Banking could surprise on positive side in the coming quarters with economic recovery, credit growth: Anand Rathi’s Narendra Solanki

Market Outlook

Narendra Solanki, head, equity research (fundamental) at Anand Rathi Share and Stock Brokers, feels a steady move on the upside is expected in the market. “Markets are now waiting for earnings to back it up. There could be some global-related factors which could impact but nothing negative on the domestic front,” he said in an interview to Moneycontrol’s Sunil Shankar Matkar.

Solanki, who has over 13 years of experience in the market, feels the banking sector could surprise on positive side in coming quarters on the back of an economic recovery and consequent improvement in credit offtake. Edited excerpts:

Q: The market has given a 13% rally in the quarter ended September 30. Do you expect a similar return in the December quarter and what would be triggers?

I think broadly markets should continue to perform well going ahead. In terms of giving a number to it, it would be difficult and we have to see where we stand today and what could be the triggers. As far as last quarter’s returns are concerned, at that point markets were facing lot of headwinds in terms of a Covid third wave, uncertainty over the US Fed’s taper, the pace of vaccination and fresh lockdowns fears, to name a few, and when gradually these fears went away we have seen markets rallying.

Coming to the current situation, all the domestic factors are seen improving and the economy is in almost full unlock mode with the festive season just starting. So markets have priced all this and are now waiting for earnings to back it up. There could be some global-related factors which could impact but nothing negative on the domestic front. So a steady move on the upside is expected.

The key triggers would be how exactly the numbers come for companies after full unlock and what kind of recovery we see. Whether we fully recover to pre-Covid levels or overshoot that as well in some pockets is what the markets would be keen to know.

Q: Do you think a third Covid wave is still a risk for the market when cases are falling with an improved vaccination pace across the country?

There are two aspects to this question. First is the risk of a third wave to people above 18 years or the working population; the answer is no, there is very low probability of a third Covid wave in the vaccinated population and as vaccination increases, it further declines.

For the unvaccinated population below 18 years, they certainly have higher risk. Hence, timelines and availability of vaccines for the younger population is the next key data to watch.

Q: The auto and healthcare sectors were only underperformers with around 1% gain in the September 2021 quarter while the rest posted decent gains. What are the sectors that could be in focus in the December quarter?

I think IT should continue to perform, followed by consumer, chemicals and specialty chemicals, and cyclicals. Banking could also surprise on the positive side as we see an improved economic recovery followed by improvement in credit growth.

Q: The quarterly earnings season will begin in the first week of October. What are your broad expectations? Will it be better than the June quarter?

The results should be good and we should maintain the momentum. As far as a quarter-on-quarter comparison is concerned, from the earnings perspective the September quarter should be at least on a par or better than the June quarter. In terms of consensus estimates for Nifty50, currently it is about Rs 162-170 earnings per share for the September quarter.

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