Speaking to CNBC-TV18, Gopal Agarwal, Senior Fund Manager- Equity of Mirae Asset Global Investment Management (India) said that they are looking at around 25% Sensex EPS growth in FY08 and around 19% Sensex EPS growth for FY09. He added that markets will remain robust in the next 2-3 months.
Excerpts from CNBC-TV18�s exclusive interview with Gopal Agarwal:
Q: Is the F&O figure giving you a feeling, alongwith other evidence, that the first quarter of 2008 could see some extraordinary level of bullishness?
A: The liquidity levels in the market are likely to be very good for the next 3-4 months, as a lot of NFOs in the market are likely to mop up nearly USD 3 billion and insurance companies are also going to get good money in the next 3-4 months. This means that in the next 2-3 months, the market will remain very robust.
Also, some indication of the Q3 results, which have come in, in terms of advance tax numbers, show that we are going to see very healthy Q3 results. Considering that factor, the market is seeing some robustness.
Q: What kind of liquidity are you expecting from the FII quarter. One has seen a tapering of liquidity in November and a decent performance in the first half of December, not carried out in to the second half. In the past, January has seen huge FII flows. Do you think that would be replicated?
A: Definitely, we will see some of the FII interest returning back to India, because the Indian market offers you reasonable value. Our market is currently trading at 17 times FY09 earnings, considering the embedded value in the system. We also offer the highest visibility, in terms of earnings growth, amongst all the emerging markets. So, definitely FII interest will come back to the Indian market.
We may not be sure whether we will see that kind of inflows we have seen in 2007. But certainly, FII interest will come back to the Indian market.
Q: What is the kind of Sensex EPS growth, that you are projecting for FY08 and FY09?
A: For FY08, we are looking at around 25% EPS growth and around 19% EPS growth for FY09 basis. In terms of that, we would look at around Rs 990 of EPS for FY09. There are around 3,200 points of embedded value, which the market is factoring for the businesses, which are still not making profit or are still not commercial.
Q: Sectorally speaking, which are the broader themes, which you would be looking at very closely, as a fund manager and investing in? What would your strategy be on IT, pharmaceuticals and autos ?
A: In the pharmaceutical sector, it is totally on a company-to-company basis, because there cannot be a very broad strategy on the pharma sector. So, we are analyzing clearly on a company specific basis. Therefore, we will be investing into these companies, based on the developments in a particular company.
In the IT sector, we are underweight. It does not mean that we can completely negate the sector. At a particular price point, it offers you great value. The companies are showing good volume growth. Our expectation is that the rate of rupee appreciation will decline going forward.
If the billing rate is going to increase, it will take the pressure off, on the cost side and it will be very positive for the IT sector. So, we would be looking forward for the quarterly results trend and also the billing rate, going forward, which will give us a very good sense on the IT sector.
As far as the automobile sector is concerned, we are more bullish on the four-wheeler sector. Definitely, we have some bets on the commercial vehicle and passenger vehicle.
Q: In January to March, what would be the sectors that you would be comfortable with?
A: In the January-March quarter, we are going to witness that the mining sector will continue to do very well. Also, we will see some activity coming in the energy sector because a couple of IPOs are planned.
Definitely, there will be some action in the energy sector. We also have to see how the banking sector performs because till the year to date, credit growth is not as good as what we have seen in FY07. So, a clear trend will emerge in the next quarter of how the banking sector is going to perform from here.
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