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Amitabh Chakraborty of Religare Securities said the markets would consolidate this year. “We may see a high of 25,000 but there could be a low of about 17,000-18,000. It would be a volatile, two-three high-low peaks and trough kind of market during the year.”

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

Q: PSU banks have been hot these last few days and UCO Bank has been the hottest why would you still buy it?

A: UCO Bank has gone up quite sharply. They have about Rs 800 crore in equity and are converting about Rs 300 crore to preference shares. There is also talk that they will be issuing Rs 445 crore as fresh equity. However, we are concerned about their adjusted book value which is at Rs 33. They have high NPAs. If one adjusts it, it comes to about Rs 33. At about Rs 80, we have Rs 2.25 per share kind of adjusted book value. We think the price has moved up quite sharply. At this point, one should be cautious to enter into UCO Bank.

Q: If you had it would you hold, sell, or book profits?

A: At this point of time, booking profits would be the right idea.

Q: UCO Bank’s management has indicated that they are not looking at a merger or an FPO. If both of those were to not happen, would you still be positive on the stock?

A: A number of news-based movements have happened in this stock. Keeping in mind the rise that has happened over the last one month, one should take profits at this point because all the numbers show that valuations are quite stretched.

Q: Another stock that you like is Gremach Infra. Why is that your preferred pick and do you have a price target on it?

A: Yes, we have released out research report. They are into oil rigs. They will be going for about 40 oil rigs, for which they are raising money. Lots of plans are still to be crystallized. We are very bullish on the oil exploration sector and believe that huge value can be created. It is quite undervalued according to us. We see huge potential and our target is currently close to Rs 800. As the plans get crystallized, we will probably be revising our target.

Q: How much upside do you see in the rice play, REI Agro?

A: We are very bullish on the food-processing sector. Rice is a part of food processing. We like REI Agro because they are also into retail. We are also positive on the retail sector. They are the largest basmati player, but the retail entry is what excites us. Our research report on REI Agro has given a target of Rs 1,000. As their retail rollout happens and as they get more visibility from the retail business, we will probably be having a re-look on our target price.

Q: Why do you like C&C Construction and what kind of price target does Religare have on it?

A: C&C Construction is a very unique construction company. Their EBITDA margin is one of the highest because of the road construction work that they did in Afghanistan, Bihar, and in the northeast. According to me, those places are slightly difficult to work. Hence, they get a higher margin naturally.

Also, the order book is much higher than other players in the market. They are L1 and have close to Rs 700 crore kind of orders. So, that also will be getting added. Overall, the order book is healthy, EBITDA margin is strong, and valuationwise it is quite cheap relative to the peer group in the construction sector.

Q: What have you been telling your trading clients about the market outlook in January?

A: One cannot talk about a month. For the whole year, our view is that it won’t be that easy. In the last three years, we have seen about 45% index return every year. 2008, would be the year of consolidation. We may see a high of 25,000 but there would be a low of about 17,000-18,000. This year, it would be a volatile two-three high-low peaks and trough kind of market.

Disclosure:
Religare has a research report on all the three stocks. Our clients might have positions on these stocks. Personally, I don't have any holding in these stocks.

Source: Moneycontrol.com