GST bill bigger near-term factor for markets than P-Notes: Avinnash Gorakssakar, Precision Investment

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“This could be a big negative surprise if nothing materialises by the end of the session. It could be a key factor for markets.”

In a chat with ET Now, Avinnash Gorakssakar, CIO and Head, Research, Precision Investment Services, talks about some sectors and stocks. Excerpts:

ET Now: Markets are seeing some nervousness. Some of it can be attributed to the P-Notes confusion. How low do you think we are headed?

Avinnash Gorakssakar: The focus will now be on the monsoon session of parliament. After the washout of the first few days, markets are now looking at whether or not the GST bill is through by the August 13 deadline.

This could be a big negative surprise if nothing materialises by the end of the session. It could be a key factor for markets.

Markets are also building some hope on the next RBI policy in terms of a possible rate cut. But personally speaking, I don’t see a cut coming. Governor Rajan will probably wait a little longer before he sees a continued pattern in both CPI as well as WPI.

So, corporate earnings are going to be the key focus area in the short term. Numbers so far have been poor if you leave out Reliance or may be IndusInd Bank. Most of the private sector banks have not done well. PSU banks are also in the same boat, with a few PSU exceptions like Andhra Bank. IOB’s numbers are extremely pathetic, which underline asset quality concerns with gross NPA of almost 9%.

My sense is that till the time this F&O expiry is not complete, we could see more volatility in markets. The latest crack in Chinese markets has also added fuel to the fire.

All recent debates have been centred upon the P-Note issue. But it’s more of a long-term thing; it’s unlikely to move markets hugely in the short run. To me, local factors — like the passage of GST bill — are going to be more important determinants for near-term market volatility.

ET Now: There have been guidance warnings from pharmaceuticals. Sun Pharma has come out with a guidance cut. Lupin has also made a huge acquisition. Have these developments upset the market mood?

Avinnash Gorakssakar: Lupin has disappointed analysts with a 26% drop in EBITDA. The US is an under-peforming market anyway; for a company with a $90-million topline, paying $880 million for Gavis is definitely expensive.

Their conference call made it clear that even the 10% guidance was unlikely to come through. So, my sense is that at least for the next couple of quarters, we could see some more downside from Lupin. It is already an expensive stock.

As far as Sun Pharma is concerned, the damage has been done by concerns over its FY16 performance. This year has been a washout; turnaround, if any, will happen only in FY17.

My view is that in the short term, pharma companies would perhaps face some pressure from other markets, especially US, if the products do not do well. Therefore, I would be a little cautious.

But at the same time, Cadila Pharma looks pretty attractive. You can’t put all pharma stocks on the same page. Cadila Pharma would in all probability stand out among the rest. I would be a buyer even at current levels.

Source: Economic Times

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