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Daily Voice| Valuations, global market uncertainty to affect earnings outlook, says Harshad Chetanwala of MyWealthGrowth

Daily Voice| Valuations, global market uncertainty to affect earnings outlook, says Harshad Chetanwala of MyWealthGrowth
October 08
10:02 2021

Harshad Chetanwala, Co-Founder of MyWealthGrowth.com with over 18 years of experience in financial services, feels economic activities are expected to improve further and catch more momentum as we enter the festival season.

The markets have begun factoring in the revival, though valuations and uncertainty in the global market may play on the minds of analysts before revising the future earnings, he said in an interview to Sunil Shankar Matkar of Moneycontrol.

Moody’s has revised India’s outlook to stable from negative. Does it mean that risks for the financial sector are lower now along with visibility of sustained growth and gradual fiscal consolidation?

Moody’s outlook particularly on banking and NBFCs has improved as these companies continue to strengthen the financial sector and reduce the risk through higher capital cushions and greater liquidity. The economy is expected to improve as the overall environment progresses and this will help reduce fiscal deficit in some years.

The sector had its challenges over the last couple of years even before the Covid crisis, at the same time, measures adopted by the finance ministry and the RBI has helped strengthen the situation. It would not be right to say we are completely out of woods, but the situation has improved and the risk has also reduced.

US Treasury Secretary Janet Yellen has warned that a US debt default could trigger another recession, as the October 18 deadline approaches. Do you feel the same way?

It is quite unlikely that the US would default on its debt, they may take measures to avoid the default. Historically, whenever such situations have arrived, the default was avoided by raising the debt ceiling and agreeing to reduce the expenses over time.

Several PSUs, including oil, power and coal, saw a big run-up in stock prices. What are the reasons for this rally? Is under-ownership one of the reasons?

The crude oil prices started rising and that has been the primary reason for the increase in the stock prices of companies in the power and energy sector. At the same time, the demand continues to grow stronger as things are getting normalised and supply resumption has been gradual.

Is the RBI coming closer to the exit policy? Will the policy provide adequate cues on the likely glided path of normalisation?

The RBI may relook at its accommodative stand and come up with measures to reduce liquidity. The coming policy may have some signs of normalisation as excess liquidity and inflation continues to remain high. They may like to move towards normalisation gradually and we may see some signs of it in the upcoming policy.

What are your broad expectations for September 2021 quarter earnings? Will these quarterly earnings help analysts revise upwards FY22 and FY23 forecast?

After a difficult quarter of April–June which was the peak of the second wave, normalcy has improved throughout the quarter ending September, this will reflect in the earnings growth of companies. The activities are expected to improve further and catch more momentum as we enter the festival season.

While markets may have started factoring in the revival, valuations and uncertainty in the global market are some factors that may play on the minds of analysts before revising the future earnings.

What are the key factors one should consider before picking stock and create a portfolio of stocks?

Investing in stock is investing in the business and hence such investment should be looked at from a long-term perspective. So, one of the key factors is the time frame of investment. Equally important is to give time to study the companies and their growth prospect by analysing their track record and management.

Valuation is another factor that you should consider at the time of investing particularly in bull market conditions. Over the period, you should also diversify across different sectors and avoid investing in many companies within a sector.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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