Not bearish on mkt but weak Re concerning: Avendus

Q: So if you had to buy now what kind of companies would you be focusing on?

A: To be honest, in this market it is safest to buy companies, which require the least amount of cash for their growth and where growth is intact. So companies which are in the consumer sector, with negative working capital cycles or pharma companies are typically good candidates for buying.

Having said that sectors of the economy where investment is inevitable, for example in power in the next 2-3 years, whether you are seeing a slowdown right now or whether you are seeing projects being delayed or abandoned in the power sector- India needs power, it is going to be a power deficit country and for our infrastructure to grow, I think it is very critical. So sectors which are power ancillaries either in the Transmission and Distribution (T&D) side or in the generation side or companies, which help erect power plants, these are companies which you can definitely bet on. These are now valued at 2-3 times their earnings and therefore reflective of deep pain, as far as working capital is concerned for those companies. But these are stocks that one should accumulate in the portfolios right now.

Q: Are you looking at buying opportunities in the midcap space as well. Are you making considerations or differences between marketcap as well for your buys?

A: The pain that one is seeing in Sensex in the last few days has got more to do with the Sensex and heavy weight stocks rather than midcaps. For the last 3-4 weeks consistently the Sensex and the Nifty has fallen more than the midcap index, which is reflective of the deep erosion that has already taken place in the midcap stocks.

From a risk perspective, the larger stocks while they seem safer to hold from a long-term perspective, from the short-term perspective there may be some erosion there, which will probably see the market either test the earlier lows or find a new low for the short-term.