Daily Voice | Devang Mehta of Spark remains bullish on this theme after March quarter earnings

We have been maintaining that a pre-election rally seems inevitable on the back of strong sentiment due to expectation of policy continuity, decent earnings/commentary and domestic investors infusing funds on a continual basis and this scenario has played out.

India looks extremely positive in terms of macro data points; fiscal deficit well under target, robust tax receipts be it GST or direct tax, CAD (current account deficit) under control, strong growth in manufacturing, etc. Credit growth data, cement volumes, car sales, power consumption, premiumisation as a trend, air traffic growth, infra creation, hotel average room rates, etc, point towards strong and sustainable momentum across sectors.

However, FPI’s are still virtually absent and if they decide to be back after a long hibernation, the rally can continue. Also, a favourable result for the market participants and expectations of reforms in the Union Budget can keep markets interested and enthused.

Where do you want to bet on in terms of themes/ sectors, if the current government wins the Lok Sabha elections and announce Union Budget?

Capex-related themes like infrastructure, capital goods, cement, automation, energy efficiency, semiconductor, building materials, etc, will see good traction. Some credit growth-related sectors like banks, NBFCs, and discretionary consumption-oriented sectors like Autos, Hotels, and luxury retail will be in the limelight.

Also, India's power and energy sector is undergoing a thrilling transformation, fuelled by a potent cocktail of rising demand, ambitious renewable energy targets, and government initiatives. Most companies in the power space are at all-time highs helped by the recent uptick in demand, an improvement in pricing trends, and pick-up in industrial demand.

What are your thoughts on the March quarter earnings season ending by May-end?

Manufacturing as a theme in different sectors has come up trumps in this result season. Power equipment manufacturing companies, industrial, autos ancillary, engineering and capital goods space have delivered numbers far better than expectations. MNC companies which have been our favourites across different themes ranging from capital goods, energy, bearings, automation, etc, have come up with robust numbers and excellent commentary.

Have you added exposure to any sector, especially after March quarter earnings?

We have been bullish on capex-oriented businesses. Most of these companies have reported historically high numbers in terms of profitability and even margins. We feel that the next 3 to 5 years still belong to some of these sub-themes and sectors. We continue to add companies in sectors like engineering, capital goods, infrastructure, motion management, energy efficiency, hotels, and autos.

Do you expect any possibility of a Fed funds rate cut in the second half of 2024?

The Fed typically cuts rates only when the economy is weakening and needs help. It does not want to cut rates too soon, a mistake past policymakers made. The discussion point is around the Fed's decision to cut, not cut or slowly cut. The year started with an expectation of 5 to 6 cuts and gradually now it has been tempered down to maybe a single or two cuts towards the last quarter of this calendar year. We will also see that US politics will be dominating the scene through the remainder of this year as it's an election year there as well.

What do you expect from the RBI commentary in the June's monetary policy meeting?

For the RBI, like other central banks, the likelihood of a future rate cut is somewhat predicated on the US Fed’s decision to cut rates. The fluidity of global narratives and other relevant data points will be key monitorable for the RBI.

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