Dawnay Day bullish on RIL, BHEL, Ranbaxy

Sheshadri Bharatan of Dawnay Day AV Financial Services advised investors to buy frontline stocks like Reliance Industries and BHEL as well as some select pharmaceutical companies like Ranbaxy.  He told CNBC-TV18 that realty and banks are to be avoided for the time being.

Excerpts from CNBC-TV18’s exclusive interview with Sheshadri Bharatan:

Q: Tell us about the inflation number and how the markets have reacted to it. Do you think they have shrugged off expectations?

A: The inflation number is around 11.63% while the market was expecting around 12%. If you look at the inflation number week-on-week, there is a clear trend that somewhere we are seeing inflation peaking out. So, markets are taking cognizance of it. The other point is that most of the stocks are at such levels that some of the funds would be buying into these stocks, especially the frontline stocks. Yesterday, we saw buying happening in Bharti, BHEL, R-COM, etc.

Today also we might be seeing frontline buying, especially in real estate stocks like Unitech and DLF. DLF has a buyback offer and the board meeting is scheduled for July 10. These factors would be there in the market today.

Q: The Finance Ministry is saying that inflation is likely to touch 13%. Is that something that would worry you for the near-term?
 

A: At this point of time, if you look at the markets inflation is a cause of concern as well as international oil prices going up. To a certain extent, it is political instability as well, which we thought would affect markets. Last week we had bad time on that. But it seems that the government would survive. The question to be asked is what would be the scenario in case the political equations change here. All these factors would play a role in the market in the near future.

Q: Inflation week-on-week is not peaking off. The numbers are not giving comfort at all. What do you think is still holding the market up? Would you say that resilience is something, which we should buy into, and therefore this would be a buy period at all for stocks?
 

A: The heartening fact is that the government has come out and said that inflation peak would be around 13%. So, what was happening was people were trading into unknown territory. Today, you know this is the level which inflation might touch.

There is a pullback rally happening in the market. But the general trend of the market is downwards. So, we might see sporadic pullback rallies in the market like we saw on Wednesday, where we saw a 700-point pullback rally. But that magic could not be sustained next day.

In this market, there are people who are trying to buy in some selective stocks and trying to take the market up. Till we have clarity on international crude oil prices, political stability and inflation numbers, the market would be on a rollercoaster road.

Q: How would you advise an investor and a trader at this point? Should a trader climb on and play this rally? What should an investor do? Will he definitely get better levels pretty quickly?

A: In these volatile markets, a trader makes a lot of money in put and call options. As far as the investors goes, he should start nibbling in frontline stocks. He should look at stocks which have good fundamentals. The reason why the markets have come down is because of a lack of liquidity. So, as and when liquidity returns back in the market, one might see these stocks going back again

Q: What are you advising an investor to buy?

A: We are advising clients to buy into frontline stocks like Reliance Industries and BHEL. We are also advising them to buy into some of the select pharmaceutical companies like Ranbaxy.

Q: Are you advising interest rate sensitives like realty and banks?

A: Not at this point of time.

Disclosure:

It is possible that we would have advised clients some of the stocks I have discussed and they might be holding in their portfolio and I might be holding in my portfolio.