Sensex to bottom at 12000 levels: Religare Secs

Amitabh Chakraborty of Religare Securities feels that the Sensex may bottom at around 12000 levels, while the Nifty may bottom at 3800 levels. The swing could be around 400-500 on either side, he added. His estimates are based on the analysis of the last bear market analysis. Chakraborty suggests that the Q1 results need to be watched closely now.

Excerpts from CNBC-TV18's exclusive interview with Amitabh Chakraborty:

Q: Do you think that the market is anywhere near finding support and are you sensing panic amongst your retail and HNI crowd?

A: At Religare, we are of the opinion that probably we are coming to the end of the whole fall. Basically our view is that around 12,000 Sensex levels or 3,800 Nifty levels, market will find a bottom probably. This is based on last bear market analysis, which actually happened in February 2000. Market fell from trailing PE of 20.6 to a trailing PE of about 12.8 in September 2001. Then market remained at that level upto about June 2003 and from there a four years bull market happened.

January 10, when the peak happened this year, we were around 28.6 trailing PE and currently assuming 10% growth in Sensex earnings then we get around 12,000 level. So we believe that 12,000 or 3,800 is the level at which the market will bottom out. Should that be the case of course the swing can be 500-600 points on this side, so it can be 11,500 nobody can catch the exact point. But the point that we want to make is that probably we are coming very near to the bottom where the long-term funds should get into all those A group stocks. When we say long-term, we are saying more than one-year horizon. But on a shorter-term, if we see probably there would be a bounce back from these levels and as they begin the market will come down.

We will be watching very closely Q1 results, our analysis shows and our report will be coming out tomorrow, that already we are seeing a slowdown for the last three quarters. So this will be a continuation of the same trend, but we will not be degrowing. So once that result comes out in Q1, there is no degrowth, but it is a slowdown from a high double digit. Probably it would be a single digit growth, but growth is still there and Q2 also we are expecting a same kind of trend, no degrowth but slowdown of the growth. If that is the case then I think market will trade positively.

Q: How would you approach a private sector banking space now?

A: In the whole banking sector, a lot of negatives have been talked about because of the interest rate hike etc, but actually interest rate hike does affect the treasury income. But the banks also increased their loan rate as well as deposit rates and Net Interest Margin (NIM) actually does not get damaged to that extent, but between private sector and public sector, we think that the public sector banks currently gives much more value. Many of those public sector banks are actually less than adjusted book value and no banks would trade below adjusted book value if the Return On Equity (ROE) is decent. In our opinion public sector banks are having more value at this point of time and one should get into those public sector banks.
 

Q: If you have to make up your mind and buy now, can you give us two to three clusters, which you would like to buy into if given your call that the markets are nearing in on a bottom?

A: Public sector banks, which are less than the adjusted book value that is a sector that we will be looking at. Also some of those capital goods sectors where a lot of selling has happened, I think we will be looking at that sector.

The sector that we will not be looking immediately though it has come down significantly is the real estate sector. We believe that real estate sector will be under pressure for some more time.