“Our FY23 year-end target for Nifty is 20,200, though we believe that the journey for the market will not be smooth and will be volatile,” Nishit Master, portfolio manager at Axis Securities, said in an interview to Moneycontrol. The Nifty50 is 4 percent away from its record high of 18,604 points.
On corporate earnings, Master, who has 16 years’ experience in both buy- and sell-side firms, said the estimate were about the same though the earnings drivers have changed.
On themes to pick and avoid, he said high inflation, which is here to stay, is positive on commodity producers and the services industry.
Have you brought down earnings expectations across the portfolio for FY23? If yes, what is the quantum of cut?
The earnings estimate of the portfolio remains more or less the same though the drivers of the earnings have changed. There has been an increase in earnings for metals and mining stocks, oil and gas stocks, hospitals, and hospitality stocks. There has been a downgrade in earnings due to margin pressure from consumer names, IT stocks, autos, cement firms and PSU banks due to expected treasury losses.
How do you approach auto stocks as everything is against them now whether it is sales, demand, commodity prices and fuel prices? Is it time to stay away from these stocks?
One needs to be selective in the auto space and need to be invested in the shortlisted stocks for the long term. Stocks like Bajaj Auto benefit from high export demand as a lot of countries where their products get exported are energy producers and, thus, their economies should benefit from high energy prices. Bajaj also should benefit from the Chetak EV (electric vehicle) launch.
Maruti Suzuki is expected to generate interest due to new product launches this year. Tata Motors, which is gaining market share in domestic PVs (passenger vehicles), has a good portfolio of EV products and is witnessing a cyclical upturn in CVs (commercial vehicles).
Most experts believe credit growth is going to pick up soon and asset quality concerns are behind us now. Do you think banking names still find value to buy?
Yes, we are positive about good quality private sector banks and PSU banks. We believe that with credit growth picking up, asset quality stress easing and an expected uptick in margins, stocks like ICICI Bank, SBI, Bank of Baroda and HDFC Bank should do well.
Where do you want to put your money in the IT sector? Is it a large-cap or tier-II?
We like large-cap IT names as the current risk-reward profile of IT large-caps is better than tier-II IT stocks, which are more expensive.
Do you think the Reserve Bank of India (RBI) will retain its focus on growth rather than rate hikes at least in the first half of FY23?
Currently, the RBI is more focused on growth than inflation, which should be the case till the first half of FY23 provided we don’t see significant pressure on INR (the rupee).
Do you think the market is reasonably valued even after a recent surge of more than 14 percent from March lows?
Currently, the Nifty is trading at a PER (price to earnings ratio) of 21.3x FY23e EPS (earnings per share), which is slightly higher than its long-term average of 17.5x, but with a low probability of earnings downgrade, we expected the Nifty to generate decent returns.
Our FY23 year-end target for the Nifty is 20,200, though we believe that the journey for the market will not be smooth and will be volatile.
What are the emerging themes that one can start looking at for FY23?
We believe that high inflation is here to stay and it is positive on commodity producers and the services industry while negative on manufacturers of consumer products which don’t have the pricing power to pass on the high cost to consumers.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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