Q: Where do they stand now for FY10 and FY11?

A: We are looking at about Rs 915 for FY10 and slightly over Rs 1,100 for FY11.

Q: Do you think those numbers are in the bag or do you see any downside risk to those numbers given what you have seen in the current quarters? Given apprehensions that the margin increases that you have witnessed this quarter might begin to taper down because of material prices increasing again?

A: We need to have a second half earnings growth to get to our estimates year-on-year at about 15% which is a notch below what it has grown actually in Q2 on a YoY basis. So that doesn’t seem to be too much of a stress. More importantly, if you look at on the sequential basis, the second half may be about 5–6% higher than the first half which again doesn’t seem that difficult. So I would think the downside risk seems limited at this point relative to where we are and I would think there is some potentially upside risk to FY11 numbers.

Q: The biggest gap in terms of estimates and what actually happened is on telecom and utilities for you, what specifically in utilities disappointed you?

A: Utilities seems to be a lumpy business from one quarter to the other, so I wouldn’t read much as for any surprises in the utilities number because broadly numbers are going to make up in subsequent quarters. Telecom was clearly a disappointment not just to one but the street in general, while everyone was estimating this significant downward pressure on ARPUs and the lack of elasticity on the MoU front so the decline in these numbers have been significantly higher than what everyone expected.

Q: What does your EPS constitute in terms of the range for the market because those levels have been all over the place? For the bullish guys it is 20,000 but for the bearish it is around the levels are we are at?

A: One can come out with any number depending on the valuation parameter used. If we just take a 12-month view, and we are in the month of November of 2010, I think a 1,200 fiscal number on 2011 earnings is not inconvincible. At that point in time potentially the newsflow are likely to be more positive and negative and the earnings momentum would have come back in the economic numbers would be looking a lot stronger and hopefully the current global uncertainty would be out of the way. So a 16-17 type of multiple would not be a stretch at that point of time and that gets you to about a 20–21,000 index level which is a fairly decent return from where we are right now. Therefore, from a 12 month perspective you can’t help at not being positive. The challenge is more in the near term approach. So if you look at fundamentals, I can’t see any significant trigger either on the positive or on the negative side.

If I look at the sentiment aspect that has been all over the place, a week or ten days back, people were looking at a 20% correction in the market. Today morning, I got this email suggesting that since Sachin Tendulkar now has reached 17,000 it is time for the Sensex to reach there. So that has been flip-flopping all over the place and that needs a near term approach to be lot more challenging.

I would think the markets would be range bound in the near term, for 12 month I am fairly comfortable.

Q: What are the clear overweight’s and underweight’s after this earnings season for you?

A: We like the financial sectors, the PSU banks and some of the private banks selectively. But as a sector we like it and the primary reason for that is credit growth should pick up and more importantly on the provisions for bad loans. So those numbers are beginning to look better.

We continue to like autos, they have had a good run but we think there could still be a little more earnings surprised in store for that sector. To an extent we like IT and Pharma as well, on IT while the currency poses a risk and broadly the earnings momentum has turned positive. We have seen in the past that once that momentum stays positive it stays positive for a while. So newsflow and sentiments should be good there. Pharma again these are stocks for safe drivers and they are the first coming out of these stocks.

Infrastructure is another one which we would have been selectively like. On the underweight side, telecom is clearly an underweight despite the fall because the fundamental problems are going to persist for a while. The 3G issue who knows how is that going to shape-up and how the revenues numbers are going to shape up there in the yields to come. Real estate is again a mixed bag, it has had a good run in the last few months and could probably take a bit of a breather, things seem to be picking up on the demand side and there is again a supply of paper there. It could take a bit of a breather, on the demand side things seem to be picking up and there is again supply of paper there which could go either way.