After the March FY23 quarter earnings season, which is near the end, Nishit Master, Portfolio Manager at Axis Securities PMS, expects sectors like capital goods, hospitality and auto to continue to deliver substantial numbers in the coming quarters.
Further, he expects banks also to show robust numbers though their growth momentum might slow down.
Despite a decent time correction in consumer staple companies, the valuations are still not reasonable considering the volume growth slowdown, especially in rural markets, he feels.
Therefore, Nishit Master, a veteran with more than 16 years of experience in portfolio management, expects consumer staple companies to do well only when we have visibility of improvement in volume growth which seems to be a while away.
Q: Do you think only a few select private banks and NBFCs would continue to sustain the earnings momentum?
We have witnessed margin expansion and lower credit cost due to improved asset quality driving earnings growth across most banks, while the situation with NBFCs has been a mixed bag. As a result, we expect the bank's earnings to remain robust.
Still, there is a high probability that their margins might contract marginally over the next few quarters, while for NBFCs, it might be a different story where margins for some of them might witness expansion due to stabilized cost of funds and improvement in lending yields.
Also read: LIC Mutual Fund bullish on these 4 sectors for FY24, says this fund manager
Overall, we expect most of the banks and NBFCs to witness robust earnings going ahead, but the earnings growth momentum should see a slowdown on a high base for banks, while for at least some NBFCs, the earnings growth momentum should witness improvement.
Q: After decent time correction, is it the time to bet on staple companies?
Despite a decent time correction in consumer staple companies, the valuations are still not reasonable considering the volume growth slowdown, especially in rural markets.
Therefore, we expect consumer staple companies to do well only when we have visibility of improvement in volume growth which seems some time away, mainly due to the possibility of below-normal monsoon due to developing El Nino conditions.
Q: Has the ongoing earnings season met your expectations?
The ongoing earnings season has been a mixed bag, with sectors like Capital Goods, Banks, Auto and Hospitality doing well while IT, FMCG, and Agri inputs have disappointed.
Q: Can the outperformance delivered by select sectors in the March FY23 quarter continue in coming quarters too?
We expect sectors like Capital Goods, Hospitality and Auto to continue to deliver substantial numbers in the coming quarters. We expect Banks also to show robust numbers though their growth momentum might slow down.
Q: What do you expect from the RBI in its June policy meeting? Any possibility of a change in policy stance?
We expect RBI to continue to be in a wait-and-watch mode and expect RBI to maintain the status quo in the June policy meeting concerning stance and rates.
Q: Are you super bullish on consumer themes considering the expected spending by the government ahead of the General Elections 2024?
We believe that in the near term, consumer spending will continue to be depressed due to still elevated inflation and the possibility of below-normal monsoon due to developing El Nino conditions. However, from a medium-term perspective, consumer spending should increase once consumer sentiment improves and the inflationary trend moderates further.
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