Metals, banking sectors to see earnings downgrades: Avendus' Andrew Holland

Avendus Capital's Andrew Holland believes that there is going to be more disruption in the BFSI industry, either through regulation or through new entrants.

Domestic growth will pick up during the second half of the year, mainly because of the capex spending by the government and private companies, Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies said in a recent interaction with Moneycontrol. This capex spending, he says, will have a multiplier effect on the economy going forward.

Holland says that the earnings upgrades could be back-ended.  “That’s the good news when it comes to valuations,” he said.

Watch: Market expert Andrew Holland on which sectors to invest in now & if markets will correct further

On inflation, Holland said that much of it had to do with a spike in food prices, which the government should be able to control. The bigger worry is that China may announce a big fiscal stimulus which in turn could boost commodity prices. “We are seeing oil prices at around $85 per barrel which is higher than most people’s expectations at the moment. That could be an extra kind of caution for investors if there is a risk-off trade happening because inflation is going to be stickier, giving the RBI less room to reduce interest rates as quickly as people were expecting,” he said.

Overall, Holland says the first quarter of 2024 was okay, although there were some sectors that did not do well like IT, which would continue to drag on earnings in the next quarter as well. Apart from IT, currently Holland says that the downgrades could continue in the metal and banking sectors.

But otherwise, the capex theme would continue to remain strong, he said. “It wasn’t a bad first quarter, the second quarter we will see a few downgrades before we start to see the upgrades,” he noted.

The rupee needs to be watched closely, Holland said. “We are importing inflation in the short term, keeping in mind what is happening in China and the depreciation in their currency over the last one month,” he said.

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