Nov 01, 2012, 03.17 PM IST | Source: CNBC-TV18

Cos showing demand revival in festive season: Motilal Sec

Rajat Rajgarhia, head of research of Motilal Oswal Securities says aggregate earnings growth so far have come in mildly higher than estimates. India Inc may not be fully out of the woods, but, a large number of companies are beating analysts' estimates this earnings season.

Rajat Rajgarhia, head of research of Motilal Oswal Securities says aggregate earnings growth so far have come in mildly higher than estimates. India Inc may not be fully out of the woods, but, a large number of companies are beating analysts' estimates this earnings season.

According to Rajgarhia, companies are indicating demand revival going into the festival season. "The number of positive surprises in the universe has been almost 3:1 versus the negative surprises and lastly based on the 18 Sensex companies that have reported, there is a very marginal uptick in the full year Sensex EPS estimate for FY13 and FY14," he told CNBC-TV18.

Also Read: Mkt to remain choppy; traders should sell on rally: Sukhani

However, he says, there are still some signs of slowdown in consumer discretionary and the underlying environment for capital goods remains "very challenging".

In terms cues to watch out for, Rajgarhia says, the market is awaiting asset quality data from State Bank of India (SBI).

Below is the verbatim transcript of Rajgarhia's interview on CNBC-TV18

Q: Earning season is almost over. What are your takeaways from it? Were there more upgrades or downgrades at your end?

A: This earning season has been fairly good. For the aggregate of about 70 companies that have reported in our universe till now, they have delivered some 21 percent growth versus our estimate of 18 percent. But these growth rates will come down. Some of the large PSUs and global business models like ONGC , Coal India , Tata Steel , Bharti etc are about to report. They will pull down the growth rate. Till now, the earnings growth at the aggregate level has been good.

Secondly, the number of positive surprises in the universe has been almost 3:1 versus the negative surprises. Lastly, based on the 18 Sensex companies that have reported, there is a very marginal uptick in the full year Sensex EPS estimate for FY13 and FY14.

Q: What are your views on some of these consumer stories like Titan Industries , Bata India and VIP Industries that have reported a slow down in sales? Are you seeing start of sales petering off from here and what would your outlook be on some of these names?

A: Last couple of quarters have been tough for a lot of these consumers discretionary. The stocks we cover are Titan Industries, Maruti Suzuki . Asian Paints we had just 3-4 percent volume growth in first half. So, it was expected that the numbers are going to look bad. But Maruti in recent concall started talking about things looking back again. Even Titan in their concall started talking about things looking back again.

So, this festive season, month of October has been good for companies. They are guiding for November-December to be better. That is what markets are started to price in. If you look at stocks like Maruti, Titan - a lot of them have again started trending back to their recent highs. So, at this point of time, we are more positive on some of these names because we think that the last two quarters of slowdown is behind and the numbers should show some gradual improvement for them.

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