get go down it will have severe ramifications for the entire banking sector because they are big lenders as far as the banks are concerned. So let us hope that there is no negative news flow at least from this company.”
On other stocks, he said: “As far as stocks are concerned let us look at some of the entertainment stocks likes of PVR, INOX may look interesting.
"We have got several blockbuster movies which have come through in the second quarter so although valuations are on the higher side good trading bounce can be expected in the entertainment and multiplex companies per se. Then there are select FMCG companies like Zydus Wellness — very impressed with their numbers, even United Spirits and by and large we have been positive on pharma as well.”Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.