ET Now: Whereas large cap stocks are holding on, are you a bit worried about market internals? The midcap stocks have caved in. If I look at the market breadth, the market breadth despite such strong and robust news flow is literally all over the place.
Suresh Mahadevan: Yes, look these are all part and parcel. India has clearly become a bottom-up market and that is why a lot more attention needs to be paid to stock specifics and not just the broad index which is more a sentiment indicator than anything else. So I would say that there are still a lot of strong bottom up stories in India and investors are better off focussing on them rather than getting too worried about playing the market itself.
ET Now: The stock which you have discussed at length is Bharti. You have got your call absolutely right, but closer to 340-350, do you think the big move in Bharti is behind us and now Bharti will move pretty much in line with its earnings growth?
Suresh Mahadevan: I still want to stay very positive simply because this is a company which has been a big laggard for the last few years. The corporate governance is pretty good and we are beginning to see some pricing power come back, which is what we premised our buy call on. So I tend to think that the earnings momentum could turn fairly positive. So I would be very constructive on this name for this year because not only do we get earnings momentum, but if people start seeing earnings momentum, there could be a re-rating as well. The stock is still under owned, I would say, relative to its history whether it is by foreign investor or domestic investors, I do think pricing power coming back is a fairly big trend shift which could continue to drive the company forward. If you look at even Idea versus Bharti, Bharti has been a significant underperformer. So to that extent, there is a lot more catch up to do. I would not be surprised if the company continues to do well from here and it is up like 25-30% this year even from these levels.
ET Now: Post the earnings, you have upgraded Maruti now to a buy. How would you pit it against Tata Motors where you have cut the long-term expectations?
Suresh Mahadevan: We have been positive on Maruti for most part. Around 1500, we became neutral, but given the surprise in margins and given obviously the yen depreciation, I do think it is good. It looks good for another maybe 20% to 30% move from here, that is why we upgraded. On Tata Motors, in the recent past, we have not had a very favourable recommendation on the stock. The stock seems reasonably range-bound between 250 and 320-330. We have always had issues with respect to some of their accounting policies which you can adjust for plus also comparables in terms of global peers etc. given a large part of the value comes from JLR. So it is a name which we are still not very positive on whereas we are positive on Maruti even at this stage.
