In conversation with Santosh Meena, Head of Research, Swastika Investmart Ltd

Armaan Madhani
/ Categories: Expert Speak
In conversation with Santosh Meena, Head of Research, Swastika Investmart Ltd

We are extremely positive about economy-facing sectors like infrastructure, banking, capital goods and housing, asserts Santosh Meena, Head of Research, Swastika Investmart Ltd

How has the earnings season been so far? Which stocks have been the hits and misses?

The earnings season is currently in the middle phase as sectors like pharmaceuticals, infrastructure, public sector banks and capital goods are yet to present their earnings. The earnings season has been as per the street’s expectations in most of the cases so far. IT companies have witnessed pressure in terms of attrition, margins, supply and competition but the long-term demand outlook is still positive. FMCG companies have seen a lot of de-rating due to inflationary headwinds and margin pressures and most of the management commentary has been cautious regarding the medium-term cost inflation.

The biggest outperformers are banks, especially corporate-facing banks; they have performed well on all fronts like asset quality, credit growth, net interest margins and profitability. For cement companies the demand outlook is extremely positive. Most of the large players have announced capacity expansion; however, commodity inflation, especially for raw materials like coal and diesel pet coke, has deteriorated bottom-lines but it is still better than estimates in some cases. The automotive sector is also showing decent volume growth even though input cost is a major challenge. The commercial vehicle sector may show a turnaround as early indications are visible in the strong earnings of Shriram Transport Finance Limited.

 

What is your outlook on the markets for FY23 and the key risks facing them?

We are cautiously optimistic for Indian markets in FY23. Geopolitical risks, inflationary headwinds, hikes in interest rates, the possibility of a recession in Europe and USA and a slowdown in the global economic growth rate are some of the factors that are key risks for the market. The good part is that most of the risk factors are already known and the market has digested some of them without witnessing any major fall. Therefore, there is a good chance that the market may start to do well if things improve from here. If we talk about the levels for the Sensex then the downside looks limited to the level of around 53,000 while 64,000 looks a probable target on the upside.

 

Which three sectors would you bet on for the long term?

We are extremely positive about economy-facing sectors like infrastructure, banking, capital goods and housing. There are strong signs of turnaround along with valuations comfort in these areas because they are coming out of a long period of pain.

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