MC Interview: Closely watch for volume growth across sectors in H2FY24, says Deepak Jasani of HDFC Securities

According to a study on the past seven elections, markets tend to do well between one year prior to the elections and one year after the elections. This time a similar pattern might also take place. However, we have risen around 9.6 percent from May 2023 and have scope for some more appreciation.

The period from now to the elections may result in a gain with some volatility thrown in between. Post the elections, we may see profit-taking as the uncertainty would have come to an end.

Is the overall September quarter earnings season in line with your estimates? Do you expect the second half of FY24 to be much better than the first half?

The first batch of earnings were in line with expectations. Later, results showed some strain on consumption due to the delayed festive season, high rates, high inflation, slowing wage growth and rural stress.

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Revenue growth has been modest on a large base but lower commodity and fuel costs and cost-cutting initiatives have helped companies report good profit growth. Volume growth lagged across sectors.

In H2FY24, we will closely watch for volume growth across sectors, which may now be necessary as the scope of margin expansion through cost-cutting may be coming to an end. Q3 will give the first hint as rural pickup in demand will be closely monitored.

Do you see another round of correction in equity in the near term, before getting back to fresh record highs?

Yes, markets have risen without any major correction from the lows of March 2023 and hence may need to correct/consolidate before attempting to move higher.

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Are you gung-ho on the power space?

We continue to be positive on the power space, given the fact that power consumption grew 7.7 percent in the first half of this fiscal and 22 percent in October. With reforms being taken forward in the sector, companies could benefit out of opportunities to add capacity in both the traditional and renewable space.

Do you expect the EMS (electronics manufacturing services) industry to be much bigger in the coming years? Do you have exposure to the same?

As the Indian government has given incentives to boost manufacturing and companies set up plants to benefit out of the China+1 policy, EMS has a good scope of growth in the coming years even as skilled labour availability is plentiful in India.

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However, the valuation of companies has gone ahead of time considering the fact that the results of companies are not consistent from quarter to quarter as order inflow and execution cycles may vary from time to time.

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