See no big surprises in Q2, but situation to improve from Q3; bet on housing: CLSA

Even as the market hovers around fresh milestones, with bouts of consolidation, CLSA believes that a flattish trend on the market is likely to continue over the next few months.

“Demand-supply for equity is not very attractive right now. On one hand, we have big supplies of equities coming in, but there is no FII support. This situation is unlikely to improve in the short term,” Mahesh Nandurkar, India Strategist, CLSA told CNBC-TV18 in an interview. Having said that, the situation is quite optimistic from a 12-month standpoint, he added.

This could probably be the case as earnings forecast look bright going forward. “This quarter may not provide big positive surprises. December and the subsequent few quarters are likely to benefit from low base effect. In fact, you could see earnings growth of 15-20 percent for 3-4 quarters after December quarter, he told the channel. Additionally, September quarter being the last quarter of GST’s negative impact is also seen.

On a sectoral basis, Nandurkar expects housing-led capex recovery going forward. “We have been bullish on the theme for a while now… property is becoming affordable in the middle and low-end of market, which is 85 percent of housing transactions and has improved to the best levels seen in the last two decades,” he told the channel.

Triggers have been provided by steps from the government on loan subsidy, tax incentives for developers, among others, to work well for the sector. Moreover, he expects this to spill to other related stocks and expects them to do well over the next 12 months.

On the real estate space, he sees large players benefitting from industry consolidation due to RERA and some market share gains are seen there.

In the telecom space, the stock reaction would make you think that the worse is over, but the global research firm is cautious on incumbents. “Impact on margins due to the entry of new players is not seen fully yet. We may be closer to the end of worse times, but incumbents could still face challenges going forward,” he told the channel.

Meanwhile, in case of non-banking financial companies (NBFCs), growth in consumer credit is a structural development and is a long term positive and is a decade-long story.

For entire interview, watch accompanying video.