Auto, metals, banks to lead in the March quarter, IT to lag: Kishor Ostwal

IT stocks are a good buy only as long term investment, says Kishor Ostwal, CMD, CNI Research in an interview with Pranati Deva. He also added he sees Nifty reaching 9,600-mark by the end of 2017. Edited excerpts

With Indian markets currently trading near record highs, do you think the time has come to turn cautious or would you think the ride has just started?

The ride is just started. With GST playing right, economy digesting demonetisation and global rally in place, the Indian markets have entered the bull market now, which will sustain.  The biggest drivers for the market will be political stability and reforms process. FPI from tax heavens have invested heavily in February and March as there is STCG of 7.5% post March 2017 on FPI from tax heavens.

Nifty has moved nearly 10-11% this year, where do you see it headed?

For the year 2017, I see Nifty crossing 9,600- mark. The index may also test 5 digit before the end of the year.   

With earning session starting this week, do you think it will give direction to the markets going forward? Which pockets do you see underperforming and outperforming this season?

I believe March quarter earnings will not set directions for the market. The lingering effect of demonetisation will be visible on various sectors.  Market will definitely go up, Q4 results hardly matters. The way our economy is shaping with hopes that GDP will cross 8% in FY 18 and 8.5% in FY 19; these factors will keep on driving the markets. 

Auto, Metals, Banks and Oil & Gas will be outperforming this season whereas IT sector will be laggard this quarter.   

Do you think IT stocks are a good buy currently with the volatility seen in the rupee? 

IT stocks are a good buy only as long term investment. The Indian domestic IT spending will be huge plus for this sector.

The way midcap stocks have moved, how long do you think the rally will continue?   

I think some midcaps are overpriced and some are still under priced. Investors should book profits in overpriced stocks and try to enter undervalued stocks. This will also protect them from capital erosion. 

What is your opinion on PSU banks? We see a rally coming in on that one but there are issues like NPA that persists. Will that be a good investment?

I think PSU banks stands out to be good investments. The NPA issue is history now. The stringent provisioning norms made even some recoverable loans as NPA. In course of time there will be recovery which will re rate stocks. Also, the overall expansion of the economy augurs well for credit off take. This will improve the PSU banks working.    

How do you think the geopolitical concerns will impact Indian markets? With Trump unable to pass the healthcare bill and the war on Syria, do you think that will affect the market?

I do not think these will affect our markets on long term basis. These events, though will create short term jerks, but they will get easily absorbed. Indian markets have digested many more issues before like the biggest of all- demonetisation.