Rising commodity prices to hit Q4 earnings: Mirae Asset

Gopal Agarwal, Head Of Equity of Mirae Asset Global Investment India feels that the markets are in oversold zone.  Agarwal feels that the Q4 earnings growth would be hampered by rising commodity prices. He expects positive surprises in the FMCG and metals sector, while he sees negative surprises expected from the banking and financial sectors. 

According to Agarwal, the possibility of interest rate cuts has diminished significantly due to inflation. He is seeing no redemptions in mutual funds, though the Portfolio Management Services (PMS) are facing redemption pressures.

Excerpts from the exclusive interview with Gopal Agarwal:

Q: What is your own sense of what has happened yesterday and what has taken place today, do you think that we are entering into a consolidation phase or do you think that there is still some more pain left in the system?

A: If you look at the market, actually it is in oversold zone and about 1900 stocks especially in the midcap segment have touched the 52-week low. So definitely, there is a bottom fishing happening and people are trying to buy some stocks where the value is emerging and also we are near to the expiry. So the combination of the value buying and the short covering led to the kind of run up, which we saw yesterday.

Q: Give us an idea of where you see value yourself in this market given the kind of domestic economic data that we are factoring in and ahead of earnings?

A: Definitely, a lot of uncertainty is there because of the collapse of the dollar and the rising commodity prices will fuel the inflation. The possibility of interest rate cut is diminishing and add to that the poor IIP data, definitely there are some concerns. Despite that, there are certain sectors and businesses, which are not impacted much by the oil or the interest rate scenario, which have been fully funded for their growth. So there is a value and we can still invest consider the impact of oil interest rate and the fund raising.

Q: Have mutual funds and PMS schemes faced a lot of pressure over the last month or month and a half in your assessment?

A: For the first time, despite so much correction in the market, we are not seeing any kind of redemption in mutual fund but some HNIs have panicked and we heard about some redemption into the PMS scheme but mutual fund at this point of time have not seen any kind of redemption till date.

Q: Give us an idea of what sectors you think would be able to head this rally and perform better than the markets?

A: If you invest in any businesses, which are not very sensitive to oil or to the interest rate. It is safer to invest in those kind of segment at this point of time.

Q: What is your own expectation from what earning season may throw up in terms of an earnings growth for Q4 and which sectors are you hoping to surprise on the positive side and negative side?

A: We are expecting the Q4 result to be average because in the last quarter, the commodity prices have moved up very significantly and also because of the collapse of the dollar, some kind of hedging losses may come on the books of the companies. We can see some positive results on the FMCG companies, some positive surprise on the metal pack because of the rupee depreciation, which happened in the current quarter. Also on the negative side, we may see the banking and financial space where everybody was expecting high growth, which was built and my personal sense is that you may see some kind of slowdown. 

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