Bullish on telecom: DBS Chola
Q: How would this month shape up for the market?
A: This month began on a very lackluster note; I don’t think it came with a lot of open interest positions built up. Looking at the derivative, I feel that although we need to consider a wider range considering the volatility in the market, support should be somewhere at 3,850 looking at the put-call position and probably it may attempt to once again move towards its earlier peak of 4,200.
Q: What is the call on both - tech and autos - sectors post the earnings season?
A: Going forward, taking a view on technology with the concerns on rupee appreciation would be a contra call. Next quarter too if we see Ebitda margins sustainable for these companies then I would have to retract my view of a contra theme for the IT sector. I believe we need to closely watch auto numbers that come month on month to look at topline growth. Auto as a sector has not done too well in the last 12 months and have already been underperformers. Any bit of positive news would drive prices up, added to that you have Maruti disinvestment coming up in the sector, and you could also see some other big outsourcing story etc coming up in the auto ancillary space. It’s a sector we have to at least have a neutral view as far as our fund house is concern. But on IT, I would rather have a contra view at the current moment.
Q: Do you think quality midcaps have more headroom to run and would you say there is a very good chance that the markets can test their old highs of 14,700 any time soon?
A: Midcaps are very scrip driven; it’s very news driven, very specific about results pertaining to each company that comes out. One has to be very careful, we cannot broadly comment that midcaps as a general theme would run away. I would rather say that it would be more news as well as results driven in the sector.
Q: As a fund manager at levels of about 13,900 would you sit on higher cash or have you been buying?
A: In open-ended schemes the fund managers should not keep any cash. If at all its needed it would be in single digits to tide over liquidity. I believe that at all points of time there are opportunities that exist and one needs to buy into those stocks, which look undervalued. My asset call between cash and equity would be to remain invested fully.
Q: How do you play the telecom sector, very good results coming from that space but would you say most of it is already in the price only?
A: Today’s results of Reliance Communications reiterated the fact that it is a growth sector which one needs to continue looking at. The kind of EBITDA margins these companies are showing today makes me believe that there is lot of steam left in the sector, and I would say that one needs to be overweight going forward as well. I don’t think the price levels today are not sustainable going forward because I see the topline growing at a robust 30% and bottomline too are in that range of 25-30% for most telecom companies. If you give them PE of between 20-25 times with FY08 earnings consensus then I think they still look a lot to go up from here.
A: This month began on a very lackluster note; I don’t think it came with a lot of open interest positions built up. Looking at the derivative, I feel that although we need to consider a wider range considering the volatility in the market, support should be somewhere at 3,850 looking at the put-call position and probably it may attempt to once again move towards its earlier peak of 4,200.
Q: What is the call on both - tech and autos - sectors post the earnings season?
A: Going forward, taking a view on technology with the concerns on rupee appreciation would be a contra call. Next quarter too if we see Ebitda margins sustainable for these companies then I would have to retract my view of a contra theme for the IT sector. I believe we need to closely watch auto numbers that come month on month to look at topline growth. Auto as a sector has not done too well in the last 12 months and have already been underperformers. Any bit of positive news would drive prices up, added to that you have Maruti disinvestment coming up in the sector, and you could also see some other big outsourcing story etc coming up in the auto ancillary space. It’s a sector we have to at least have a neutral view as far as our fund house is concern. But on IT, I would rather have a contra view at the current moment.
Q: Do you think quality midcaps have more headroom to run and would you say there is a very good chance that the markets can test their old highs of 14,700 any time soon?
A: Midcaps are very scrip driven; it’s very news driven, very specific about results pertaining to each company that comes out. One has to be very careful, we cannot broadly comment that midcaps as a general theme would run away. I would rather say that it would be more news as well as results driven in the sector.
Q: As a fund manager at levels of about 13,900 would you sit on higher cash or have you been buying?
A: In open-ended schemes the fund managers should not keep any cash. If at all its needed it would be in single digits to tide over liquidity. I believe that at all points of time there are opportunities that exist and one needs to buy into those stocks, which look undervalued. My asset call between cash and equity would be to remain invested fully.
Q: How do you play the telecom sector, very good results coming from that space but would you say most of it is already in the price only?
A: Today’s results of Reliance Communications reiterated the fact that it is a growth sector which one needs to continue looking at. The kind of EBITDA margins these companies are showing today makes me believe that there is lot of steam left in the sector, and I would say that one needs to be overweight going forward as well. I don’t think the price levels today are not sustainable going forward because I see the topline growing at a robust 30% and bottomline too are in that range of 25-30% for most telecom companies. If you give them PE of between 20-25 times with FY08 earnings consensus then I think they still look a lot to go up from here.
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