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Next trigger in mkt is going to be valuations
May, 29th 2010

The Eurozone crisis is serious, but wont have much impact on the Indian market. Theres a bottom being formed, which will provide an opportunity for investors to buy and create long-term investments. ET NOWs Nikunj Dalmia caught up with Dinesh Thakkar, chairman and managing director of Angel Broking, who identifies pockets of value in the current volatile market.

What is your outlook for the Indian market for the next six months?

The current downtrend may last for a month or two, because there is a serious issue in terms of whats happening in Europe. But having said that, I dont think that we are into a kind of a sustained downtrend. The market will stabilise at the levels of 4700 for the Nifty and 15,500 for the Sensex, Thats where I see a bottom being formed. This would be an opportunity for investors to buy and create long-term investments. Over the next two years, the market could go up by 40%. So, one should be focused on this upside rather than getting worried about whether the market can go down by 5-7% from here.

Why are you so confident that we will be able to escape the European problems?

The US economy, which is around $14 trillion, has quite an influence across the globe. And hence, the problem in one country spreads to others. But if you take a look at the troubled Eurozone, the countries average around $4 trillion. So, this time, the quantum is very less and if you see this bailout package, its a massive $1 trillion. When the US was in crisis, the bailout package was a mere $1.5 trillion. That too, to bail out a $14-trillion economy. So, this time, I feel that the recovery would be faster and impact would be far lesser.

What could be the next trigger for the Indian market earnings or liquidity?

I feel that the trigger is going to be valuations. When the market comes down, it will offer great value on the table. If you look at last years liquidity, a lot of hedge funds came in and took opportunity of good valuations in India and took the opportunity of interest arbitrage, too. But this time, I feel that long-only funds are more interested in India and, this time, they would invest in our country.

Lets talk about sectors. Do you still like financial stocks?

Yes, financials still remain our favourite. When we talk about sectors, we take a 5-10 year view. In fact, if you ask me, at least for the next 5-10 years, our theme would be to go big on financials. We like this sector, because we know that this is in proxy to Indian economy. We are bullish on banking and if you are talk about specific players, we would go for ICICI Bank. We like that stock and with its recent correction, it has become more attractive. We also like large-cap banks like Axis Bank and SBI.

What is your view on IT stocks?

I like the software sector, it has a significant potential. If you look at exports, it is around 17-18%, which is quite low, if we compare exports with far more-developed countries like China and Korea, where exports are almost 40-50%. As we evolve and the Indian economy evolves, we will see a significant increase in exports. And India being a global leader in IT, the IT sector will definitely expand.

Can you share some specific ideas?

Among large-caps, we like TCS, but one aggressive bet that we like is Tech Mahindra, we look at it as a multibagger. I see the possibility of a merger with Mahindra Satyam. With a long term view on the generic business and India being a global leader in IT, on a long-term perspective, it is a good bet and in the short term, the stock has attractive valuations.

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