Private banks will outperform market and will generate maximum returns, due to strong revenue growth along with stable NII's (Net interest income).
It is unlikely that markets will fall below August lows, and we should start accumulating good fundamental stocks. Global markets will trade with volatility as US presidential elections are ahead in 2020, Gaurav Garg, Head of Research, CapitalVia Global Research Limited- Investment Advisor said in an exclusive interview to Moneycontrol's Sunil Shankar Matkar.
Q: September quarter earnings season will begin this week. What are your expectations on overall earnings season, and do you expect more upgrades than downgrades or vice versa?
September quarter FY20 is expected to be a mixed bag, earning season will kick start with IT major TCS along with IndusInd Bank which is to declare their results on October 10. Banks and NBFCs may show good performance as a cut in repo rate will help in maintaining liquidity.
Consumption sectors including FMCG, auto and paint stocks may show good numbers due to good monsoon along with slashing of corporate tax rate cut. Metal and pharma are expected to remain in pain due to weaker global along with muted demand. Keeping these points, we can expect downgrades in these particular sectors but FMCG, auto can outperform previous quarters.
Q: The Reserve Bank of India cut repo rate by 135 bps in 2019 and transmission of same has been very low against RBI expectations. Considering the big repo rate cut this year and lowering growth forecast by RBI, do you still expect more cuts in coming policy meetings?
Yes, we can see another rate cut in MPC meet in December 2019, in spite of 135 bps rate cut in 2019. In order to maintain liquidity and to enhance demand, repo rate cut is one of the powerful tools that RBI has. As far as the transmission of these rate cuts is concerned, we may have to wait for another two to three quarters in order to see a significant action on ground.
The main concern that our economy is facing right now is that demand is not picking up consistently. At present, the biggest festive season is ahead of us, so we can expect some bloom in economy. Adding to this, favorable crude prices along with stable currency can be vital for next few quarters.
Q: The market sentiment hit by several negative news flow last week, do you expect the sentiment to remain weak in earnings season and market to fall below August lows?
After sharp rally that drove markets almost 10 percent after corporate tax rate cut, indeed markets have corrected recently due to weaker global along with domestic cues. But it is unlikely that markets will fall below August lows, and we should start accumulating good fundamental stocks. Global markets will trade with volatility as US presidential elections are ahead in 2020. But domestic quarterly results can be surprising, and we may see good numbers from companies and keep our bias positive for next two quarters.
Q: What should be one’s strategy at this point of time as sentiments are still weak? Should one be with midcaps/smallcaps or largecaps?
It would be a wiser decision to stay with quality largecaps that are available with reasonable valuations. Let market stabilize and discount negative news, then only we can expect momentum in mid/smallcaps. In this volatile environment, largecap will outperform the broader markets, therefor SIP or regular pickings in largecap stocks would be preferable.
Q. What are your top five ideas which could give maximum returns when the market starts its actual uptrend on fundamentals ground?
Private banks will outperform market and will generate maximum returns, due to strong revenue growth along with stable NII's (Net interest income). HDFC Bank, ICICI Bank and Axis Bank will be top private bank picks that can generate handful returns when actual uptrend on fundamentals ground.
Moreover, paint stocks may come out with flying colors ahead of the festive season. The biggies including Asian Paints, Berger Paints and Kansai Nerolac can be a good pick on account of their fundamental as well as expectations of them doing good.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.