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Deven Choksey of KR Choksey Securities said the markets will remain rangebound till certainty comes in. "Money from bonds and the commodities should flow into equity this particular quarter and that thing would probably stabilize the market to a great extent. We still have the uncertainty prevailing on macroeconomic as well as corporate fundamental factors. On corporate fundamental factors, we could get some kind of answer once the earning season starts. Till such time, we see the markets staying rangebound with the Sensex trading in the range of 14,700 to 18,000 levels."

Excerpts from CNBC-TV18’s exclusive interview with Deven Choksey:

Q: How low is the participation in these past few days?

A: Both from the institution side as well as from the retail client side, investor is completely absent. Even the trader is present but with a very low volume. Most of them want to trade in a very narrow band. We are seeing a typical situation wherein they would like to exit between 3% and 5% gains and the same would be the situation in case of loss. So, on either side the stoploss is getting figured or profit is booked. The range is remaining very narrow.

This particular situation will probably continue till we have some more certainty coming in. There is one factor out of three, which is likely to become slightly positive in April-June quarter. That is the factor of liquidity which otherwise impacted our market in the January to March quarter.

The money from bonds and commodities should flow into equity in this particular quarter and that thing would probably stabilize the market to a greater extent. We still have the uncertainty prevailing on the macroeconomic factors as well as the corporate fundamental factors.

Q: What did you make of BHEL’s numbers? The market seems quite disappointed.

A: Honestly no. The management admitted that they have provided for the wage increase of 40%. If we take that factor into account, then the numbers on the bottomline are not that bad. The order flow is not slowing down. They have confirmed that against Rs 50,000 crore worth of orders that they received in FY08, they are likely to receive more than Rs 40,000 crore order in FY09 as well, which is important and reassuring. It suggests two things; one is that the earning growth is continuing for BHEL. But most importantly, the economy is not slowing down.

So, the numbers are not so disappointing. They are only if we take this provision into account. With higher volumes in the next year, we might see profits coming in and the earnings looking quite attractive if the market goes down further

Q: What have you made of Indiabulls Securities?

A: The favour is not with the sector. That is the reason for which they are getting badly hammered. Otherwise, I do not see any other problem. We may have to see how badly they are impacted as far as the quarter-ended March is concerned.

Volumes were lost because of the lull in the market. If they have some amount of provision done for the bad debts, that would be an important thing to be observed. The industry as a whole has been suffering with this particular problem on the bad debt side because of the sharp fall in that particular quarter. So, one will have to actually wait for the numbers to come out before taking any call on the company.

Q: What is the call on autos at this point, given the interest rate scenario? What is the expectation for FY09? How are you playing the sector?

A: If one wants to play this sector, one will have to play this sector closer to the festive season. At that point of time, either the demand will pick up or there will be some kind of clarity on the interest rate scenario.

Historically, in this quarter, I don’t think demand is going to be in favour of auto companies. So, if one wants to look at it from a timing point of view, then auto can be avoided for this particular quarter. One can look at it during the July-August period and start investing in auto companies.

Fundamentally, some of the companies have started valuing very well. So, if the market does give an opportunity at lower levels then one would be compelled to look at some of these companies.

Q: How have you read talk of the steel price curb and putting curbs on exports? What would you do with some of these steel stocks now?

A: From the earnings point of view, things may not be going too bad. Even if the government has to ensure that the steel companies do not raise price, they may not be driving them down to push below a level to which they will have to sell steel. So, to a greater extent, they will hold the price. Cost pressure may be there in the balance sheet of most of the companies. Those who are integrated players will remain relatively safe compared to those who are not integrated players. The second line of steel manufacturers would badly get impacted.

Valuationwise, these companies have gone down quite substantially. But my major worry for these companies is the intervention of the government into the micro-management activities. Last year, it happened with cement and this year it is happening with steel. One never knows which other sectors will be targeted.

If such kind of dictation comes in from the authority, wherein the companies are forced to bring down their prices, it may affect them badly as far as their future growth is concerned.

Q: Apart from IT, which are the other sectors that you will be keenly watching out for in terms of earnings?

A: IT companies will give a good guidance as far as future growth is concerned. It will also give signals of what is going to happen in America as far as subsequent quarters are concerned.

What I liked about BHEL’s announcement is that they are not seeing slowdown in order book position. That means that in the capital goods segment, the maximum amount of attraction is because of the infrastructure spending continuing.

If this slowdown is not seen in the order book, it means that in general the economy is not having too much of an impact at his point of time.

As of now, I stay optimistic on the capital goods segment. Other than that, one will have to be very selective and stock-specific instead of looking at the sector. Some of the banking stocks are definitely looking attractive, if one wants to trade on the valuation at this point of time.

Q: What are you hearing from the traders in terms of participation? Is that going to remain on hold till this whole STT issue is resolved? Do you think the arbitragers and traders are coming back to the market?

A: I think not immediately because the STT issue is unlikely to get resolved very soon. These traders are unlikely to come back to the market in quick succession. They are not gaining anything and so won’t participate.

Once delivery-based activity starts, probably they will find a new way of creating an arbitrage into the market. Then, they will return and that activity will definitely take time, at least an additional couple of months. So, I don’t think they are going to come back with strength in this market and operate. A small portion of players may continue to occupy themselves and may play around in the market. But larger volume will not come.

Q: How are you reading the pharmaceutical space? We have been hearing a lot of M&A activity happening in that segment. What are you advising your clients?

A: In a couple of stocks, particularly in companies like Cipla, it’s a strong candidate for growth. Against the domestic market growth of around 11-12%, this company is growing more than 15% in the domestic market. The new formulation plants they have is probably going to add a lot of value to them in the generic market for the export business. So, Cipla looks stronger of the lot in the pharma space followed by Ranbaxy. In the second half of this year, when the R&D unit is separated, the main company’s balance sheet will be seeing some amount of value profits which is otherwise not getting reflected into the books. So, these two companies stand out distinctively as far as the pharma space is concerned. Other companies may have some value. But these two have a lot of merits given the kind of price at which they are quoting today.

Disclosures: It is safe to assume that my clients and I may have an interest in the stocks/sectors discussed.

Source: Moneycontrol.com