'Average to disappointing' earnings makes us cautious, says Enam's Sridhar Sivaram

Another reason for the not so great Q1 numbers was that the government spending has been poor in Q3 and Q4, resulting in a slow down.

India Inc’s March quarter earnings report card has ranged from being average to disappointing, weighed down by weak government spending, though some pockets have delivered a good show, Enam Holdings’ Sridhar Sivaram told Moneycontrol during a conversation.

On The Wealth Formula Podcast, Sivaram regretted that the numbers were more negative than positive, “I think the largecap banks were fine, NBFCs were a mixed bag. Some of the others like the auto numbers were broadly okay. IT numbers were disappointing, some pharma numbers were good. So, I think it's been a mixed bag,” said Sivaram.

One of the reasons was that the government spending has been poor during Q3 and Q4, resulting in a slowdown, said Sivaram. State-level finances and spending is also under pressure. “What we hear is that most state governments don’t have money. So, companies which were dependent on state government spending, especially the contractors, construction companies, they've been crying a lot,” said Sivaram.

As a result, businesses are turning more cautious. “At the margin, most companies are also slightly pulling back saying that, I’m not sure how, because demand has been weak,” said Sivaram.

The Enam Investment Director pointed at a broader slowdown in consumption as the demand has not been very robust. “Even in the K-shaped recovery, the upper end of K is also struggling a bit right now,” he added.

While the earnings have not been as encouraging, Sivaram said these are part of a market cycle. “Once this phase gets over, we get into a new phase. When I look at the overall view, we are slightly cautious, but it's okay. Once the dust settles down, we'll find opportunities,” he added.

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