December quarter earnings were largely driven by better results from the banking, financial services and insurance (BFSI) sector, said VK Sharma, Head - PCG and Capital Market Strategy, HDFC Securities. In an interview with CNBC-TV18, Sharma also talked about the impact of coronavirus on global equity and currency market viz-a-viz the Indian market.
Markets are rising amid weak macroeconomic situation with high inflation, low industrial output and concerns over coronavirus. What do you think is fuelling the rally in markets?
This is exactly the situation. The markets are rising because of many reasons. The first is that massive short covering that emerged next day of the budget on account of the fact that China did not fall more than 7.5 percent, something that was already priced in the markets as the NY listed Chinese ETF had already fallen 7.5 percent during the time China was closed.
Secondly, the Manufacturing PMI for the month of January had come in at an 8 year high on 3rd February.
Thirdly, the Nifty had recouped all its budget day losses in the next two sessions, which meant that the markets had digested the budget completely and was technically on a sound footing.
How do you see the overall December quarter earnings? Which sectors performed well and which were the worse? Do you see any green shoots?
December quarter results were better than expectations. BFSI and Consumer sectors led from the front. Nifty sales declined 2 percent YoY against the estimated decline of 3 percent. EBITDA/PBT/PAT increased 11 percent/4 percent/9 percent.
The performance was driven by BFSI, excluding which Nifty PAT would have been down 5 percent YoY and PAT was flat YoY.
The sectors that didn’t do well are the usual suspects, cyclicals. Metals and Oil & Gas amongst the cyclicals and Auto and Capital goods amongst other sectors didn’t do well.
The midcaps and smallcaps have shown decent gains this year. What are the reasons and will this rally sustain?
The midcaps and smallcaps have been beaten down so much that they are finding buyers. As these stocks get off their lows, technically they are strong and investors are feeling the relief.
How is the coronavirus outbreak and worries over global economic slowdown impacting the currency markets, especially Indian rupee? What is your outlook for rupee going ahead?
We believe Coronavirus will have a temporary impact on the global markets. With Apple and Maersk warning about the current quarter, expect more companies to come out with warnings.
Our markets will be relatively well placed as we are essentially an inward-looking economy. As the world trade slows, crude will continue to behave.
The Rupee may not depreciate much and Gold will still do well from here till the virus worries don’t die down.
What impact do you think the recent developments in the telecom sector will have on global investors’ sentiment?
This may have a slight negative impact on the investment sentiment. But will be temporary.
Name five stocks that could give better returns post Q3 earnings.
After the third-quarter earnings, stocks such as Bharti Airtel, UPL, Dr Reddy’s Laboratories, Titan Company and Tech Mahindra will do well.
First Published: Feb 24, 2020 11:28 AM IST
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