In an interview to CNBC-TV18, Anand Shah, CIO at BNP Paribas MF, spoke about his reading of the market and his outlook.
"We are looking at some benefits coming out of recovery from demonetisation. To that extent, we will have some improvement in earnings for a largely consumer facing businesses", he said.
There are not many great surprises in results till now, he further added.
Below is the verbatim transcript of the interview.
Ekta: We have seen Infosys, DCB Bank, Gruh Finance come out with numbers till now. We have Tata Consultancy Services (TCS) this evening and IndusInd Bank and Yes Bank tomorrow. What is your sense in terms of how results have been till now and your expectations on the ones that I mentioned?
A: All the results we have seen so far – there are not many great surprises yet. We were expecting challenging time for the IT companies and that is how it looks like. If I were to see what to expect going forward, very clearly we are looking at some benefits coming out of recovery from demonetisation. To that extent, we will have some improvement in earnings for a largely consumer facing businesses.
Prashant: What is your expectation with regards to banks this time? Do you think numbers would be very steady or should we expect further deterioration, slowdown in credit growth etc?
A: It will be the tale of two parts. We will have retail banks and we will have corporate banks. So there was a lot of expectations that there would be some resolution to the large NPA recognitions, which already made but the provisions need to be made. So there we will continue to see some stress in terms of more provisioning requirements for the banks, which have corporate exposure and have had already recognised NPAs as they age.
For the private sector banks, which are largely retail oriented, will see improvements. So while we had some softening on the loan growth, generally for the industry and moreso for them, due to demonetisation – that will come back and we will see some sort of early recovery which will then gain strength as we move forward in quarters to come.
Prashant: You like private banks, you like housing finance companies, private sector NBFCs, so it is essentially just a play on consumption continuing to be very strong?
A: That is not new. In India consumption has been in a bull market for more than two decades and that continues to remain the story but what this particular retail oriented banks and NBFC does is also benefits from a very low penetration of loans in the households. So there is a lot of room for penetration and to that extent, the quality of assets also have been – because you have not gone deep into substandard households to that extent, the retail assets, the quality issues are also not there yet, given the household is not very leveraged.
So both works in your favour – in terms of growth and also in terms of quality of assets.For full interview, watch video...