MOSL conf key takeaways: Earnings to be divergent; domestic flows to be strong

However, if one were to talk about segments outside the realm of consumer and finance then infrastructure is space where some segments have done well and some not. According to CRISIL, it would take 1-2 years for the broad-based recovery in private capex.

“As far as earnings is concerned, market will remain polarized with 3-4 sectors pulling the entire burden and rest 5-6 sectors chugging along,” said Duggad.

Another important thing to be noted is that supply of paper is going to big, said Rajgarhia. Moreover, most supply is coming from business models that one has been upbeat on.

With the government’s thrust on affordable housing, RERA which will play out over longer term, the macro fundamentals are in place for the cement sector, said Duggad. The house is upbeat on Shree Cement, UltraTech Cement, JK Cement but a lot of growth seems to be already discounted in pricews, he added.

Below is an excerpt of the interview.

Anuj: Clearly, we could sense the buzz all through the three days. We were getting all the feed and there was clearly quite a bit of buzz. What has been the key two or three takeaways from investors' point of view?

Rajgarhia: The three key takeaways, first the sense about the domestic flows continuing into the market just gets more and more stronger. The panel yesterday which discussed this gave confidence that in the coming months, we can expect these flows to get actually bigger from here rather than being worried about them.

The second, earnings is not going to be broad-based on a recovery front. You will see few companies doing well and then you will see few companies which will still struggle. So, investors are essentially going to focus companies which are going to do well.

And the third important thing is that the reforms from the government will remain very strong, notwithstanding what they may lead to earnings in the very near-term, you will see the continuous pace of reforms which will build blocks for a far more sustainable long-term growth rate for this economy.

So on the overall, the positive macro trends continue, earnings divergences between few companies doing very well and many companies still struggling and the third, domestic flows can get even better from here than what we have seen.

Latha: I got very positive vibes from that financial sector panel, the small banks and the non-banking finance companies (NBFC). Likewise, the consumption guys have all been very strong. Outside the realm of consumption and consumer finance, did you get any positive vibes for growth?

Duggad: Financials and consumption have been the big foundations on which the market's trajectory has been built over the last couple of years. So that continues to remain pretty resilient. In fact, to add to that, a couple of commentaries that I have heard from the investor meetings yesterday, from the consumption side as well as the private financials, it gives some sort of comfort that earnings growth is not completely dislocated.

Coming to the point of infrastructure side, yesterday we had the L&T MD presenting. He did mention a couple of green shoots in segments like power transmission and distribution (T&D), road, defence, metros, but at the same time, we cannot paint all the infrastructure segments with the same brush. So there are some segments which are doing well and some which are not yet doing well.

If I were to just refer to the presentation which the CRISIL MD made at our conference day before yesterday, she was very categorical in saying that it will take a couple of years, one year or maybe even two years for the broad-based private Capex to recover and therefore, for that to feed into the double digit earnings growth it will take some time.

So market will remain, as far as earnings is concerned, very polarised. 3-4 sectors pulling the entire burden and rest 5-6 sectors just about chugging along at flattish or maybe at the margin some sort of a decline. So that polarisation will continue to remain at least in the foreseeable future.

Nimesh: Even I got a sense that there were a lot of queries or concerns regarding the geopolitical risks. You had General Bikram Singh at the conference today and he sounded very positive that it does not look like this risk will get bigger and bigger. So in that sense, what are your key takeaways from there and what is your general sense as far as the geopolitical risk is concerned?

Rajgarhia: General Bikram Singh did clarify that while we see a lot of noises around the geopolitical and some of them are for real also, India today is a lot more stronger nation to defend any threat from part of the world, point number one.

Point number two, he demonstrated a lot of confidence in the current government in the way they are handling matters, where they are not just giving in and waiting in, but they are basically responding also very strongly.

And the third, he thinks that given India's emergence as an economic power also, very few nations would like to be on the wrong side of India because today's world is not just about political battle. Political battles have a core essence of economic issues that countries have to deal with. So investors were a lot more relaxed after hearing him, coming from an Army Chief who has just recently retired, so that was quite calming for investors to think about the risks that have been spoken about.

For the full discussion, watch video