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Oct 17, 2012, 07.55 PM IST
Sandip Sabharwal of Prabhudas Lilladher says the market after outperforming global markets is consolidating now.
Sandip Sabharwal of Prabhudas Lilladher shares his views on the market outlook with CNBC-TV18.
Below is the edited transcript of Sandip Sabharwal’s interview with CNBC-TV18.
Q: How exactly do you read the numbers of Axis Bank, HCL Tech and Reliance?
A: I think results have been pretty divergent. Like Infosys disappointed again but HCL Tech did well in terms of profitability, though it disappointed in terms of revenue growth.
The top line of most of the IT companies clearly seems to be under pressure. The key is, given the US Presidential elections are coming through and the race is so close, we could see a deferment of budgets as far as IT spending goes in US corporations for sometime.
It might not happen at the same time like what people were expecting. That will impact the near term growth of these companies. For IT companies what we also have to see is that the rupee actually appreciated only in September. The impact of the rupee appreciation on profitability will be felt from this quarter and next quarter. One could see a squeeze in margins for some of these companies. So I would be slightly vary of IT as a space at this stage.
Private sector banks have continued to show positive results despite the kind of problems the economy is facing and the kind of inflow we see in the Corporate Debt Restructuring cell or the accretion of Non-performing assets.
To that extent, the space is well positioned. So both private sector banks as well as private sector Non-bank financial companies should do well and they should be actually leading the next wave of the rally.
Q: If the market is faced with a 5.9 percent expectation on fiscal deficit do you think that there could be profit taking in January or even earlier?
A: The entire fiscal deficit story and how it will actually impact the markets is something which has already been factored into the markets. The probability that the Government will exceed its fiscal deficit target is very clear. Indirect tax collection figures which have come through despite the excise and service tax are not very clear. The economy is in a slowdown mode at this point of time. But I have recently started seeing that some brokerages have started upgrading their expectations for next year GDP growth that is something which is happening.
There are two factors- global & domestic. Globally economic data out of the US continues to surprise on the upside. The European issue seems to be controlled at this stage and we won't see a shock coming from there anytime soon. The US dollar is actually falling significantly. Technically the US dollar index is positioned in a manner where we could see one more move of downswing in that Index. If that happens, flows into risky assets will come in. India will get its share of money as the global markets rally. The next move as it starts should take the markets to at least 6,100 to 6,200 levels. December-January could be the time frame when we could see those levels.
May 21 2013, 13:56
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