homemarket Newsstocks NewsRisk reward unfavourable for next 3 6 months; upbeat on cement space, Macquarie
Risk reward unfavourable for next 3-6 months; upbeat on cement space, Macquarie
Sandeep Bhatia, managing director, head of equity India, Macquarie does not think the election results would be a non-event but it is not the only single determinant of market performance
Sandeep Bhatia, managing director, head of equity India, Macquarie does not think the election results would be a non-event but it is not the only single determinant of market performance. “After every election, the market has either moved up or down but what has happened in next 2-3 years has been driven by what happens in the rest of the economy and what happens with regards to the global growth outlook,” he said, adding that currently, the global growth outlook is worsening.
Moreover, issues like trade war/tech war would be bigger determinant for market performances globally, said Bhatia.
According to Bhatia, the risk-reward for the next three-six months is unfavourable. Even if the BJP gets the full majority and forms the government, the risk-reward is weighed against a stellar performance from here on, he said. There are headwinds both domestically on the economic front and on the global front, he said.
Bhatia said the NBFC issues have to be tackled and it will be the first job for the incumbent government, and the RBI so that we do not see a further consumption slowdown. It could take another 1-2 quarters to tackle the issue but if that is not handled well then it can have ripple effect in the economy and the system, he added.
Sector-specific, auto space will see negative to very weak growth up to June to maybe Diwali period this year, he said. From Diwali to March there is an expectation of pre-buying before BS-VI transition, mainly in commercial vehicles. So we may witness some volume growth for autos from October to March and March onwards one will have to wait and see if growth revives. However, the structural story for the autos is still intact but near-term there is a weakness.
Moreover, BS-VI norms would increase the content costs, and so price points will move up, the demand structure could change, said Bhatia.
With regards to consumption space, he said staples cannot see a slowdown for long. Moreover, there is no alternative to buying consumer stocks and so they would continue to buy into the space, said Bhatia.
Sharing the rationale for being upbeat on cement, Bhatia said cement will see steady growth coming through because public capex, road building programmes are where the government would continue doing the good job they have been doing. Volume growth would be steady and pick up in the next two years, he added.
With regards to real estate space, he said they would prefer to wait till the end of this year but the government needs to resolve the NCR issues, where lot of inventory is stuck, money locket etc.
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