3 stocks Hemang Jani is bullish on from capital goods sector

"I think healthy correction has already happened at the index level and the broader market level and it will be a great time to kind of start accumulating the companies which have reported good numbers," says Hemang Jani, Independent Market Expert.

A lot of news data points and especially a lot of midcap earnings. We were looking at Mankind Pharma, for instance, and then, of course, the new listing and Akash Bhansali now checking into this one as well, Aadhar housing that is. Just wanted to understand what is it that you are making of some of the news flow this morning?
After volatility and turbulence that we have had last two weeks, things are settling down. Numbers, by and large, have been good. Have not really seen any major disappointments. In fact, when I looked at the earnings detail, I think far more number of companies are reporting a much better margin profile versus market expectations, which is great news. Globally, also, things are settling down. In fact, US is making new highs and the CPI print surely will held the sentiment.

So, except for the fact that the market is getting ready for political event on 4th of June, I do not think there are too many risks or concerns on the horizon. I think healthy correction has already happened at the index level and the broader market level and it will be a great time to kind of start accumulating the companies which have reported good numbers.

So, let us in fact discuss some of those candidates that have come out with a fairly decent set and you have got an LIC Housing Finance that comes to mind in terms of a pretty stellar set of numbers. How have you looked at the quarterly performance?
LIC Housing, in terms of the asset quality, they have done reasonably well. Top line growth was slightly lower than market expectations and we believe that NBFCs as a space can do very well given that we are going to have a slightly stable kind of interest rate environment.

So, that is surely good news for the housing financial. So, LIC Housing Finance surely will remain one of the top picks when it comes to that category.

While the FPI positions are at an 11-year low in terms of the kind of shorts that there are in the system, the market has been quite resilient so to speak after that aberration and that bit of a crack that we had. We have recovered quite smartly and, in fact, this morning we are almost cruising to that 22,400 print already. Wanted to understand where is it that you find buying opportunities right now if you could be stock specific?
The top on the buying list will be the telecom play. So, Bharti, which reported very good set of numbers, in line in fact, but I think the larger focus when it comes to telecom would be on what kind of ARPU increase are they really going to see and that would bring good amount of action in the entire space.

Bharti would be the top pick. And, of course, for the retail investors who are looking out for a low-price stock, surely Vodafone Idea presents a great opportunity, a bit risky, not too much of an upside, but a 14 to 16 kind of a price one can easily look at it.

Apart from that, Bharat Forge came out with stellar set of numbers. Outlook over there continues to look very good. Private banks have corrected. Somehow, they are not participating much but when you look at the numbers per se, ICICI Bank and Axis Bank and even SBI for that matter numbers were blow out and we do think that at some point the banking stocks will take the centre stage when it comes to the next leg up. So, banking is where we should be focusing upon. And, of course, PSUs will have its own sort of momentum, a little bit of volatility here and there, but defence PSUs are the ones where the larger focus should be.

Going by data, it seems that the FII fraternity is just waiting on the sidelines for the 4th June outcome. Any other stocks that you recommend buying then because I do not think there will be any time to actually catch your breath between the event and the kind of rally that is going to follow after.
I do think that the FIIs have been sellers and there are short positions, but I do not think it is only because of the election results per se. We have to look at what is really happening in the US markets and the kind of numbers that the companies are delivering and more importantly if you have slightly favourable CPI data, people who are managing large global funds would focus more on their mother markets and not on the other markets.

I think that to my mind is the primary driver. Having said that, for whatever reasons, we have had this correction in the last let us say one month or so. We have been underperforming the global market, so that presents in a way good opportunity.

Apart from the other names that we have discussed, there are a lot of opportunities in terms of let us say pharma companies where the numbers are good. So, Sun Pharma, Aurobindo, those are the ones that we like at this point of time.

Banks, we have already discussed. I think banks would be one of the best performing names over the next let us say 6 to 12 months. And apart from that, some of the auto companies have been delivering good numbers. So, having seen a major outperformance by Hero Motors and Bajaj, I think Maruti and to some extent Ashok Leyland would give a good 12-15% kind of an upside over the next few months.

What is the outlook when it comes to the entire capital goods space, for instance, after having digested L&T's numbers. You also had something like a Thermax that has been in the spotlight, Siemens, because of the overall demerger and their quarterly earnings. Where are you finding comfort?
Three companies stood out for me. One is ABB, Siemens, and Timken. I think L&T numbers were not up to the mark, the guidance people are not too happy with, no doubt it is a great company and overall growth potential there is great.

But I would really focus upon ABB, Siemens, and Timken, they are all trading at all-time high levels. But given the momentum in the earnings and the kind of growth that one can really look at, best companies to participate would be these three.