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Q&A: Ajay Parmar, Head Research Institutional Equities, Emkay

Source : BUSINESS_STANDARD
Last Updated: Thu, Aug 19, 2010 20:51 hrs

In the final series of ‘Smart Portfolios Season 2’ interviews, Emkay Global Head (Research - Institutional Equities) Ajay Parmar talks about the recent June quarter results and his stock-picking strategies. He is also betting on crop protection, pharma and niche companies. Excerpts from his interaction with Rex Cano:

In your last interview in February, you had mentioned that the markets are likely to be stock-specific this year. Indeed, we saw a lot of selective action, compared to the benchmark indices. Do you see the trend continuing?


Yes. I believe the indices are not really reflecting a true picture of the market dynamics. Besides, if you need to outperform, you need to have to be stock-specific. There are a number of sectors that have under-performed the Sensex. But certain stocks within the sector have given excellent returns. For example, the BSE Oil & Gas Index has given a return of just 5.9 per cent last year. This was 14 per cent lesser than the Sensex’s returns over the same period. However, many oil and gas companies have given much superior returns — BPCL (31 per cent), HPCL (30 per cent), Castrol (100 per cent), Indraprastha Gas (101 per cent) and Gujarat Gas (90 per cent). Some of these are not mainstream, but mid-cap companies.

Now that we are five months away from the year-end, are there any particular levels you are looking for on the Sensex and Nifty? How long will it take for us to see new highs?
I think the market (Sensex) may touch 20,000-plus before the year-end. If FII (foreign institutional investor) flows remain buoyant, I do not see any reason why we should not touch a new high within a year.

Your top holdings in Smart Portfolios are mostly small-caps. What’s the strategy?
Our market provides a very wide range of stocks to choose from. In mid-caps, there are some companies that are leaders in individual segments. My endeavour is to focus on such companies with better management bandwidth, decent business models, robust earning numbers and strong balance sheets. These companies have given superior returns in the past and will continue to do so in future.
 

AJAY PARMAR, HEAD RESEARCH INSTITUTIONAL EQUITIES, EMKAY
Top Holdings % of  
assets
Cost 
price (Rs)
Current 
price (Rs)
Value
 (Rs) lakh
Hathway Cables 8.08 211.57 216.80 1.19
Den Networks 8.06 232.93 237.95 1.19
Raymond 6.46 283.25 380.95 0.95
Rallis India 5.70 735.26 1401.50 0.84
Greaves Cotton 5.15 371.95 380.05 0.76
Total investments 99.63     14.70
Cash  0.37     0.05
Net worth       14.75
Returns (%) 47.53      

If you were to hold some of the stocks from your current portfolio for a longer term, which would they be and why?
I would retain all agri companies in my portfolio, like Rallis India, Chambal Fertilizer, Jain Irrigation, Excel Crop, Zuari Ind, etc. I think these companies have a bright future and should be a part of a long-term portfolio of any investor. I would also like to include in this list Coromandel International (unfortunately, I booked profit in it) and Tata Chemicals. Another set of companies I would like to retain are from the pharma space, like Cadila and Torrent Pharma. Besides these, I prefer niche companies like Jubilant Foods, Greaves Cotton, McNally Bharat, Talwalkars, Shri Ram Transport, etc.

Since we are now done with Q1 results, what is your takeaway from them and what’s the outlook for rest of the financial year?
The Q1FY11 (first quarter of 2010-11) results were a mixed bag. PAT (profit after tax) )was up around 17 per cent — in line with market expectations. Paper, pharma, agri-input and auto sector companies have given good results, while telecom, construction, cement sectors results were very weak. There were positive surprises from companies like Tata Motors, TCS, Titan, Coromandel Int, Jubilant Food, Piramal Glass, etc, while shocks came from Maruti, Dr Reddy’s Lab, India Cement, IPCA, RCom, IVRCL Infra, etc. We have to see how interest rates move up in the future and how commodity prices are likely to impact raw material costs.

Of late, global markets have steadied, too. Do you think we have seen the worst?
I am not an expert in predicting the global scenario. However, I do not think that we will see as severe a situation as we had witnessed two years ago.
 

AMAR AMBANI, VICE-PRESIDENT (RESEARCH), IIFL
Top Holdings % of  
assets
Cost 
price (Rs)
Current 
price (Rs)
Value
 (Rs) lakh
TRF 4.44 829.41 823.70 0.70
Raymond 3.39 288.75 380.95 0.53
Mindtree 3.38 533.15 532.80 0.53
VIP Industries 0.53 319.20 503.45 0.53
Godawari Power 3.27 3.27 3.27 0.52
Total investments 78.67     12.39
Cash  21.33     3.36
Net worth       15.75
Returns (%) 57.53      
 
VINAY KHATTAR, HEAD – RESEARCH OF WAIS, EDELWEISS
Top Holdings % of  
assets
Cost 
price (Rs)
Current 
price (Rs)
Value
 (Rs) lakh
Havells India 9.88 683.68 806.25 1.29
Action Const 9.65 56.70 63.00 1.26
Hindalco 8.96 155.92 179.80 1.17
Unitech 8.34 89.05 83.75 1.09
Idea Cellular 7.77 69.74 69.95 1.01
Total investments 82.62     10.78
Cash  17.38     2.27
Net worth       13.05
Returns (%) 30.50      
 
PHANI SEKHAR, FUND MANAGER - PMS, ANGEL BROKING
Top Holdings % of  
assets
Cost 
price (Rs)
Current 
price (Rs)
Value
 (Rs) lakh
Tech Mahindra 8.70 853.35 715.50 0.97
Reliance Infra 8.62 1183.00 1063.25 0.96
Reliance 8.27 1046.93 977.20 0.92
JK Tyre 7.95 174.45 171.55 0.88
3i Infotech 7.92 80.26 62.85 0.88
Total investments 99.93     11.10
Cash 0.07     0.01
Net worth        11.11
Returns (%) 11.07      




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