Midcap cement and non-ferrous metals offering value plays: Sunny Agrawal

What do you make of the markets? Do you think that the next two weeks of May will be a week where the markets are going to take it a bit easy, try to consolidate and hover around those areas?
Sunny Agrawal: What I feel is that market is pre-empting maybe aggressive rate cut by RBI. So, we all know that RBI policy is in the first week of June, so maybe I believe that market is pencilling a kind of 50 basis point rate cut by RBI. And if you look at the screen, most of the rate sensitives are participating in the rally and at the same time the uncertainty pertaining to domestic as well as global uncertainty has reduced significantly.

So, it seems that the overall setup is constructive and even in terms of rate cut trajectory we believe that there is a great likelihood of further rate cut by RBI to the extent of 50 basis point in an upcoming meeting backed by the robust earnings growth by select few largecap companies. So, if you look at ICICI Bank, HDFC Bank have reported a very good set of number. So, again, stock specific activity is something. Again, overall, we continue to remain constructive at least from short-term horizon at a broader level.What is it that you are recommending to your clients right now? Where is it that you have your biggest overweights and underweights sectorally?
Sunny Agrawal: So, coming to sectors, right now we are overweight on selective names within banking, auto space, as well as oil and gas space. So, case in point, within banking as discussed earlier ICICI Bank, HDFC Bank we feel have reported a very good set of number and still there is valuation comfort. On PSU side, we are recommending Indian Bank.
We feel Indian Bank has reported relatively better set of number compared to it peers. So, Indian Bank we have got a price target of 650 around, so Indian Bank is one of our pick. Among the auto pack, we are riding on tractor segment through Mahindra & Mahindra. Again, a combination of tractor as well as SUV play, so Mahindra & Mahindra is a clear leader over there. And among the smaller player within the auto space Force Motors is something which we like.

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We believe that the company has been reporting very good set of volume number, so Force Motors is one of our top pick. And auto ancs also we like a few names such as smaller names like Lumax Auto, SJS Enterprises, Uno Minda which is more of a diversified play and at the same time if somebody is looking for an high-risk, high-return kind of bet, then Sona BLW where we feel that in case the US auto sector is again back on track, then Sona BLW can be one of the play to ride on US auto growth stories.Within oil and gas space, we feel the oil marketing companies are well placed, risk-rewards are favourable, so HPCL is a top pick within oil marketing companies. Cement and metal continue to remain a contra bet. So, we have seen that a kind of underperformance by both these pack during the last 6 to 12 months.

But again, we feel that over the period of next two quarter the earnings will improve sequentially. So, within cement pack we like a mid-sized players like Birla Corp which has recently reported a very good set of number. JK Lakshmi again a north-based player, so JK Lakshmi is a top pick. And to cover north-east belt Star Cement is one of our picks. And within metal, we would like to ride with non-ferrous pack, so, companies like Nalco.

We would like to bet our money on Nalco where we feel that valuations are still comfortable and relatively aluminium prices are hovering in the band of $2400 to $2600 to the tonne. Within the ferrous pack, we have seen a decent amount of recovery as far as the net sales realisation is concerned and we believe there one can ride that story through Tata Steel which is a kind of leader in the steel space.