Like Infosys but no high hopes from Q1 results: Amisha Vora

Given the way global markets are fretting about early rollback of stimulus by the US Fed on strong jobs data, the upcoming first quarter earnings season will be a challenging one, says Amisha Vora of Prabhudas Lilladher.

She doesn’t expect anything great from IT giant Infosys in Q1 and cautions that cost pressures are likely to remain. But adds that in the next two-three quarters, volatility to reduce. Infy is one of Prabhudas Lilladher's top picks.

Sectors like auto, cement, capital goods and construction are likely to feel the pinch in Q1, she tells CNBC-TV18 in an interview.

Also Read: Sell equity & bond, hold cash as more gloom ahead: Faber

Below is the verbatim transcript of Amisha Vora's interview on CNBC-TV18

Q: How is it looking through earning season, the global context is quite tricky? What would you expect our market to do?

A: The earning season will continue to be pretty challenging no doubt particularly because a couple of more sectors are getting added to the list of sectors which were worried about this, auto will be one of the sectors which will be in trouble which is the additional sector. Even cement on a year-on-year and quarter-on-quarter basis margins will be under pressure.

So whatever is happening in capital goods and construction and some such sectors. So the earning season will be just a small and one part of where the market is heading and all sides will continue to be on how the fund flows, particularly dollar flows, are moving for short-term.

Q: What have you made of this painful period for the banks, their continued underperformance and how are you telling your clients to approach this space now?

A: Banking now has around 28-30 percent weightage in Nifty and particularly private banks had a phenomenal run for more than two years, eight quarters plus in terms of their stock performance which also means that amongst the few stocks in Nifty which has done better than markets and given positive returns are private banks.

Public sector banks anyway were languishing quite a lot. So any selling which has been happening by Foreign Institutional Investors (FIIs) are bound to be in some of these sectors where they have invested in the past. As the mark-to-market losses where corporates are coming into play and as the economic cycle recovery in the second half, the prospects are getting slightly more dimmer or faint and also the possibility of interest rate reduction leading to some kind of treasury gains for PSUs are getting faded, I think this sector is coming under a lot of burn, both because of its overriding positions in FII portfolios as also because of some of the fundamentals which is not falling in place the way it should.

So this kind of trend will continue for some time and probably Bank Nifty on the way up was leading Nifty’s rise and on the way down also probably the same will happen, it will lead Nifty’s fall.

Q: What would you do with a stock like Reliance Communications now, it has been a big mover all of last week as well?

A: We do understand that a lot of restructuring is happening in terms of both adding some revenue lines which can really help them get rid of the extraordinary debt that they have piled up but overall business to some extent continued to remain pretty challenging and competitive. After the kind of rise we have seen we need very specific few more corporate announcements to lead the stock to next level. Otherwise at the current level we will wait and see what corporate actions are happening.

Q: What are your expectations from Infosys this week?

A: We think in terms of numbers delivery there will be nothing great to go by. As it is it was a short time and we feel the cost pressures will continue to be there. So it will depend largely on the kind of conference call inputs that investors as well as analysts get. However, our feeling is that for the next two-three quarters, the volatility in Infosys will come down around results time and even otherwise much lower. It is one of our top picks which means that we think that the chances of it outperforming markets are much better.