"Engineering and certain pockets have been expensive relative to the last decade. Make in India coupled with government initiatives bode well for the sector," Sushant Bhansali, CEO at Ambit Asset Management says in an interview to Moneycontrol.
However, the market pricing in earnings to double in next 2-3 years looks unlikely, he feels.
After June quarter earnings, Sushant with over 19 years of experience in the asset management says asset quality, credit growth, and deposit share remain strong for private sector banks reflecting strong fundamentals, though there was margin compression as anticipated.
Q: What is your reading on the FOMC minutes published recently? Do you expect a further delay in the interest rate cut cycle?
Fed’s minutes reiterated the cautious and hawkish narrative despite noting some divergent views among members. While some members were cautious about overtightening along with noting downside risks to economic activity and upside risks to the unemployment rate, there seemed to be unanimity in the decision for a hike and restrictive policy.
We think that with inflationary pressures abating & moderation of growth, we might see the last hike before the long pause.
Q: Do you see any worrisome signal for banks after reading recent corporate earnings? Are the valuations reasonable?
Banks have witnessed margin compression as anticipated, in some cases higher though. Asset quality, credit growth, and deposit share remain strong for private sector banks reflecting strong fundamentals.
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Valuations in most cases are reasonable despite the expected moderation in pre-provisioning operating profit for FY24.
Q: What is your big takeaway from the July inflation numbers? What should be the RBI move going forward?
July inflation was higher-than-expected, led by food prices. On the food front, there's limited RBI can do to influence food supply management, however, it adds pressure to respond to domestic dynamics.
Q: Are the engineering and manufacturing sectors overvalued now?
Engineering and certain pockets have been expensive relative to the last decade. Make in India coupled with government initiatives bode well for the sector, however, the market is pricing earnings to double in next 2-3 years, which looks unlikely.
Q: Do you see earnings upgrades in the pharma space going forward?
Pricing erosion on the back of higher competition has been going on in the US generics space for almost a decade now. If you look at the US generics market, it has declined by 5 percent CAGR until 2021. That's beginning to change and could pose a piece of good news for the sector.
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Domestic pharma sector was steady and remains so.
Q: Do you think the second half of the financial year will be more challenging than the first half for the markets and economy?
Good monsoon progression coupled with positive sowing data, positive rural wage inflation after 3 years, government capex impetus and expected Election-related spending will enable higher economic activity and rural recovery. This bodes well for the economy and markets even after recent rally trades in line with long-term averages.
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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