Jan 15, 2013, 03.28 PM IST | Source: CNBC-TV18

See 15% earnings growth, bet on large caps: DSP BlackRock

Indian market looks confident on strong third quarter earnings. As it is marching towards the psychological 20000-mark, Anup Maheshwari of DSP Black Rock Investment Managers is expecting to see a positive trend in the market over two-three years.

Anup Maheshwari

EVP & Head Equities & Corporate Strategy

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Indian market looks confident on strong third quarter earnings. As it is marching towards the psychological 20000-mark, Anup Maheshwari of DSP Black Rock Investment Managers is expecting to see a positive trend in the market over two-three years.

In an interview to CNBC-TV18, he said, "We are expecting 15% earnings growth over next 2 years. Consumption cycle continues to remain strong." Maheshwari is betting on large cap stocks with a positive outlook for two years. 

According to him, the Reserve Bank of India is likely to cut repo, cash reserve ratio (CRR) by 25 basis points in January policy review.

Bullish on IT; see realty demand picking up: Morgan Stanley

Here is the edited transcript of the interview on CNBC-TV18.

Q: What is the call on the market now? Is it still going higher on the back of liquidity or are you getting concerned about some of the fundamental underpinnings?

A: We still tend to take a slightly longer term view on markets and our sense is the next two to three years look like a much better phase than we have seen in the last three years and that is quite clear to us. It is going to be very difficult to try and predict whether markets hit a new high in the next month or give a correction later on in the year. Those things, to me, are external factors influencing that.

Generally, our sense is that the two most important variables, interest rates and earnings growth both seemed to be heading in the direction we would like them to head and therefore that is generally positive for the overall direction of the market. It is the structural trend we are more interested in and that is looking a lot better over the next couple of years for sure.

Q: On the second aspect, not interest rates but earnings growth, are you confident that growth is going to pick up this year or while announcements are good and sentiment is better, the pace of change of economic and earnings growth is probably still suspect as we move forward into 2013?

A: We are looking at growth in 2014-15 now and our sense is that after about an 8 to 10 percent range of profit earnings growth over the last three or four years, it is quite likely that we will move up a notch for the next two years. We are looking at more like 15 percent and higher earnings growth over the next two years.

If you actually deconstruct the index and you look through the part of the market that is quite predictable, it is very steady in terms of growth. That is a little over half the index where you are likely to get close to 15 to 20 percent growth in any case and the call we are taking is the balance part of the index which is a little more volatile or linked to what is happening externally. It is something that will start picking up and overall, we will get back to about a 15 percent plus earnings growth rate.

That is the call that we are taking for FY14-15 which gives us the confidence in terms of an earnings growth pick up coupled with some correction in interest rates.

Q: When you say it is a market that should likely trend positive over the next couple of years, are you saying it is the beginning of a bull run for trade and you see those kind of consistent returns and consistent upward performance for the next few years?

A: It is one of those markets where a full-scale bull run is something that requires a fair amount of economic activity to start picking up. We have to be back to a proper investment cycle. I think that is still probably a phenomenon that we would look forward to, maybe in the next year in terms of a bit of pick-up in corporate expenditure. But, for now, the whole consumption cycle continues to be reasonably strong and that is pulling the market along.

Our sense is it is a steady sort of a market that we would look forward to in the next couple of years. If we do get the catalyst for a much higher performance, that is great, but I think we are going with a view that it would be a good steady asset class, at least over the next two to three years.

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