homemarket NewsBanks, financial institutions likely to outperform; input cost pressure will be felt in Q1FY23: Kotak MF
Banks, financial institutions likely to outperform; input cost pressure will be felt in Q1FY23: Kotak MF
In an interview with CNBC-TV18, Harsha Upadhyaya, CIO - Equity, Kotak Mutual Fund, said that commodity cost pressures as witnessed in the past weeks are significant and unprecedented and the same will be felt in Q1FY23 earnings. Among sectors, he believes and banks and financial institutions will outperform hereon.
In an interview with CNBC-TV18, Harsha Upadhyaya, CIO - Equity, Kotak Mutual Fund, said that commodity cost pressures as witnessed in the past weeks are significant. He added that the sharpness seen in commodity costs is unprecedented.
"The commodity cost pressures are very significant. What has happened in the past four to six weeks, it's unprecedented in terms of the sharpness of commodity price increase," he said.
He believes that there is a need to track the impact of price hikes on demand. He explained that the pressures owing to input costs will be felt in Q1FY23 and consumer margin will get hit.
He said, "We have to wait and see how each company, each sector takes price increases and what happens to the demand thereafter because in many sectors, demand may not remain similarly strong after the price hikes."
"So that also needs to be seen. Our view is maybe you will not see the entire commodity cost pressures in earnings during Q4FY22. But in the ongoing quarter (Q1FY23), you will definitely see adverse impact on the corporate margins. And also in some cases at worst, you may see some demand slackening as well," he added.
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On sectors, he is placing his bets on banks and financial institutions. He believes the space could outperform from hereon. He also mentioned that some power stocks and diagnostic-related stocks remain part of the fund’s portfolio. Additionally, cement demand remains strong, which Upadhaya believes is a positive sign.
"There are a couple of individual stocks within the power sector, which are part of our portfolio. We do believe that financials is one space, especially the large private sector banks where valuations are on our side, the stocks have not done so well in the last couple of years. Once growth picks up, then we can expect this segment to actually get rerated. We have a reasonable position across pharma and healthcare names. Dr Lal PathLabs is also part of our portfolio as of now," he said.
"On cement, the silver lining at this point of time is the strength of demand. Despite the sharp increases in prices that we have seen over the past few weeks, demand at least up until now has remained quite strong. And if it continues to remain strong, there is a possibility that we may see a little more hikes and that should improve profitability," he further mentioned.
Watch the video for the full interview.
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(Edited by : Dipikka Ghosh)
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