"We do not expect sharp incremental earnings cuts during Q3FY25. The earnings cuts have happened during 1HFY25," Shridatta Bhandwaldar, head, equities at Canara Robeco Asset Management Company said in an interview to Moneycontrol.
According to him, FMCG, cement, 2-wheeler auto and a few banks could see some earnings cuts in Q3FY25.
As far as the Union Budget is concerned, Shridatta Bhandwaldar with over 18 years of experience in Indian equities expects government to take measures to increase its own capital expenditure in FY26 as well as nudge the private corporates to do more capex. "We also expect government to boost consumption through higher rural spending and some tax cuts for masses," he said.
Is it the right time to start investing in the BFSI sector?
BFSI sector is combination of a few sub-sectors like lenders (Banks and NBFCs), insurance and capital market players. Given the way credit growth, net interest margins and credit cost expectations are over FY24-27E, it appears to us that large lenders could be in a favourable spot over next 2 years. This includes well run banks and large NBFCs. In insurance too, the valuation looks attractive despite regulatory uncertainty.
Capital market players have been beneficiaries of equity market volumes and are rich in valuations now. Overall, the sector is well poised to take benefits of economic cycle, given the cheap valuations of the sector.
Is earnings recovery expected to be challenging in 2025?
Consensus expects the earnings to recover to double in FY26 after a subdued FY25. Earnings recovery is contingent upon, 1) Increase in government spends on infra, 2) Private capex acceleration and 3) Limited negative growth impact of new policies of US on tariffs and other aspects. Base case though is that the earnings growth will mean revert in FY26/27 from FY25 lows.
Which sectors are likely to see earnings derating post Q3FY25 numbers?
The earnings cuts have happened during 1HFY25; we do not expect sharp incremental earnings cuts during Q3FY25. Having said this, FMCG, Cement, 2-wheeler auto and a few banks could see some earnings cuts this quarter.
Do you think full-year GDP growth might come in below 6.5% after reviewing the advance estimates?
Our understanding based on consensus expectation as of now is that the GDP is likely to be around 6.5% given, 1) Recovery of government expenditure during 2HFY25, 2) Festive/Wedding season impact and 3) Recovery of private capex and exports gradually.
Do you foresee any major risk factors for the equity market in 2025?
Most domestic macro and micro parameters are steady and thus risk to markets can only emanate from slower than expected earnings growth, in case - capex, consumption and export remains lower than anticipated. Global risks are more live in our view. US policies on trade and defence and its implications for global trade, capital flows as well as geo-politics can have impact on growth and capital flows.
Do you expect the government to take strong measures to boost economic growth in the Union Budget?
We do expect government to take measures to increase its own capital expenditure in FY26 as well as nudge the private corporates to do more capex. We also expect government to boost consumption through higher rural spending and some tax cuts for masses.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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