Better to exit CV finance stocks on rallies: Sandip Sabharwal

Financials still remain the most troubled space and the weakest link in the market, says analyst, asksandipsabharwal.com.

Where do you think this market is in danger of being in a bubble territory? Which are the “touch me not” stocks because if you buy these stocks you are playing with fire?
Financials still remains the most troubled space because irrespective of the fundraising these banks are doing or the kind of rally which we have seen in some of them, the trouble in their balance sheets is going to be very extreme because too many loans are still under moratorium and five months of moratorium ends this month end and then suddenly there will be lot of people who will be hit with the repayment requirements etc. That will be tough for many of these banks and NBFCs to handle.

I think people are looking at reported results which obviously do not carry the deterioration in asset quality which is going to happen because of slowdown in the economy and moratorium. That remains the weakest link of the market that is where people should be cautious and not get carried in by the huge rally which some of these stocks are seeing because we could easily see a significant drop off and that is where I would think that we should be most cautious.

Markets are betting on a recovery coming in the CV cycle. Analysts have said money can be made in some of the CV finances. Recovery has not been great in this space. What is your opinion?
I do not think there is going to be any big recovery in the CV cycle at all. I have followed the commentary of most of the companies and what is happening on the ground currently utilisation has just 40-50% most fleet operators were bought in over a last few years have deeply underutilised capacities I do not think there is going to be a big recovery, there is a contrarian buying scenario which is playing out in the markets so whichever has got stock has got left out, buy that and you will make money. I would think it would be a good idea for people to exit these stocks on the rallies because at least this space will continue to have deep stress not only for the next two or three months but for the next one year or even more.

We were just the other day drawing a correlation with Bharti and ICICI Bank. All and every participant on the street has a bullish call, but the stocks have not been able to do anything?
Yes, it is interesting to see the price movements in Bharti because of the MSCI changes and all are just technical factors which create short term movement. Whoever is positive on long term prospects, should be buying this news. I am not sure whether the markets have some inkling of what is going to come out in the AGR hearing etc. That is the reason why the stock remain down so it is tough to predict.

Once this uncertainty of AGR gets over, Bharti should participate because the numbers which they delivered and their operating matrix all seem to be encouraging and overall the telecom consolidation story is a reality.

Would you look for any specific plays or are you avoiding metals altogether?
Metals is a trading play and we have participated in the trading play. I cannot take a long term bet on metals because of global economic uncertainty. But the rally in the prices of aluminium, copper and steel globally is something which we cannot ignore. The metals could still outperform. If we get an adverse reaction because of the results and the prices are actually down, and after that we have seen the rally. Again people could play it for a 10-15% bounce back. Among the companies which are more strongly placed at this stage at these levels of the market are these metal stocks.