Aditya Birla Sun Life AMC says mild correction in markets likely from global hiccups

Mahesh Patil, the chief investment officer of Aditya Birla Sun Life AMC, on Thursday (August 10) said he sees a certain amount of risk in market sentiment globally and he feels a mild correction is likely to take place from global hiccups.

"On the global front, you could see some kind of hiccups and in that context, you could see some consolidation or possibly mild correction in the markets," he told CNBC-TV18. His comments come in the backdrop of US banks being downgraded, India and US inflation data now being in focus, and the earnings season almost wrapped up.

He said while the outlook on the market has been positive, the overall earnings season though has been a kind of a mixed bag. However, the overall earnings growth still remains fairly intact.

"We are still seeing, this year, Nifty earnings growth in the mid-teens, which is very good, and overall, India's outlook in terms of GDP growth also remains very strong. So, we are expecting around 6.5 percent GDP growth this year, which is actually higher than what we were looking at the beginning of the year," Patil said.

He noted that the rural demand too is witnessing some positive signs, "It has been weak now for almost a year, and the commentary coming in from the auto companies or from the FMCG players, they are seeing some kind of green shoots over there. And also, the overall rainfall has been good. So that should be fine."

Patil said he has been positive about the auto sector for a while now. "We have seen a good rally across commercial vehicles, four-wheelers, and two-wheelers. Having said that, for the overall valuations in the sector, the upside is limited while the uptick could still continue in terms of recovery,” he said.

And on the banking space, he believes it may witness some earnings downgrades, "In the banking sector, we have seen some amount of margin pressure in a few banks."

The net interest margin of some of the large PSU banks have been slightly disappointing when the expectation was that the fall would be much lower. So, that is where you could see some kind of downgrades to earnings growth in this fiscal year," he said.

Patil added the pharma sector has also positively surprised in the US generics space, "There were some amounts of supply-side disruptions which were there which probably led to some price increases for a few categories. But the indications that we are getting, talking to the companies, is that there is some amount of consolidation which is happening on the supply side."