Grasim Industries reports Q3 net profit at Rs 333.61 crore

Aditya Birla Group firm  Grasim Industries today reported a consolidated net profit of Rs 333.61 crore for the third quarter ended December 2014. The company had posted a consolidated net profit of Rs 331.93 crore during the same period of previous financial year, Grasim Industries said in a filing to the BSE.

The company reported consolidated net sales of Rs 7,888.53 crore in October-December period as against Rs 7,063.43 crore during the same quarter of last financial year.

The consolidated revenue from its Viscose Staple Fibre (VSF) and Wood Pulp segment was Rs 1,607.26 crore during the quarter under review as against Rs 1,613.45 crore in the same period of last fiscal. Its consolidated revenue from cement division was Rs 5,947.15 crore this quarter. It was Rs 5,169.59 crore in third quarter of FY14.

Revenue from chemicals division was Rs 441.63 crore this quarter as against Rs 259.73 crore in same period last fiscal. Grasim Industries said “figures for the quarter and nine months ended December 2014 are strictly not comparable with previous periods” due to merger of Gujarat cement units of Jaypee Cement with UltraTech Cement , a subsidiary of the company. On the company’s performance, Grasim Industries said: “Implementation of growth plans led to significant capacity increase in both VSF and cement businesses.

At the greenfield VSF project at Vilayat, 99K TPA capacity has been commissioned during the year. With acquisition of Jaypee cement units in Gujarat, the cement capacity increased by 4.8 million.” On the outlook, the company said VSF sector will continue to face headwinds for some more time due to over capacity and sharp reduction in price of cotton and polyester. Moreover, cement segment would grow as demand growth in the long term is likely to be over eight per cent.

“With additional capacity coming on stream in both the businesses, the company will further consolidate its leadership position,” it added.

Market technically overbought; paper supply to weigh: Dutt

The market is technically overbought and unlikely to rise much in the near term, feels Sanjay Dutt of Quantum Securities. He compares the ongoing rally with the frenzied bull market of 2007-08, and says the recovery in corporate earnings has already been discounted.

“We are a tad overbought, global factors aren’t helping in any manner,” Dutt said, adding, “so a combination of these should pull the markets back before we take the next leg up and come into that 9,400-9,500 range after we breakout of 9,100-9,000 range.”

In an interview to CNBC-TV18, Dutt says the market still looks from a medium term perspective, but the government needs to address the issues being faced by small and medium sized companies.

He expects liquidity flows to be strong, but the supply of share offerings is expected to cap market gains.

Dutt is bullish on financial services and banking stocks, and is betting on capital goods and EPC (engineering procurement and construction) companies to play the domestic recovery.

Latha: Markets are in terribly cheerful mood, you want to play party pooper?

A: The viewers should mute the channel when I am speaking right now because I got it totally wrong. I wasn’t expecting this when I last spoke to you and I was expecting a reasonably good retracement to the 8,000 range. Markets always are smarter than us. Let me hazard a guess as to what lies ahead. I think markets are purely running on momentum, liquidity and expectations right now.

The real earnings, the fundamentals need to catch up a lot but at the same time as most analysts will tell you and everyone will tell you that markets are always factoring in the future therefore, it is probably a future what is built into the prices. If that be so, I think there isn’t much scope for the markets to go up in the immediate short-term.

If I continue to maintain if there is a possibility, there could be a reasonably good retracement and that would be a good time to add in to investment buys. I maintain that the medium-term to long-term outlook of the market is very positive. It is the short-term retracement that I think is long overdue, even technically we are a tad overbought, global factors aren’t helping in any manner. So a combination of these should pull the markets back before we take the next leg up and come into that 9,400-9,500 range after we breakout of 9,100-9,000 range.

Latha: Does this period remind you of 2003 when the markets steadily built up — until 2003 we did not have great numbers in terms of earnings but thereafter earnings picked up and we had a nice secular rally all the way up to 2006-2007, does it remind you of that period or does it remind you of a frenzy that we saw only between 2007 and 2008 when markets ran on only money? Where is it more akin?

A: I think it is more akin to the only money and the India story because on ground, things haven’t changed as yet or aren’t changing that fast as we want them to.

It is only most of us on the Dalal Street or in front of a trading screen, they are feeling very optimistic but when you talk to on-ground, hardcore business people particularly the real engine of our economy, the real heart of our economy that is the medium and small enterprise, they are struggling with a lot of problems right now.

I think those need to be addressed at the grass root level and once that activity picks up, obviously the initiatives are being taken by the current dispensation that is Prime Minister and his team on Make-in-India and those kind of issues sorting out bottlenecks, those would lead to that. That is the reason why I maintained that medium-term looks good.

However, what we are seeing right now is more akin to the 2007-2008 frenzy in the immediate short-term. If numbers catch up faster than what we think today, probably this momentum would maintain and we wouldn’t get that pullback that I am looking at and lose some of my gains and be left behind.

But then I will catch up probably later on because there is no doubt that there is a structural change in the way government is looking at business, the way businesses are changing, the way the entire landscape is changing and will change. It is just that these three-six months is what we all are trying to comment and game on. At least I am trying to comment and game on.

Sonia: We have a slew of paper that will be hitting the market in the near-term. In your assessment generally when there is supply of paper, does it affect the market in a big way or is it just about a 2-3 percent downtick and then we resume our uptrend?

A: If the downtick does happen, it will not be 2-3 percent, it will probably be bigger than that. Yes, paper supply does impact the market. For instance in Coal India, approximately USD 3-4 billion will get sucked out. Therefore, paper supply does move out a lot of money that is meant for equity allocations particularly out of global emerging market portfolios as well as domestic portfolios but liquidity flows to India would continue as long as the reform momentum and all these measures that are being spoken about are implemented and on ground one sees action.

However, the real stuff we need to see is that the core economy starts to pick up, that is credit offtake, capital goods, employment numbers those take time but those need to pick up, we haven’t seen them picking up in the last nine-twelve months but those need to pick up substantially. Bank balance sheet is getting sorted out. We know government is working on them, we know their right intentions whether it is power sector or bank non-performing assets (NPAs) etc but stuff needs to radically change there for the entire economy to pick up and the numbers to change. So it is not just about these 100-200-300 big companies that drive our economy. It is that real heartland that needs to feel everything coming back to that robust level.

Sonia: Let us talk about how to approach this market sector wise now because the good part is that since the start of the year, the rally has been so secular, Hindustan Unilever Ltd (HUL), Axis Bank, HDFC, Larsen and Toubro (L&T), you cut across all sectors and you have seen gains of 20 percent but from hereon what would the sectoral approach be for investors?

A: Financial services and banking looks good because things like insurance, things like widespread reach of financial services and banking whether it is mutual fund (MF), non-banking financial services (NBFCs), those kind of businesses then of course if you are betting on the economy recovery then capital goods, EPC, infrastructure, contracting companies because that is the only way that you will see a revival in the investment demand, revival in the capex cycle, everything else and it is all flowing down to the grass root level. So these are the sectors out of big companies that I would look at which I think would give good returns.

Latha: Speaking of financials, the public sector undertaking (PSU) bank numbers that we got from Union Bank and Oriental Bank of Commerce (OBC) were quite disastrous especially the bad loan creation. Is this a good time to buy them?

A: I would take that risk. We have seen the worst of the PSU balancesheet hits. Most PSU banks have been ultraconservative now and trying to provide for everything. So I think negativity as far as non-performing assets, restructured assets etc are all kind of built in and whatever would happen, would happen for the positive as to what Reserve Bank of India (RBI) is working on in trying to help banks solve the problem relating to these slow recoveries and these bad accounts.

Few emerging markets as good as India; like pvt banks: LGM

A combination of low inflation, declining interest rates and strong corporate earnings growth will support the ongoing rally, feels Jeff Chowdhry, Senior Portfolio Manager, LGM.

In an interview with CNBC-TV18, Chowdhry says India’s macro economic fundamentals have improved significantly over the last year.

He says he is not worried about the market levels and basis his investment decisions on whether the outlook on fundamentals is positive and what are the other alternatives?

Art this point, very few emerging market stories are as good as that of India, Chowdhry says.

He is bullish on private sector banks and select consumer names, and sees the rupee strengthening as the outlook on corporate earnings improves.

Latha: Its about 9 percent increase in the indices just in one month over 31 percent rally all of last year. Do you think the fundamentals are catching up?

A: The fundamentals throughout 2014 and into 2015 have continued to improve. The single biggest positive hasn’t been the election; it’s been the oil price. There are whole sectors and whole areas of Indian industry which will benefit as well as the macro position. So yes, the fundamentals have definitely improved since this time last year.

Latha: You would say this rally is largely accounted for by oil prices maybe global liquidity, not domestic improvement?

A: I think it has been multiple factors. Obviously the value started last year with the election of Mr. Modi, but there are number of things which have happened since then which suggests that the rally can continue for some period of time. The oil prices definitely big positive. India together with China and one or two emerging markets are big beneficiaries of the falling oil prices and some reforms have taken place – that is also positive for the market and looking forward I see lower inflation, lower interest rates and better earning growth, which is a powerful combination.

Sonia: We have seen that the expected Q3 corporate earnings have been lower than what the forecast was. Are you saying that we would have stronger corporate earning going forward and if yes, then when that would be?

A: The last quarter is a reflection of the past. It is much more important to look forward. Indian consumer has not reacted so far in a positive way to lower oil price and more money. We think it very simply, effectively the Indian consumer has been given a windfall in terms of more money in his or her pocket and that windfall will be reflected in increased consumer expenditure and a technical windfall in the sense that there are current account deficit, is going to come down.

Sonia: We have seen the Nifty move up about 8 percent in the month gone by. What kind of returns do you think one should expect in 2015?

A: I never worry about levels, I never worry about percentages. I look at it from the point of view is, is the fundamental outlook still positive, is there a tailwind behind that fundamental outlook and what are my alternatives in global emerging market context. I look around emerging markets and at this point in time, there are few stories out there which are good as India.

Bank Of Baroda Q3 profit tanks 68%, provisions & tax hurt

Bank Of Baroda  disappointed street on Friday by reporting a 68 percent (Y-o-Y) decline in profit at Rs 334 crore for quarter ended December 2014. Higher provisions and tax rate impacted the bottomline.

Profit of the public sector lender was expected at Rs 1,243.6 crore and net interest income at Rs 3,501 crore for the quarter, according to the average of estimates of analysts polled by CNBC-TV18.

Net interest income grew 7.5 percent to Rs 3,286 crore in the quarter ended December 2014 from Rs 3,057.1 crore in same quarter last fiscal. Net interest income is the difference between interest earned and interest expended.

Other income (non-interest income) increased marginally to Rs 1,090.35 crore from Rs 932 crore during the same period.

Domestic net interest margin declined to 2.92 percent during the quarter compared to 3.02 percent in previous quarter. Ranjan Dhawan, executive director expects net interest margin to stay stable at 2.92 percent.

Provisions for bad loans jumped 65.6 percent year-on-year (up 42 percent sequentially) to Rs 1,262 crore during the quarter with the provision coverage ratio at 62.37 percent as on December 31.

Tax expense doubled to Rs 743 crore in the third quarter of current financial year 2014-15 from Rs 372 crore in the year-ago period. The bank says tax expense worth Rs 375 crore was due to Dubai income tax levy.

Asset quality also deteriorated in October-December quarter as gross non-performing assets (NPA) rose 53 basis points year-on-year and sequentially to 3.85 percent. Net NPA climbed 23 bps Y-o-Y (up 37 bps Q-o-Q) to 2.11 percent in the quarter gone by.

In absolute term, gross NPA spiked 29.6 percent on yearly basis (up 18 percent sequentially) to Rs 15,453 crore and net NPA jumped 25.2 percent Y-o-Y (up 23.7 percent Q-o-Q) to Rs 8,291 crore in the quarter ended December 2014.

Fresh slippages jumped to Rs 3,042 crore from Rs 1,758 crore on sequential basis, says Dhawan (in press conference). “Domestic restructured advances were Rs 1,529 crore and global restructured advances were Rs 1,598 crore (against Rs 1,175 crore in Q2FY15) during October-December quarter,” he adds.

He further says cash recovery during the quarter was Rs 238 crore, write-offs Rs 328 crore and upgrades Rs 180 crore.

Addition of non-performing loans (NPLs) to loan book was higher than expected in the quarter gone by, says Dhawan, adding it will be tough to contain gross NPA at 3.1-3.2 percent as targetted for financial year 2014-15.

“We don’t expect NPA accretions to come down much in 1-2 quarter. Pressure on debt recasts and asset quality will continue in Q4 as we have major issues w.r.t 2-3 accounts,” says Dhawan.

Capital adequacy ratio (as per Basel III norms) increased to 12.42 percent during the quarter from 12.19 percent in previous quarter and 12.01 percent in same quarter last fiscal.

At 11:53 hours IST, the scrip of Bank Of Baroda was quoting at Rs 192.45, down Rs 25.00, or 11.50 percent after hitting a 52-week low of Rs 187.90 on the BSE.

HCL Tech Q2 net up 2.3%, $ rev rises 4%, issues 1:1 bonus

HCL Technologies , the fourth largest software services exporter in India, surpassed street expectations on every parameter on Friday. Profit increased 2.3 percent sequentially to Rs 1,915 crore during the quarter.

Profit was expected at Rs 1,770 crore on revenue of Rs 8,950 crore for the quarter, according to the average of estimates of analysts polled by CNBC-TV18.

Revenue grew 6.3 percent quarter-on-quarter to Rs 9,283 crore and dollar revenue rose 4 percent to USD 1.49 billion during October-December quarter (as against expected dollar revenue of USD 1.477 billion).

“We have posted yet another strong quarter with constant currency revenue growth of 6.2 percent (the highest in last 16 quarters) Q-o-Q and 16.2 percent Y-o-Y,” said Anant Gupta, President & CEO.

Constant currency growth in dollar revenue was far better than its peers Infosys (2.6 percent), TCS (2.5 percent) and Wipro (3.7 percent).

The company follows July-June as its financial year.

“Our continued focus in developing next generation propositions around digitalization, engineering platform services and target operating model for enterprise IT have allowed us to stay ahead of the innovation curve and gain significant market share in the Global IT services market,” he added.

Earnings before interest and tax (EBIT) during the quarter jumped 5.9 percent to Rs 2,210 crore but margin declined 10 basis points to 23.8 percent on sequential basis. Analysts had estimated EBIT at Rs 2,050 crore and margin 22.9 percent for the quarter.

HCL Technologies has maintained its USD 1 billion mark in deal wins for the eighth consecutive quarter. It signed 15 transformational deals in Q2FY15 with total contract value of USD 1 billion.

The software services exporter’s USD 50 million clients were 16 (against 15 in previous quarter) and USD 40 million clients increased by 2 to 22 in the quarter gone by.

“This quarter we crossed the 100,000 employee milestone. Our Ideapreneurs are creating unique value for our clients by delivering ‘Relationships beyond the contract’ and continue to be our most critical differentiators”, Anant Gupta said.

Blended utilisations (including trainees) stood at 82.9 percent during the quarter compared to 82.7 percent in the previous quarter. Attrition at its business services segment increased to 6.7 percent from 5.9 percent while at IT services segment attrition declined to 16.4 percent from 16.6 percent on sequential basis.

“We continue to do well in managing our working capital and delivered superior return on equity at 38 percent for Calendar year 2014,” said Anil Chanana, CFO, adding (in order to expand the retail base), the board has recommended issuance of bonus shares in the ratio of 1 share for every 1 share held.

The board of directors also announced dividend of Rs 8 per share.

Negative US inflation seen; mkt fairly valued: JP Morgan

The US Federal Reserve on Thursday said that the economy is expanding at a solid pace and repeated its ‘patient’ stance in taking a call on raising benchmark borrowing costs.

In an interview to CNBC-TV18, James Glassman, senior economist, JP Morgan welcomes the Fed’s decision and says the Fed’s goal is not to slowdown the economy but to merely step off the gas.

He expects the US inflation to continue to remain low and infact expects a negative inflation.

“I do not see inflation coming back within the range of Federal Reserve’s 2 percent goal for a year,” Glassman said.

“I do not think they wait for this to happen. As long as they feel that the trajectories are moving in the right direction, they will be willing to start slowly raise interest rates,” he said.

Latha: What are the key takeaways for you from the statement? Are you getting a sense? When would you place the first rate hike?

A: We do not get any sense from this statement on any clarity on what the Fed is going to do. They acknowledged that the growth is looking better but the inflation trends are moderate and they did recognise the uncertainty that is going on internationally. So I do not think that there is any clarity from the statement.

I think that some time by the end of the year they will try this. However, my peers are saying that the Fed may begin to raise interest rates by the June meeting. I think that is early because it is going to be very difficult for the Fed to discern how much of the oil intake affecting inflation. They have this view that inflation is going to slowly come back but the problem is we are not seeing much signs of pressures building on the labour market side, the wage front. My guess is that by later this year the time will come when the Fed will start to slowly do this but meanwhile we had Japanese and the European central banks buying assets, holding long-term interest rates down and so I am not sure whether it matters much what the Fed does as long as they are going to be patient to do this as a very gradual process way, which they will. The thing to remember is the goal of the Federal Reserve is not to slow the US economy down. The goal here is to take the foot off the gas.

Latha: Two subsidiary questions – (1) what is your assessment of inflation. The last reading was way below 1 percent. When do you see it coming back or anywhere close to 2 percent? Therefore, would the Fed wait for 2 percent before it hikes rates and (2) are you surprised that the Fed didn’t worry about the strength of the dollar. It seems to be casting its shadows on several of the earnings that came up? Wouldn’t they worry it as a reason why growth may slow?

A: On the inflation front we are going to see very low inflation nearly negative for a little while because what is going on with the oil markets, I do not see inflation coming back within the range of Federal Reserve’s 2 percent goal for a year. I do not think they wait for this to happen. As long as they feel that the trajectories are moving in the right direction, they will be willing to start slowly raise interest rates. I think they will be willing to anticipate but the problem is you have to see some signs somewhere that inflation pressures are building and the natural place to look might be wage front. It is not much going on there. In terms of dollar, the rising dollar is hitting earning for some companies but you have to ask why is this happening, why is the dollar rising particularly as the euro and the Japanese yen. It is because the central banks in those two regions are buying assets and stimulating their economies, holding on interest rates, so the US itself is not being hurt that much as much you might think from the higher currency because we are benefiting from lower interest rates and it is sort of offsetting, its connected to what these central banks are doing. So it does affect earnings and the translation that they tell you about but the dollar impact on earnings is going to be a short-lived phenomena, it’s a one time adjustment and let the dollar keeps moving.

Latha: Going by your analysis, is there reason to believe that India would be an outperformer?

A: I think the election was an important moment. What happened in India is very significant and everybody knows that the ability to invest in more infrastructures will help the speed grow up. The things that we see, that we cheer for the US economy are all there for the Indian economy. The very gradual policy changes that are taking place are going to be energising for the Indian regions. I think it takes time for these things to develop but the next several years are going to be promising for India.


India tops Credit Suisse Emerging Consumer Scorecard 2015

A strong government, easing inflation and growth recovery has revived consumer optimism in India, says a Credit Suisse report.

India tops the Credit Suisse Emerging Consumer Scorecard 2015, being the only country to score in the top three for medium-term expectations of personal finances, expectations of inflation, and household income trends alongside their immediate spending intentions.

A total of nine countries were surveyed for this report: Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey.

“More people believe this is a good time for making big ticket purchases as average household income increased by around 10 percent in 2014 after being relatively steady the two previous years. Fewer people are expecting inflation to increase – a sign that high entrenched inflation expectations have finally started moderating,” says the report.

The report highlights a few key themes:

(Excerpts from the Credit Suisse report) 1.

E-commerce and the emerging consumer

The survey has indicated that e-commerce across the nine countries could become bigger as a share of total retail sales than in developed economies.

2. Travel & leisure and the emerging consumer

The desire to increase future spending on holidays and travel has been a consistent theme of all previous surveys, and this continues into 2015. The propensity to travel has risen again in this survey with consumers holidaying rising from 45 percent to 65 percent during the life of our surveys with multiple holidays now a feature.

3. Autos and the emerging consumer

Mobility is another key trend for economies where GDP per capita is rising. India and Indonesia have the lowest household car ownership rates, at 19 percent and 7 percent respectively, and in that respect are a source of great potential.

4. Healthcare and the emerging consumer

Trust in local brands, safety concerns abating- The survey suggests an increase in overall trust for local brands. The correlation between a lack of confidence in local brands and a willingness to pay for international brands continues to be a key feature.

5. Brands and the emerging consumer

The relevance of technology and e-commerce is a new feature to this debate and highlights the significance of domestic rather than global e-commerce brands and platforms and the challenges it poses to the global software companies and networks.

Can sustain NIMs at 36% post investment phase: Justdial

In an interview to CNBC-TV18, Ramkumar Krishnamachari, chief financial officer Just Dial , shares his insights on the company’s Q3 numbers and his outlook for the upcoming quarters.

Latha: Can you just break up the top line growth of about 29 percent in terms of how much was volume growth and how much was realisation improvement?

A: If you look at the over all campaign that grew about 23.50 percent and the over all growth in revenue is being about 29 percent so you can balance, you can attribute between the volume and the overall growth to the pricing. This quarter we did do some pricing action but those are things that we do it on routine basis as and when opportunities arise.

Over all this is being a greater quarter in terms of the revenue in top line growth. There is no specific action as such on the premium campaign it is just that over all volume plus the pricing which is led to this revenue growth and that will continue it is no different from other quarters.

Sonia: Margins in Q3 have looked very healthy. In fact margin striped of ESOPS is the highest we have seen in the last many quarters. What led to that improvement and is that sustainable?

A: It demonstrates our ability to sort of generate this kind of margin if we are in a steady state. However we are still in an investment phase. We are investing in sales, in marketing; we are investing in Search Plus this will continue. We believe that, you will see increased employee addition in Q4. Other investments that we continue to make in Search Plus while it demonstrates what margins we can generate but the focus of our is on growth and other Search Plus initiatives where we are continuing to invest. I would say that at some point of time I would have a steady state at 36 percent sustainable margin but the focus is more on growth and investment in the right areas rather than growing up this margin.

Sonia: You had earlier told us that the employee stock ownership plan (ESOP) cost would average at about Rs 3.5 crore per quarter, this quarter it is higher at close to Rs 6 crore, will the average ESOP cost be higher henceforth?

A: The ESOP is normally the cost is front-ended in but the way the accounting is done, a lot of cost is upfronted in the initial years. So this quarter we did a lot additional number of — within 700,000 Q2 we allotted 350,000, this quarter we allotted another 240,000. So the cost of the additional grant of shares has come in this quarter. Hence the expense has been recognised. The entire 700,000 perhaps will be recognised in Q4. So there, we believe per quarter my cost would be about Rs 6-6.5 crore that we believe should continue in the next one-two years and then it will come down. Overall cost would be to the tune of about Rs 95-96 crore for the 700,000, which will be recognised as one time for the next five-seven years.

Latha: You have an approval to raise Rs 1,000 crore, will that come this quarter before March?

A: We have not found any immediate short-term or in the medium-term any adequate deployment opportunity of that fund hence the question of raising fund does not arise. As I said earlier, I reiterate that we will raise if and only if I find suitable opportunity to deploy this fund in terms of any organic action initiatives, we have not found anything, we are sitting on Rs 800 crore of cash right now. If at all the question of raising money comes, it will be only over and above whatever is the utilised cash. So right now, we have not found any opportunity to invest or deploy this fund hence the question of raising funds does not arise.

HDFC Bank, Lupin up on hopes to rake in more foreign moolah

Shares of both  HDFC Bank and  Lupin jumped 2 percent intraday Thursday on hopes of raking in more foreign moolah.

The private bank has got Cabinet Committee on Economic Affairs’ (CCEA) nod to raise up to Rs 10000 crore via foreign investment and is allowed to limit foreign holding in the company upto 74 percent of the total paid-up capital.

Brokerages are bullish on the private bank calling it a positive move. Jefferies maintains a buy rating on the stock with an increased rating of Rs 1255 per share. “With foreign limit at 74 percent  and foreign ownership at 73.4 percent, technically, the issuance can be slightly ahead of the 74:26 split. Management, however confirmed that they won’t use this capital issue to issue more rupee shares to create foreign headroom. We concur, as the size of issue is unlikely to move the ownership needle much, even as greater FII ownership implies better price realisation (ADRs and FII board trades at a decent premium over local shares),” it says in a note.

Nomura also reiterates a buy rating with hopes that Rs 10000 crore dilution will be 12 percent book value-accretive. “While at current Tier-1 levels of 11.8 percent (Q2FY15) there is no pressing need for a dilution, some pick-up in retail loan growth and higher threshold levels of equity capital under Basel III possibly explain a potential dilution,” it explains.

Meanwhile, Lupin touched record high at Rs 1539 per share as the CCEA has allowed itto increase in FIIs investment limit to 49 percent from 33 percent, which would result in foreign investment of around Rs 6099 crore in the country.

At 10:39 hrs HDFC Bank was quoting at Rs 1,074.75, up Rs 16.65, or 1.57 percent and Lupin was quoting at Rs 1,537.30, up Rs 23.95, or 1.58 percent on the BSE

Short term correction likely; US rate hike risk seen: Ambit

Market could correct in the short term as valuations have become rich and the recovery in the economy and corporate earnings is not up to the mark, says Pramod Gubbi of Ambit, Director-Institutional Sales, Ambit Capital.

In an interview with CNBC-TV18, Gubbi says private banks were vulnerable to a pullback as they had run up quite sharply. He is bearish on state-owned banks as he says they still face many structural issues.

Gubbi is advising his clients to buy Indian equities from a 2-3 year perspective as the long term story is attractive.

And while a lot of global risks are abating, the possibility of a rate hike in the US is very much on the cards, he feels.

He is closely watching the Budget for the government’s measures to revive the investment cycle.

Gubbi says the investment cycle can pick up only if government spending increases. He is more interested in the revenue deficit figure than the fiscal deficit number. He says it is fine even if the government exceeds its fiscal deficit target, as long as revenue deficit has narrows.

He says the government failing in delivering on structural reforms is a big cause of concern.

Another key source of risk for the market is a sudden reversal in commodity prices, he says.

Gubbi is bullish on consumer stocks, infrastructure, power and capital goods. and bearish on IT and pharma.

Ambit has a Sensex target of 30,000 for FY15 and a target of 36,000 for FY16.

Latha: Would you be scared of these fairly high levels which we have notched up very quickly? Eight or nine percent in just first 20 days of trading in 2015, is it too much too soon and good to perhaps take some profit?

A: From a short-term perspective when it happens, such as these last few sessions, that the rally is so sharp, it always concerned that there is a pullback around the corner and perhaps rightly so because while the future looks quite bright from every perspective be it global liquidity or domestic reforms, the underlying recovery in the economy and more particularly corporate profitability is not there yet.

So you do not want to reach a stage where you are looking at significantly rich valuations without a proper recovery in the earning cycle. So, I would think from a short-term perspective yes, worth looking out for a pullback but the future looks bright from a two to three year perspective. We still recommend buying into these markets.

Latha: At what levels would you recommend an investor to buy? For instance private sector banks, do they have to shed a lot of weight before you buy them. Would it be good to buy public sector banks if they shed weight now?

A: We have argued that if you are entering the market with reasonable long-term view, shorter-term valuations are less of a factor in terms of your overall returns after the three years. Having said that, the rally in financials particularly has been quite sharp moreso in private sector banks. Private sector bank is where we would perhaps be keen to see a bit of a correction. It is always nice to buy lower.

Giving the quality of some of these franchises, if it is illusive the sense of timing the bottom of the market might as well get in hold on for the long-term. Public sector banks would rather wait given there are structural issues where the government needs to pull up its socks and deliver the sort of reforms to recapitalise these banks if these banks were ever able to be part of the credit growth story in India. So, in that case we would not be in a hurry to buy at these levels.