Asit Bhandarkar, senior fund manager (equity), JM Financial Asset Management, says the March quarter earnings have been largely and have set the stage for acceleration in growth as markets start pricing in lower interest rates.
Management commentaries have been largely optimistic about local demand, especially on the rural side and manufactured product exports, the fund manager with 20 years of experience tells Moneycontrol in an interview.
Financials, capital goods and export-oriented manufacturing are some of Bhandarkar’s picks. Edited excerpts of the interview:
What is the most encouraging factor in the March quarter earnings and management commentaries?
As of now, we can say that the result season has been largely predictable for us and has set the stage to play acceleration in growth ahead as markets start pricing in lower interest rates sometime in the future. Management commentaries have been largely optimistic about local demand, especially on the rural side as well as on manufactured product exports.
Any concerns about earnings or commentaries?
We have seen a deeper-than-expected slowdown and margin destruction in sectors which benefited from covid disruption. Higher interest costs may result in weaker sequential quarters ahead in several sectors, whether that is priced in or not remains to be seen.
Also read: RBI unlikely to change policy stance in the next few meetings, says Weekend Investing founder
Do you expect strong earnings in auto and auto ancillary space over the next two or three years?
Although there has been intermittent volatility, auto and auto ancillary space has been a structural play in India, given the steady rise in penetration. We see that the positive framework for further penetration still exists but we are watchful of challenges thrown up by EV (electric vehicle) adoption and its likely impact on legacy technologies.
Do you see the Reserve Bank of India changing its policy stance in the June meeting?
Our view is that given the inflation-related challenges faced by the developed world, central bankers all over the world will most possibly watch inflation over a few more months before they reverse their stance. The RBI, may as well, wait and watch and take a judicious call.
Also read: Scope of early interest rate cut by RBI low - Azeem Ahmad of Waterfield Advisors
Your take on staples and quick service restaurant (QSR) segments? Which one do you prefer between them?
We find a lot of growth opportunities in both sectors. Given the rapid rise in our per capita income, companies with the 'right' product mix may see sharp growth in staples even. QSR penetration story is quite apparent. The challenge for investors will, however, be how much are they willing to pay for growth and all uncertainties that come up ahead.
We are taking a research-driven approach and will back companies with strong brands, capable managements and robust cash flows to make the most of opportunities that our economy throws up.
Which are your preferred bets for FY24?
We will focus on following earnings growth and allocating money towards growth sectors. Financials, capital goods and export-oriented manufacturing businesses appear promising currently.
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