Nifty may take out 8800-9400; buy with 18-24 month view: IL&FS

With events such as a Fed rate hike and the Reserve Bank monetary policy lined up in June, shares could remain choppy in the near term, says Vibhav Kapoor of IL&FS.

But the medium term outlook remains strong even as two risks, a weak monsoon and Brexit, could upset the applecart.

In an interview with CNBC-TV18, Kapoor said that even as valuations from a short-term perspective may look expensive, investors should buy shares with a 18-24 month view.

IL&FS yearend target for the Nifty is at 8,700-9,100, which may go up to 8,800-9,400, he said.

Sonia: Things have been hunky-dory for the market in the month of May. That age old theory of sell in May and go away has not worked for anyone. What is the sense you are getting about the month of June? Do you think this bonhomie could continue?

A: I don’t know about the short-term. We have already gone up a lot. So some correction could always happen. We have two-three important events in June. We have the Reserve Bank of India (RBI) policy here and then we have the Federal Reserve meet and then we have the British referendum. Then we have the onset of the monsoons. So we have to look at all those.

However, by and large that is going to be immaterial as these are all short-term things. So you could have some correction in the market. The overall trend is undoubtedly up now. There is no doubt about that. Therefore, over the next few months or over the medium-term, we are going to see higher levels coming forward.

Reema: Even if the Fed hikes in June, you think it is priced in and the global markets can conquer that and move up?

A: What has happened of late is that, the global markets seem to have become very comfortable with a small rise in interest rates in the US and the way investors are looking at it is that this means that the US economy is doing well. Therefore, a moderate increase in interest rates is not going to hurt anybody and it has been taken as a positive.

My feeling is that, you are probably going to have a situation where there is going to be moderate hikes in interest rates in the US, moderate strength in the economy in the US and probably all over the rest of the world including emerging markets. So it is going to be pretty good situation for equities to be in globally and my sense is that you are going to have a substantial upmove in equities globally and not only in India but also in the US and other emerging markets.

Sonia: This kind of consensus bullishness is a bit scary. 10 out of 10 people who we have spoken to so far believe that the market is moving up higher in the near-term and medium-term and that is when you know for sure that the market may just not oblige but what do you think could be the risk to the market on the upside?

A: One is that in the short-term, it may not go up. So I don’t know about that because we have already gone up a lot. The biggest risk from the Indian market point of view is the monsoon. If the monsoon forecast does not turn out to be correct and if the monsoon fail or there is a repetition of the last two years then obviously that is a big downside risk to expectations. So I think all that we are saying is keeping an assumption that the monsoon forecast will turn out to be correct. That is one big risk.

The other risk at least temporarily could be negative British referendum result in the end of June, which could then cause a fair amount of volatility in markets all over the world including India and you could get some sharp downside moves for some time.

The other risks of course have been the Chinese risks for hard landing but I think that has reduced very significantly over the past few months or a recession in the US, which obviously doesn’t seem to be happening.

Then at the end of the year, we have the US presidential elections, which is completely an unknown at this point of time.

Looking at the overall picture, I think provided the monsoons are good and the forecast turnout to be true, we are headed for a substantially good period over the next few months.

Reema: This quarter Larsen and Toubro   (L&T) positively surprised after many quarters of a disappointment. Would you start betting on the investment oriented sectors as well as individual stocks and if yes, which ones?

A: I think, it is still a bit early for the capital good sectors to play that because that is a late cycle sector and we are in the early stages of this cycle. However, yes, some signs of improvement obviously had started coming in and over the next 24 months, this theme could play out very well.

However, before that probably there are other themes to play upon, which is basically the consumption theme, the finance companies, rural oriented consumption particularly. Those themes will play out earlier and then you will have the capital goods at a later stage.

Sonia: Don’t you think these finance companies, the non-banking financial companies (NBFCs) or even the consumption oriented stories have gotten a bit crowded right now? Everyone is buying into paint companies, into NBFCs like Shriram Transport , Bajaj Finance   etc, where do you see value here?

A: They have, there is no doubt and that is why I am repeating again that maybe in the short-term for the next one-two months nothing much may happen. The markets may go into a correction or they may go sideways. However, what happens is a bull market is that the valuations always keep ahead of the fundamentals and that is what is going to happen again.

So they will always look expensive but as time goes by, the market starts to discount things well in advance or right now it is discounting maybe FY17 and then maybe four-five-six months down the line, it will start to discount FY18 and so on and so forth.

So, they will look expensive and they are expensive in the short-term. I think what is going to happen is in particularly if you have a good monsoon and if this global scenario plays out, your growth rates probably in earnings are going to be much higher than what the market is anticipating right now if not in FY17 definitely in FY18 and FY19. So we remain pretty bullish on that.

Reema: This quarter also many auto companies like Bajaj Auto   , Tata Motors   have positively surprised the street but these are stocks, which have already seen a near 50 percent recovery or pullback from their February lows. Would you still recommend a buy on auto stocks or do you think it has run up too much and you would wait for a bit of a dip to enter?

A: Generally, auto industry will be one of the bigger beneficiaries of an economic revival particularly in the rural economy. Therefore, over the next 24 months or if you look at a 24 months perspective, these stocks are not very expensive. They might be expensive in the short-term. So this is a market where you need to look at it from an investment point of view. You need to look at an 18-24 months horizon. If you are looking at a six-nine months horizon, you will find almost everything expensive and you may not be able to buy anything. So you have to look at a longer-term perspective, it is an investment market.

The other thing is since it has gone up a lot, probably it is not good to chase stocks at the moment, you will get a correction sooner or later, you always do and that will be the time to buy.

Sonia: If you had to give us a range for this market, what do you see as the upside for this range because we are not too far away from our all time highs? In over the next three-six months, how much higher do you think this market could head?

A: We had a target for March 2017 of between 8,700 and 9,000-9,100. If things go well globally as well as the monsoons are good, I would up that target a little bit from 8,700-9,100 to maybe 8,800-8,900 to 9,400.

MSCI rejigs global index: These stocks will get impacted

MSCI has revamped its global standard index, and the changes are effective from tomorrow. CNBC-TV18′s Nimesh Shah explains the impact this will have on Indian stocks whose weightages will get affected.

The announcements were done two weeks back. The changes will be effective from close of today.

For four stocks, which got added to the MSCI Global standard index, Bajaj Finance   , Havells India   , Yes Bank   and Titan , the biggest inflows will come in Bajaj Finance of USD 102 million whereas stocks like Titan and Yes Bank will see inflows of close to USD 100 million.

The bigger stock to watch would be Tata Motors   . The company’s free-float has increased, which should mean that that stock will see inflows of close to USD 240 million. That explains the kind of build up that has been seen in the F&O market as well.

In the smallcap indices, 23 stocks got added to the MSCI smallcap indices and eight stocks got deleted. The impacted ones, among others, are some public sector undertaking (PSU) bank stocks like Canara Bank   , Bank of India (BoI) .

There are a lot of these midcap stocks which have got added to the MSCI smallcap indices: SpiceJet   , V-Guard , Supreme Industries   .

Eight stocks got deleted. Of them, Ricoh is anyway suspended for trading, but Trent   is another stock that is getting deleted. Even the likes of GVK Power   , Bombay Dyeing   are the few stocks which got deleted from the MSCI.

Bottom-up investing difficult; valuations not cheap: Kotak IE

The Indian markets have a lot of things going for it from the macro perspective but valuations may not be cheap once a stock investor gets done to researching ideas, says Sanjeev Prasad, Senior Executive Director and Co-Head Strategy, Kotak Institutional Equities.

In an interview with CNBC-TV18, Prasad said earnings are likely to pick up going forward, thanks to an expected economic recovery in the second half of the fiscal and low base, but said cheap valuations were difficult to come across stocks and sectors.

He picked out consumer discretionary and autos as offering moderate value but said most of the market’s recent favourites — investment cycle pick-up beneficiaries, NBFCs, oil marketing companies — as stocks that had already run up.

In the interview, Prasad also talked about changes that Kotak Insitutional Equities had carried out to its model portfolio.

Latha: What is the sense you are getting? Are we getting overpriced, would you dip in and buy even now because earnings are better than you thought?

A: The issue is if you look at the market on a top-down basis, things are looking good. You have had a lot of reforms in the past two-three months. Economic data turning out to be positive and also results have been generally good. However, if I look at the market from the bottom-up basis, that is where the struggle starts. We don’t find that many attractive ideas at this point in time. If you look at the broader market on March 2017 earnings basis, Nifty is already trading at about 18 times.

This is not on any conservative set of estimates, we are looking at something like 19 percent growth for the Nifty 50 index for March 2017. So challenges, even though you are looking at things, which will improve from where we are, the momentum will continue. Earnings numbers will look good at least for next three-four quarters because the base itself is very low for the first three quarters of last year. So all that is good news. the challenge is how do you combine that with valuations which have started to look fairly rich across many other sectors now.

Latha: I wanted to take that valuation argument forward for the finance companies. We have seen some vertical gains in stocks like YES Bank and probably well deserved. You spoke about valuations in public sector banks now probably looking compelling although hedged with perhaps one more year of high provisioning. Will you now want to stop buying YES Bank and start buying an SBI or even sell a YES Bank?

A: We have been positive on a set of banks which includes the traditional names such as an HDFC Bank or IndusInd Bank where you don’t really have any issues with non-performing loans (NPL) issues or the book out there and on the other side the call we had taken was a buy a bunch of banks such as Axis Bank and ICICI Bank which were obviously very good when it comes to a Current Account, Savings Account (CASA) profile 40 percent CASA for both of them, good liability franchise. Yes, there are issues on the asset book but they are both sitting on fairly large amounts of capital, capital adequacy ratio (CAR) is fine and these banks will come out even though there may be two or three quarters of pain as far as the NPL numbers are concerned and at one point of time when let us say when Axis Bank was at Rs 380, ICICI Bank was below Rs 200 more or less they had started to trade at one time book adjusted for the value of their subsidiary. So, that is when we got really excited about these names. So, we haven’t really changed the stance, so, that continues. So, we are still positive on the likes of good high quality banks such as HDFC Bank etc. To play the economic recovery you also have a fair bit of NBFCs, all the three segments whether it is consumer finance, whether it is CV finance which is through Shriram Transport or mortgage based through LIC Housing Finance.

Sonia: I see in your model portfolio that you have added Bajaj Finserv to your list of stocks. In fact 200 bps of Bajaj Finserv is added to the large cap model portfolio. Both Bajaj Finance and Bajaj Finserv have been great wealth creators in the past. Don’t you think that a large amount of the juice is already out or is there still a lot more to go?

A: We have been doing a little bit of trading in the stock to be honest with you. In the sense Bajaj Finserv has been there for a very long time in our portfolio, all the way from Rs 1,000 or so. At about Rs 1,750 we had taken it out about few months back and about a month back it had come down to Rs 1,650 or so and again I added it back, that is the only change. So, it is not as if we have changed our stance too much over there. Just that we have always like the company, it has been a good long term investment, it has given lot of returns. It just had become very pricey a few months back when it had gone to Rs 1,750 and when it came down I just decided to add it back, that is about it.

Latha: What about the traditional favourites, auto ancillaries. Anything in that space that caught the eye. They used to be run away rally stocks. Do they still have value?

A: Not really. We are not positive on any of the auto ancillaries at this point in time in terms of valuations. We were positive on things like Minda Industries, Suprajit Engineering limited, some of the smaller names. But even they have had a pretty good run up in the last few months. So, we had to downgrade most of the names. If I remember correctly battery companies we have reduced rating. Motherson Sumi we have reduced. From practical purpose most of the auto component companies we have reduced rating as of now.

Latha: Real estate, are you coming back to that space?

A: No, excitement in that sector. The sector will start performing when you start seeing some volume recovery. As far as residential market is concerned so far we are still not seeing any real recovery there. As far as the commercial segment is concerned that continues to do well. The balance sheet of the company seemed to be okay for at least some of them but then on and off we keep hearing that some of the companies seem to be borrowing at rather expensive rates in the market which probably suggest that the cash flow situation is not as good as what the P&L maybe suggesting. So, I would be a little bit careful about most names at this point of time. We do like some of the stronger ones such as Oberoi Realty or Sobha Developers which have a decent balance sheets but in general not very excited about the sector at this point in time.

FRBM review panel chief says will also look at state finances

The panel appointed by the central government to review the 12-year-old Fiscal Responsibility and Budget Management (FRBM) Act will likely go into the subject of central as well as state finances, its Chairman NK Singh says.

In an exclusive interview with CNBC-TV18′s Shereen Bhan, Singh, a former revenue secretary and Rajya Sabha MP, said the panel held its first meeting on Saturday to discuss its terms of reference.

The FRBM Act, enacted in 2003, deals with the subject of fiscal policy, and seeks to curb the country’s fiscal deficit. Its targets, to bring down fiscal deficit to 3 percent by March 2008 were suspended by the UPA government in the aftermath of the global financial crisis, but it has seen several complaints regarding the rigidity of constraints it lays down on spending.

In the Union Budget speech, Finance Minister Arun Jaitley had called for the need to review the FRBM Act, even consider the possibility of having a fiscal deficit range, as opposed to a single target.

“We will certainly be consulting with states,” Singh told CNBC-TV18. “State governments feel that while the Centre has a lot of flexibility, they have been straight-jacketed. States have been complaining about lack of funds despite the increased devolution.”

Q: I do not want to get you to pre-judge this issue, because I know that this is a matter that is now being deliberated on by the committee that you head. You have until October 31 to present your recommendation. So, I am going to ask you this purely in an academic realm because these are concerns and issue that have been raised with the fiscal responsibility and budget management (FRBM). Let me ask you about the meeting that was held over the weekend. That was the first meeting of the FRBM panel. Was that essentially to sort of suss out the terms of reference that the government has given you?

A: It was a preliminary meeting where we wanted to discuss the roadmap, the contours, the procedures of work. It was largely a housekeeping kind of activity which is to be expected in the first meeting. But we did go into some of the issues which are in public domain. So, there is no great secret the debate which has raged not only in India, the debate has been raged all over the world. And also, who are the kind of people with whom consultation should be taken. This is the issue on which there are a large number of stakeholders, not this smallest of which are state governments because state governments are very keenly watching what are the kinds or rules of the game that the central government prescribes for itself. And whether the same would be applicable to them or not.

Q: Absolutely. In fact on that point you have pre empted my next question, because the former Deputy Chairperson of the Planning Commission, Montek Singh Ahluwalia in a piece that he wrote on the need to overhaul the FRBM had said that the FRBM Act succeeded in disciplining states, because states cannot borrow without the centre’s permission. But it was spectacularly ineffective in disciplining the centre. Would you agree?

A: I do not know whether it was spectacular or not, but Montek was very much a party to whatever was done. So, for the ten years in which he headed the Planning Commission, the part of the culpability really rests also on his doorsteps, if not personally.

But the time for instance, when Mr P Chidambaram pressed the pause button in wanting to augment gross budgetary support or the government support expenditure and that when Vijay Kelkar [committee on fiscal consolidation] did – the second one, which was to revise the roadmap that was prescribed — it was that the central government brought more flexibility with itself, then they were very much a partner with it.

And that it is true, however, that state governments really felt that while the central government has brought flexibility, the states have been straitjacketed.

Q: Since we are talking about states, let me ask you this in the context of what has been recommended by the 14th Finance Commission as well and what that would then mean in the context of the new FRBM, so to speak. How do you portion what the centre bears, what the state bears, also keeping in mind the combined fiscal deficit?

A: One of the terms of reference of this FRBM committee, if you look at the terms of reference, it is talking of the finance of the government as a whole which means that the union and the states. Without specifically referring to the states, it does imply that the implications in respect of states, need to be factored in any recommendations which are made. And to some extent, yes, you are right that the rules of the game and the overall milieu has been dramatically altered by the recommendations of the 14th finance commission. Not only in terms of the much larger devolution to 10 percent points higher devolution – from 32 percent to 42 percent is a very large number in absolute terms.

But what happens to really the central support mechanisms, for centrally sponsored schemes, for many activities which are exceedingly important. It is quite curious that many states have really brought it to the Prime Minister’s notice, that they do not have money to, for instance, do the Sarva Saksha Abhiyan, on health issues which is curious, because they have got a significantly higher devolution in absolute terms.

And that you cannot have really both. You cannot have a much higher devolution and not still wanting to depend. But anyway, the fact remains that we have traversed a big distance from the time when state governments were really seeking the reserve bank support for overdrafts. From there this particular thing of imposing fiscal deficit constraints and fiscal constraints and moving towards fiscal rectitude by the states has something repaired the states’ finances very significantly.

But how much of borrowing they can do for supporting that infrastructure from out of the internal resources because do not forget that in addition to this, the state governments also have public sector under takings many of which are run very inefficiently.

And particularly with respect to the power sector, the efforts of the power minister Mr Goyal at repairing the finances of the power sector of the states has been a significant and a quantum shift in the way in which the power sector finances are being managed. But these all need to be factored that how is a states borrowing needs to be accommodated along with a degree of fiscal discipline which would be consistent with the overall framework. And that therefore, the central and the state governments need to act in tandem and in harmony.

Q: So, the states will be large stakeholders as part of the consultation process when your committee sits and deliberates on these.

A: By all means. We certainly will be consulting the states.

Postal dept’s payments bank to have diff ownership model: Min

Union Communications and IT Minister Ravi Shankar Prasad said having committed to invest Rs 400 crore in Department of Post’s payments bank venture, the government is considering a different ownership structure to run the arm professionally.

Stating that it is targeting to launch the bank by March next year, he said, “We propose to have Rs 400 cr investment by the government and the rest by way of equity. The final architecture will come about then.” When asked if he is hinting at a possible equity dilution in the payments bank venture, he said, “It would be a separate architecture from the postal department. The bank will be run professionally.” However, the minister did not explain the structure of different ownership.

Speaking at the specially-convened meet, which is part of a plan to elaborate the government’s achievements across the country, Prasad said the Narendra Modi regime believes in empowering its officials.

“This government gives discretion to its officials and the system. Why do you want me to take decisions on their behalf? We give them freedom, we only help them by enabling atmosphere,” he said.

The Postal Department was one of the 11 entities to be given in-principle nod by the RBI to launch payments banks.

Three of the chosen entities – Cholamandalam, Tech Mahindra and Dilip Shanghvi-Telenor-IDFC – have already said they would be surrendering their licences citing aggressive play by competition.

When asked about the concerns expressed by these entities, Prasad said, “We are neither jittery, nor happy. Let there be a fair competition. The one who wants to come, will come.” He said the approval (to Postal Department) is only in-principle and in the move towards getting the final nod from RBI, the department will be moving some proposals before the Cabinet.

He said the department has embarked on giving 4,000 hand-held devices to the rural postmen on a pilot basis and will soon be rolling out 1.3 lakh of such machines, which will help them sell third-party products, make e-commerce deliveries, etc.

He said a major chunk of the department’s over 1.5 lakh post offices is in the hinterlands, which contributes over 60 per cent of the e-commerce players’ catchment area.

After starting an e-commerce delivery station in central Mumbai’s Parel, Prasad today laid the foundation stone for a similar facility to come up in the satellite city of Navi Mumbai’s Airoli node, which has been planned as the single-biggest facility in Asia.

Over 22,000 post offices have already been connected under the core banking system and the department has also started over 800 ATMs, he added. PTI AA BEN SDL ABI .

RBI to infuse Rs 15,000 cr liquidity next week

The Reserve Bank will buy government bonds worth Rs 15,000 crore through open market operations (OMO) next week in order to infuse liquidity.

This is the second OMO within a week to infuse liquidity in cash starved banking system. RBI yesterday bought government securities of Rs 15,000 crore.

Based on the current assessment of prevailing and evolving liquidity conditions, the Reserve Bank has decided to conduct purchase of government securities under Open Market Operations for an aggregate amount of Rs 150 billion on May 31, the central bank said in a statement today.

There is an overall aggregate ceiling of Rs 150 billion for all the securities in the basket put together.

Purchase of security would help in release similar amount of money in the market and ease liquidity condition.

RBI further said it can purchase marginally higher than the aggregate amount due to rounding-off effects and other relevant factors.

RBI can accept or reject any or all of the offers either wholly or partially without assigning any reason, it said.

The result of the auction will be announced on the same day and payment to successful participants will be made on May 31.

Nifty likely to touch 8900 by end of this year: IDFC Sec

Following an above-average earnings report of corporate India in the last quarter of FY16, this fiscal year could see a growth of 20 percent in earnings, says Anish Damania, CEO and Head, Institutional Equities at IDFC Securities.

Upgrades are coming through in this quarter and we are seeing tangible signs of recovery, he said, speaking to CNBC-TV18.

He believes Nifty may touch 8900 levels by end of this year.

His stock picks include Larsen and Toubro   (L&T), which he believes will outperform in the next year or so.

As for ITC   , there could be more impact on the stock, as government looks to bring in more controls in the liquor and cigarette businesses.

Among midcaps, he prefers Adani Transmission   .

Q: What is your take? Let us talk about the big stock of the day, L&T. Has the bus been missed at around Rs 1,400 or do you think upside will be capped at around that Rs 1,500?

A: L&T has been a story — if you look at Q3, they had pretty much announced that their guidance for the year is going to be so much. So if they had back-calculated, probably these were the numbers, which would have come about in Q4.

However, what happened in the past three quarters was a lot of disappointments so analysts were little conservative and obviously because of that even the fund managers were very conservative. Now it is completely under-owned stock. I have been on road shows and L&T were a consensus sell in the fund management industry.

These numbers show that there is traction, execution is happening. So from that perspective we have seen a margin beat, we are seeing a sales beat, we have seen a profit beat. However, there is some disappointment on the order inflow but that is for the quarter.

Given that the guidance is now about 15 percent growth in order inflow and 12-15 percent growth in sales, I would say that we are at the start of that upgrade cycle in L&T and whether we are at the start of an upgrade cycle, I have found that the stocks keep on outperforming.

So my guess is that barring this move today, the stock will continue to outperform in next one year.

Q: So being under-owned — a lot of our retail public there are wondering whether they get it at Rs 1,350, should they dip in?

A: I will talk to my institutional investors and I will tell them that yes, this is the time to buy this stock.

Q: Let us talk about big heavyweight, ITC. That is something you have been fairly cautious on. You said that you don’t like it too much, the numbers look quite good for ITC, would you be relooking at that or do you believe that it is a completely avoid?

A: My sense is that now consumers have got into another category called consumers related and every state government, someday or the other comes and says liquor ban or cigarette not to be sold in this fashion or that fashion, taxes keep on going up on these things and there is no certainty on what is going to come about. So, it has become a budget play rather than a structural play in that sense.

We have seen over the last several years that cigarette volumes have declined. So now with these new regulations coming up, where you need to put big signs of smoking is injurious to health, maybe there could be some more impact coming through. So I am not so gung-ho on that.

Q: We have always been talking about private sector banks. We have Yes Bank today at around Rs 1,000. I have heard you talking about IndusInd Bank as well in the past. From the banking space, is there that temptation, go in there and just pull in one of those public sector undertaking (PSU) banking stocks into your banking portfolio?

A: Yes, of course there is this huge temptation because a lot of stocks have fallen. There has been a lot of kitchen sinking, which has happened, the Reserve Bank of India (RBI) has been extremely at the forefront of getting this sorted out. Government is working on the non-performing assets (NPA) issue on a massive scale and the banks have been asked to report and take all the skeletons out.

I would believe that the skeletons are out. It is there in that domain and now one needs to take a call as to whether a recovery will mean recovering some of those write-offs back. That is something which we still need to analyse.

I would say that one can go into bigger banks like a State Bank of India   (SBI). It has corrected quite a lot and we should start nibbling at those positions now. We have turned overweight on the financials in the last two months. SBI result is expected on May 27 so we are waiting for that. Let us see what SBI reports but I am sure a lot of kitchen sinking will be done and probably that is the time when you need to go into buying SBI.

Q: Let us talk about earnings growth then for FY17, what exactly is the earnings growth you are estimating this year. In the past you have said around 20 percent, you are sticking with that? Do you believe that there is some upside to that?

A: No, I think 20 percent is a  fairly robust target to give because we have not seen — over the last five years, the growth has been about one percent compounded annual growth rate (CAGR) and to talk about 20 percent means you are building in a lot more upside.

I am a lot more confident that it will happen because we are starting to see — except the financials where we saw a lot of kitchen sinking — upgrades come through. This is the first time when I am seeing in this quarter that upgrades are coming through. So, analysts had slashed their estimates quite a lot. We are seeing very tangible signs of recovery in the economy. So I would go more towards the fact that we would see 20 percent earnings growth.

Q: Year-end target for the Nifty and give our viewers a few midcap picks as well?

A: We are looking at a target of 8,900 and that stays right now for the time being. We will look at it as the earnings season progresses. If the earning season progresses over the next two quarters the way we are anticipating, maybe there is a chance for an upgrade in those targets as well.

In terms of midcaps, clearly, I am preferring to buy some beaten down midcaps where a lot of people would find — at this point of time I am not seeing anything but we are seeing that if this happens and it is already there in the price and if this happens, the stock could literally double.

So Nava Bharat Ventures   and Adani Transmission are the two stories, which I would go with. They are non-consensus and they are probably something which people would want to look into.

Morgan Stanley upgrades India outlook to overweight

Global investment bank Morgan Stanley has upgraded its outlook on India to ‘overweight’ from an ‘equal weight’ rating. While the bank hasn’t given any target for the index, it says that certain key events will help boost market sentiments.

The bank believes that India is becoming a low-beta market within the emerging market basket. India’s relative valuations and positioning amongst fund managers have come off from its record highs, the report says.

Also, the bank sees lesser rich valuations and less crowded positioning for India. Attractive dividend yields on the back of rising dividends per share are another reason for the rating upgrade.

This dividend improvement, the report says, is mainly due to improving corporate balance sheet.

Besides dividend, Morgan Stanley says that macros are now turning positive. The bank expects atleast a 50 basis points rate cut during the year.

A higher probability of Goods & Services Tax (GST) getting passed this year and expectations of normal monsoon are big catalysts for Indian equities, mentions the report.

The bank expects a 3 percent earnings growth in FY16 and 14 percent growth in FY17.

India woos Chinese investors, promises conducive environment

India today promised a conducive environment for Chinese investors and urged them to participate in ‘Make in India’ and other flagship programmes of the government to boost bilateral trade.

“We will facilitate your efforts to make your investments in India profitable. We must take advantage of the opportunities that abound in the growth of both our economies,” said President Pranab Mukherjee addressing a meeting of the India-China Business Forum here on the second day of his four-day visit to China.

The forum, attended by industrialists and businessmen of both sides, was told by the President that India would like to see greater market for Indian products in China in a bid to balance bilateral trade which is now in China’s favour.

This, he said, would particularly be needed in sectors where the two countries have natural complementarities as in drugs and pharmaceuticals and IT and IT-related services and agro products.

“It is a matter of satisfaction that there is emerging focus on two-way investment flows,” he said.

The President noted that the bilateral trade between India and China has grown steadily since the turn of this century from USD 2.91 billion in 2000 to USD 71 billion last year.

Guangdon province boasts of a USD one trillion economy with high manufacturing and other industries along with being a powerful export house of China. It has sister province relationship with Gujarat and Maharashtra.

A pilot smart city cooperation project has been announced between Shenzhen and the Gujarat International Finance Tec-City in Gujarat last year.

Referring to the links of 2nd century before the Christian era between Guangdong and Kanchipuram through a direct sea route, Mukherjee said this is an exciting time for India and China to reinforce the old linkages and join hands for new.

Noting that India has recorded a growth rate of 7.6 percent each year for over a decade now, he said India believes that it cannot grow in isolation.

“In an increasingly interconnected world, India would like to benefit from technology advances and best practices of different countries.

“The comprehensive reforms introduced in key areas of our economy have enhanced the ease of doing business in India.

Our foreign investment regime has been liberalised through simplified procedures. And removal of restrictions on foreign investments,” he said.

The President said these reforms have renewed the interest of global investors in India. In 2014, there was a 32 percent growth in investments and in 2015, India emerged as one of the biggest global investment destinations, he said.

May release consultation paper on call drops, if needed: TRAI

With Supreme Court dismissing Telecom Regulatory Authority of India’s (TRAI) provision of a penalty for call drops, the body is now mulling over steps that can be taken to protect consumer interest.

Earlier this month, the apex court had said that telecom companies cannot be fined for call drops and had also said that the Parliament can make and enact a call drop compensation rule.

Any decision taken by the TRAI will be preceded by a consultation paper, said the regulatory body’s chairman RS Sharma.

If need be, then the body will release the consultation paper over the issue of call drops and how consumers can be protected, he told CNBC-TV18’s Prerna Baruah. If a consultation paper is released, then inputs from stakeholders will be considered.

Q: What do you think about the call drop issue?

A: We think that the TRAI has the mandate and the duty to protect the interest of the consumers and this regulation was brought essentially with that objective. While the regulation has been quest, we will continue to protect the interest of the consumers. So we are now deliberating within TRAI as to what should be the road ahead for us and we will come with that proposal as and when we take that call and decision.

As I said, we are still deliberating the issue. There could be many other things, which could come in and as of now, we have not come to any conclusion.

Q: If you could just throw some light, will it be in the form of a fresh consultation in line with the Supreme Court?

A: Whatever decision TRAI comes up with, it is always proceeded by a consultative process. It is an extremely inclusive consultation process which takes place, which means the TRAI puts up a consultation paper, which sets out the issues under consideration and thereafter the views of the stakeholders are invited. Those views are posted on the website of the TRAI.

Thereafter we also invite counter comments on those views. After that we have an open house discussion where every stakeholder is invited to participate and give its views. Thereafter we basically arrive and when we arrive at a decision, we also give what is called an explanatory memorandum, which sets out as to why we arrived at a decision, the logic of that decision.

So, all the decisions, regulations, orders, recommendations are done after a consultative process. So, we believe that we are certainly a model of transparency for other agencies to emulate. We follow an extremely transparent and open process.

Q: Will we soon hope for a consultation paper being floated by to protect the consumer interest?

A: In case TRAI decides to do that. As I said, we have not come to any decision as to what should be the next course of action but in case we decide to take any action or any kind of other thought, which we have, we will bring it out in form of a consultation paper.