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Apr 12, 2012, 05.20 PM IST
Head of Equity at Daiwa Mutual Fund David Pezarkar expects to see strong results from autos, banks and FMCG companies this earnings season.
He goes on to say that this season is going to be individual company oriented, where key factor to look out for is how each company is gaining or losing as far as market share is concerned.
Below is an edited transcript of his interview with Sonia Shenoy and Ekta Batra. Also watch the accompanying video.
Q: Infosys is showing a down tick of about 2% odd before its numbers. What is the expectation from Infosys and from earnings season as a whole?
A: As per the regulatory requirements, I will not be able to talk about individual stocks. But for the software companies in general, the guidance for next year is likely to be a crucial factor. There is some amount of nervousness in the market regarding that, so that is why we are seeing that kind of a down tick.
For the market as a whole, I think we will see the non-cyclical sectors doing quite well. So I think we will have auto, banks and FMCG companies reporting quite strong numbers. As far as the metals sector, is concerned I think we will see a QoQ improvement, but YoY fall in profits.
On the whole, I think we will see some amount of compression as far as margins are concerned, but that compression will be much less compared to the previous quarters. There aren’t very high expectations from these results, so net-net I think it should be some sort of a positive take away from the result season as a whole.
Q: Do you think the IT results may be muted and will not give too much of buoyancy to the market?
A: I think there will be some amount of dispersion between individual companies. For the sector as a whole, if we see a guidance of around 14-15% kind of dollar growth, then I think that will be considered as a positive because the market is expecting lower numbers than that.
In terms of individual segments, I think healthcare, manufacturing etc are doing well as far as IT companies are concerned. So I think it will be more of an individual company oriented result season and one will also be looking at how each company is gaining or losing as far as market share is concerned. So it will be difficult to sort of generalise for the sector as a whole.
Q: Have you managed to look at what is happening with the defensive space of late? Would you recommend investors to allocate more towards defensives now?
A: As far as our portfolio is concerned, we are neutral this sector because we have seen over the past month or so there is an increased tendency towards more risk-off kind of trades. As far as this quarter is concerned, I think we will see strong numbers from FMCG companies as a whole. I think they have taken enough of pricing increases to offset raw material cost increases, plus I think we will see decent volume growth. So net-net there are no fundamental negatives.
One factor is that some investors are uncomfortable as far as the valuations are concerned, but then if there is a strong momentum then I think the valuations have been known to take a backseat and that is what is happening. So I think as far as general investors are concerned, it would be better off being in line with the market as far as this particular sector is concerned.
Q: Just wanted your perspective with regards to what we saw in the rupee today, which is currently at 51.45, as well as the yields which saw a bit of a rally post the IIP numbers today?
A: As far as the rupee is concerned, I think that is more influenced by the trade balance, current account balance kind of numbers that we have been seeing and they have not been positive. So the rupee is likely to remain under pressure, but I think if we see a 50 basis kind of a rate cut next week, then I think that will create some sort of positive sentiment which will lead to a rally.
In terms of the IIP numbers, as we all know they are quite unpredictable, but if one looks at the three month average, then it appears that the intermediate goods are sort of bottoming out. If you also look at the OECD composite leading indicators, then they also indicate that as far as the Indian economic cycle is appearing it looks as if we are seeing some sort of a bottoming out kind of process. So there seems to be less negativity, but we cannot be quite positive as far as the industrial capex cycle is concerned. So if we see a 50 basis point kind of a cut, then that might lead to positive sentiment here.
May 25 2013, 16:36
- in Technicals
May 25 2013, 16:36
- in MARKET OUTLOOK