The Hindu Business Line : `Sensex may touch 7,000-mark in six months'

MOTILAL Oswal Securities hopes to be at the forefront of the intermediation business, offering services that meet the diverse requirements of its clients. It, however, lays special emphasis on research, which, feels Mr Raamdeo Agarwal, co-promoter and Joint Managing Director, adds tremendous value to its efforts.

``The significance of research can not be overstated... it should form the very foundation of the equity broking business,'' he points out, adding that `value investing' is at the core of the company's investment philosophy. Clearly, the idea is to identify opportunities where the underlying value is higher than the market price. Excerpts from the interview:

What is your medium-term outlook on the stock market?

Let me tell you at the outset that the one-to-three year outlook is very positive as far as the stock market in this country is concerned. Having said that, let me also convey to you that the next six months or so may actually see the market moving in the range of 5,000 to 7,000 points. The Sensex, as you know, is hovering near the 4,800-mark at this juncture and from this position, a journey towards the level of 7,000 points will be quite an experience.

Are there any sectors that are likely to be re-rated in the months ahead?

I could rattle off a few names. But coming to the specifics, the automobiles sector may not see any change in its fundamentals. Crucial factors like growth rates and earnings for the players in this sector will continue to be strong across the board. The capital goods segment, a major contributor to the economy, is also likely to remain prominently on my radar screen.

The capital expenditure cycle of most industries continues to be strong. A good number of companies have logged decent order book positions. In many cases, these are of over two years, a trend that seems to underline strong growth momentum. The IT services sector too will be watched intently for possible signs of growth.

Are there any sectors that you are particularly bearish on at the moment?

I happen to be bearish on FMCG. The sector has, in recent times, witnessed a severe pressure on margins and this has led to practically no growth in the profit numbers. I am also not very excited about large pharmaceutical companies. Valuations are running quite high on this front. And there is no outlook for growth in the current financial year. Let me simultaneously state that I am genuinely bullish on a few areas. These include auto and capital goods, two sectors that have been mentioned earlier.

What are the major issues before the broking community at this moment?

One must make a special reference to a much-talked about issue - turnover tax. Turnover tax, in lieu of capital gains tax, effectively shifts the burden of payment on to the broking industry. This is a matter that has to be looked into very carefully.

It is my firm view that the turnover tax at an appropriate level should be imposed on FII trades, while domestic investors must be subject to long-term and short-term capital gains tax. In other words, there is no need to impose turnover tax on domestic institutions and investors.

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