Gautam Chhaochharia, managing director and head India Research at UBS said the mood around the liquidity in NBFCs is not that bad but is still a worry for investors
UBS Securities is expecting a 13 percent earnings per share (EPS) growth for Nifty in the financial year 2019, said Gautam Chhaochharia, managing director and head of India Research.
In an interview with CNBC-TV18, Chhaochharia said, "Earnings cut is not a structural thing but structurally, the investor community, the analyst community need to reset their expectations that India can grow earnings at 20 percent plus unless GDP grows at 8-9 percent." He added that as long as the GDP growth is around 7-7.5 percent, earnings growth estimate would be around 10-15 percent range.
Meanwhile, the Nifty base case for the house remains 9,500 for March 2019, he said.
He further mentioned that the mood around the liquidity in non-bank financials is not that bad but is still a worry for investors. However, crude is a big silver lining that has helped revive positive sentiment for Indian investors, he said.
According to him, most global and local investors are now looking forward to what happens on December 11 as the results of three state elections come out.
"So elections remain an overhang on the market. Most global investors are still hoping and pricing-in Modi coming back to power as against concerns of local investors. However, if the outcome is adverse then it may cause some worry among global investors," said Chhaochharia.
Sector-specific, he said in an environment where there will not be easy money, the business in terms of growth and profitability will shift away from NBFCs and wholesale funded banks to banks which have retail liability franchise.
With the valuation gap between the developed markets and emerging markets widening, he said investors do want to look at EMs. The balance sheet of EMs is better than it was in 2012-2013 but the earnings power is not as strong as earlier upcycles.
The house is positive on the property space on back of two drivers, one is that the listed players will gain market share in a tighter liquidity environment and two, for the next big upcycle in India’s economy, there will be a need for housing and property cycle to kick in.According to him, with crude prices correcting, oil marketing companies will be bigger beneficiaries.