"We are not expecting the RBI to cut interest rate in the December policy meeting as the food inflation continues to stay high," Divam Sharma, the smallcase Manager and Co-Founder of Green Portfolio said in an interview to Moneycontrol.
According to him, the February meeting could be the time when the RBI can go for a rate cut.
After lukewarm Q2FY25 earnings, Divam does not see a significant cut in full-year earnings estimates. In fact, he is optimistic about full-year earnings. "For many sectors, Q3 and Q4 are the major book builders. We are also expecting better earnings for the third quarter due to festive demand and sales," said the Chartered Accountant, who has over 17 years of experience in investment management, having over Rs 600 crore under management.
Is the worst over for the auto sector?
The sector has reported good numbers post Diwali, and the issue of inventory being piled which we were earlier seeing has toned down after the festive season. The festive quarter is usually the best for auto companies and we are expecting to see good numbers from auto companies in Q3FY25 earnings. We are optimistic that auto will see good growth in near future.
The banking sector has not seen a major downturn in the recent correction, outperforming the benchmark Nifty 50. Are you betting on the sector?
Banking has shown resilience during the recent corrections in the last month. We’ve seen banking to be relatively stable despite lukewarm Q2 earnings. This stability comes from a strong demand for credit. Banking tanked after China’s stimulus announcement but has been resilient during the corrections.
Do you think the IPO pipeline will not be impacted by the recent market correction?
The IPO market has not cooled down despite steep market correction. It continues to be the lucky lottery that it has been for a couple of years now. Even in October, multiple IPOs were subscribed over 100x while the markets were crashing. Owing to the GMP and listing day gains, investor sentiment for IPOs continues to be strong.
Do you see a significant cut in full-year earnings estimates?
Not really. Despite lukewarm Q2 results, we are optimistic about full-year earnings. For many sectors, Q3 and Q4 are the major book builders. We are also expecting better earnings for the third quarter due to festive demand and sales.
Are you still concerned about valuations, even after the sharp correction from the record highs?
We were never too worried about valuations as we have found pockets of opportunities even in the overheated markets. There have always been pockets of both expensive and fairly valued stocks in the markets. The corrections sure have brought several previously expensive stocks to comfortable valuation levels. Many companies have entered our buy lists again and that’s a positive for us.
What could the RBI's move be in the December policy meeting, especially after the 75 bps rate cut in the Fed funds rate?
RBI has not been taking interest rate decisions in sync with the Fed and we don’t expect that to happen either. The macros and micros for India are way different than that of the US and thus RBI cannot just follow the Fed in its rate cut decisions. We are not expecting a rate cut in the December meeting as the food inflation continues to stay high. The February meeting could be the time when we see a rate cut.
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