Earnings downgrades may pick up if COVID situation continues: IIFL's GV Giri

IIFL says the upgrade momentum of FY22 has slowed down. CNBC-TV18 spoke to GV Giri, Head-Research at IIFL institutional equities to discuss key risks and the outlook for the market.

On earnings downgrades, Giri said, “We have seen downgrades in April particularly in few sectors which have we might have re-associated with re-opening. We have seen downgrades in discretionary, we have seen downgrades in business services, we have seen retail, travel and leisure of course. We have also seen some small downgrades in FMCG also. We have only seen upgrades in healthcare, IT, and that has been the broad story. “

He added, “Not too much movement at this point in private banks and PSU banks because I think the numbers are yet to come if the tight conditions on economic activity continue for the next two months, we will probably see some more softening in banks earnings numbers. So at this point aggregating everything we reached the conclusion that the only bright spot has been metals.”

He also said, “If the current conditions continue for a month we will see more downgrades.”

On the COVID situation, Giri said, “If we are unable to control the generation of these variants and the spread of the existing variants then it is difficult to say how long these restrictions will last. There is a risk that the economic pessimism of last year repeats for 2-3 months and this may not go away that quickly."

“I am still hopeful that by the end of the quarter, by the end of June we should probably have something to look forward to in terms of the economy getting back to the normal.”

He added that one might see a rush back into equities if the wave comes under control but at this point, the existing data doesn’t let us confidently predict how long that will take.