Sushant Bhansali is the CEO at Ambit Asset Management.
The fourth quarter earnings have seem to have failed to enthuse the market and triggered a skew in the upgrade-downgrade ratio, according to Sushant Bhansali, CEO at Ambit Asset Management.
In an interview with Moneycontrol, Bhansali shares that he believes that the pressure on earnings will last one more quarter and, by the end of the first quarter of 2022-23, most of it will be behind us.
After the recent corrections, Ambit believes private sector banks, discretionary consumption, and IT services are some places that are offering attractive investment opportunities at the moment. Excerpts from the interview:
Do you expect the bear phase in global equity markets to continue if inflation persists and the geopolitical tensions sustain with aggressive rate hikes by central banks?
We believe that equity markets typically tend to be forward-looking in nature and usually factor in the impact fairly quickly. We believe that the current global inflationary scenario is arguably going through its worse phase and will likely improve gradually from this point.
We also believe that this is now largely factored in by the markets as long as the situation does not worsen from here, markets should incrementally stabilise. In our view, a cumulative 100-125bps rate hike by the RBI will not take a toll on the markets.
Global central banks seem more worried about rising inflation and hence they started raising rates this year. So how do you make your portfolio inflation-proof now?
The simple steps to equity market investing, especially in these tough times, are as follows:
(a) Be patient: The markets will typically try and test your patience, stay put. As long as you have invested in quality stocks with a clear thought, do not panic.
(b) Be greedy: If liquidity permits, invest more with every fall. Remember, great companies are best bought in the worst times.
(c) Focus on growth: As long growth is in line with the above expectations, PE multiples do not compress significantly. In this scenario a growth focus is important.
(d) Leverage: Focus on companies which do not have massive leverage.
Do you think persistent inflation will keep Federal Reserve as well as other central banks including RBI hawkish in 2023 as well?
We believe that the Government of India is playing a very proactive role in trying to control and curb inflation. The recent cut in fuel duty is a case in point. Given the forecast of a normal monsoon, we believe that food inflation will come down and should help bring the CPI back into the RBI tolerance level.
Hence, we at the moment, all things remaining constant, do not envision a hawkish stance in 2023. The Fed will, however, continue to hike in 2023 as well.
Is there any possibility of emerging markets starting to outperform developed markets in medium term?
Yes, the inflationary pressure is relatively lesser, and the economy is still on a strong footing in emerging markets like India. This should mean that as earnings stabilize, FII flow should improve and money flow should come back into India.
Do you see recession risk later in the current calendar year?
The US can possibly slip into a technical recession as the focus clearly is on controlling inflation even if it means sacrificing growth.
What are your thoughts on March quarter earnings and have you make a drastic change in earnings estimates for Q1FY23 and FY23?
Q4 earnings have been below expectations and that is quite visible in the change in upgrade: downgrade ratio. We have cut earnings to some extent and believe one more quarter of the pain is left, by the end of Q1 most of the earnings pressure should be behind us.
Where do you see the value now considering the rangebound and volatile markets?
We believe private sector banks, discretionary consumption, and IT services are some places that are offering attractive investment opportunities at the moment.
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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