Markets

It is a quality driven market, cyclicals lagging behind: Devang Mehta, BNP Paribas

Talking to ET Now, Devang Mehta, BNP Paribas, says when the market breadth improved, along with the large-cap stocks, midcap and small-cap stocks all came to the fore and did well.

Edited excerpts:

ET Now: Did the 2 per cent market move this week surprise you?

Devang Mehta: Not at all. We have always been deploying money on dips and asking our clients to do so and we have been saying that this is a market which clearly is driven surely more by liquidity. But clearly one thing is quite evident that quality will keep on commanding that premium and the theme of the rally has generally been expensive, becoming more expensive as well. The sectors which have not been doing well are currently also punished but one thing was quite evident in this week that the market breadth improved simultaneously and along with the large-cap stocks, midcap and small-cap stocks all came to the fore and did well.
It is clearly a quality driven market where your good stocks, your good businesses would tend to do well whereas the other businesses which are so called high debt businesses or cyclicals would continue to lag behind.

ET Now: Any view on ONGC? Do you think that it can reverse the underperformance that it has had for so many years?

Devang Mehta: I would not be in a position to comment about individual stocks but except for some of the upstream companies, there has been a dream run in a lot of downstream City Gas Distribution companies. This is one place where a lot of money is still waiting to come into such types of businesses but again no comment on the individual stock.

ET Now: Can you just tell us about the entire PSU lot or not including the banks but the entire public sector enterprise names like NMDC which can be included or except PSU banks? What are your view on PSBs?

Devang Mehta: Generally we do not have much of a coverage on such type of PSUs but I think there is a little bit of I can say fancy amongst the investors as all of these stocks are more or less undervalued and some of the stocks also sort of give you good dividend yield plus they are all divestment candidate so the only problem is that the overhang of the divestment remains in the shorter to medium term though long term some of this generate good cash as well as they also need to give dividend to government who is the largest investor and in that way, even the investors get benefited. So, selectively some of those would be attractive bets for purely long term.

ET Now: What exactly would be your outlook on the stock given the fact that they are talking about the monetisation of VSNL land and the cabinet note coming in soon?

Devang Mehta: As I said before, I cannot comment on individual stocks but yes this is one sector we have been avoiding along with other weak sectors like IT and pharma where earnings growth is still an issue and there are more headwinds than tailwinds.

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