Kotak Mahindra AMC MD Nilesh Shah draws attention to innerwear to assess December quarter results

Nilesh Shah

As we prepare to conclude the earnings season, Nilesh Shah, Managing Director of Kotak Mahindra AMC, shared some interesting insights about the December quarter that could explain the overall tepid earnings.

In an exclusive interview with CNBC-TV18, Shah said that “superlative results” from the BFSI sector was the only factor that pulled the cumulative Q3 results in line with the market. “The moment we remove the BFS side, there are few exceptions here and there, but by and large companies have given results which are little below expectations,” he elaborated.

In an interesting turn, Shah highlighted Allan Greenspan’s ‘innerwear index’, a unique way that the American economist would use to assess the economic situation based on the volumes of innerwear sold in the market. The purpose of the index is to track whether sales of boxers and briefs go down, because this is usually accompanied by a dip in the economy. “If you look at the listed innerwear companies’ results, they all are showing volume de-growth, not turnover de-growth,” Shah pointed out.

To that end, he noted that the concerning trend is stemming partly from margin pressures and partly from volume growth not materializing as expected.

The broader market results in the December quarter came below par, spurred to an extent by the drop in profitability of companies. This sparked a series of downgrades on the outlook for stocks for the FY24 and beyond.

As the market looks ahead at the March 2023 quarter results, Shah is hopeful of a trend reversal. “Market is looking forward now to the March’23 quarter, let’s hope and pray that the subdued trend of September and December 2022, gets reversed in March’23.”