Higher input costs adding pressure on earnings; auto sector still on a bumpy road: Kotak Mahindra AMC

In an interview with CNBC-TV18, Nilesh Shah, MD, Kotak Mahindra AMC, said that there are signs of pressure on earnings owing to higher input costs. Shah is of the view that Q4FY22 and subsequently Q1FY23 earnings could potentially miss Street estimates. Further, he said that he is eyeing companies that are better placed to push price hikes to its customers.

He said, “Undoubtedly, there is earning deceleration happening in corporate India. We believe March 2022 quarterly results will be below the expectations that we were carrying in December 2021 quarterly results. We believe even June 2022 quarterly earnings will get impacted as companies will find it very difficult to push the price rise.”

Shah believes this is a good time to build a portfolio at reasonable prices in the Indian market. According to him, the auto sector could remain under pressure for some more time. However, he remains confident of retail participation picking up steam.

“Automobile industry per se has issues related to supply side. Demand side was reasonable and that was giving some hope to the bulls. Now, even the demand side is getting impacted as we have seen higher effects of oil prices. So overall, we believe the auto sector will remain under correction mode for some time,” he said.

On banks, he said that they are well-placed but FII selling is adding pressure on them.

Shah said, “Banking stocks’ selling pressure is more driven by the positions of certain large institutional investors than anything fundamental.”

For the entire interview, watch the accompanying video