The Hindu Business Line : `Quality mid-cap stocks will again start attracting investors'

India can be in a position to command a price earnings multiple of 13x-15x on a one-year forward basis, feels Mr Dinesh Thakker, CMD of Angel Broking. "Retail investors, who truly form the backbone of the market, need to fully understand the country's potential and act on the strength of their conviction," he says even as he refers to the company's intention to cater to retail clients in a bigger way.

Excerpts

A section of traders seems to be losing severely in mid-cap stocks, which are quite volatile. How do you view this?

It is true that some quarters in the traders' fraternity have been losing substantially in mid-caps. However, we must also point out that there has been a revival of sorts in the frontline stocks. With this serving as the backdrop, the overall market sentiment has tended to turn positive. We believe that quality mid-cap scrips will again start attracting investors and will sustain their interest over a period of time.

What is Angel's medium-term stance? Are investors likely to see the pre-May valuations soon?

The Sensex has for now slipped from its May 2006 peak of 12,000 points and more. We remain positive on the market in the medium to long-term. However, there may be some volatility in the short-term.

We believe that India can command a P/E multiple of 13x-15x on a one-year forward basis. Considering the current corporate earnings growth and the macro-economic scenario, we are of the opinion that the highs of the past can be reclaimed in the next 15-18 months.

Stocks of certain sectors — like real estate — have been hurt badly in recent times. Isn't this a reflection of a dangerous trend?

Yes, many investors tend to commit a cardinal error: they just ignore the benefits of diversification when the market tends to become euphoric. Now, this should be regarded as a hazardous strategy.

We are referring to the practice of concentrating one's investments in only a handful of areas, especially ignoring the fact that blue chip companies are available across the sectors.

What are the issues that the stock-broking community is facing right now?

Let us dwell on just one important aspect, taxes. We feel that the market is in equilibrium with the current tax structure. We are particularly talking about securities transaction tax as well as tax on short-term and long-term capital gains. In our opinion, any increase in these taxes may have a dampening effect on the sentiments of investors.

How do you see BSE's corporatisation drive?

With regard to corporatisation, allow us to tell you that this has always proved to be beneficial in all spheres. The case of stock exchanges is no different.

It is desirable to have a healthy competition in any industry. If we take the example of BSE, corporatisation of the country's oldest stock exchange will raise the bar for service standards. This should ultimately lead to healthy competition. In fact, our policy makers should be feted for taking up this matter.

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