The earnings performance for the September 2024 quarter is expected to be a mixed bag, according to Naveen Kulkarni of Axis Securities PMS. "Growth is likely to be subdued, especially in key sectors like banks," he said.
According to Kulkarni, the September quarter is seasonally the strongest for the IT sector, but the year-on-year earnings growth for major large-cap IT companies is expected to be in single digits.
Naveen, the ex-Co-Head of Research at PhillipCapital India, who has more than 17 years of experience in the financial services and telecom sectors believes the domestic oriented sectors are better placed than export oriented as challenges in other global economies of slowing growth is more significant. However, Indian economy is still well placed to deliver on consistent growth, he said.
Do you expect the September quarter earnings performance to be strong?
The earnings performance for the September quarter is expected to be a mixed bag. Growth is likely to be subdued, especially in key sectors like banks, which are expected to see tepid earnings growth. While this quarter is seasonally the strongest for the IT sector, the year-on-year earnings growth for major largecap IT companies is expected to be in single digits. Small-cap companies are likely to experience earnings pressure due to the high base effect. Overall, this earnings season is anticipated to be muted.
What could be the RBI move in October policy meeting, considering the Middle East tensions and Federal Reserve's interest rate cut?
The consensus expectation is that the RBI will cut the repo rate by 25bps. However, the transmission challenges are likely to significant. Thus, RBI needs to do more to manage the liquidity challenges to have a meaningful impact of rate cut. This could include a reduction in SLR (Statutory Liquidity Ratio) or CRR (Cash Reserve Ratio) , or other related liquidity measures, which will result in better system liquidity and better transmission of rate cuts.
Are you worried about the market amid Middle East tensions?
The Middle East challenges are serious and it will eventually show in crude oil prices. The crude oil prices have risen but not so significantly, indicating that the tensions in the Middle East appear to be contained.
Is it still better to focus on domestic sectors than export-oriented sectors?
Domestic oriented sectors are better placed than export oriented as challenges in other global economies of slowing growth is more significant. However, Indian economy is still well placed to deliver on consistent growth. Inflation is under control and upcoming festival season should help in improving growth prospects. Thus, domestic consumption based sectors are quite well placed.
Are you super bullish on semiconductor story?
The Indian semiconductor industry is set to boom in India, considering the government push and the latest technology coming. Thus, in a decade, India could potentially have the best technology for semiconductor fabrication. However, this is a very long gestation project and will take a few years to unravel. Nonetheless, the prospects of the industry hold immense promise for the country.
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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