The pharmaceutical sector’s growth is expected to be driven by a weaker rupee pushing up export revenue as well as new product launches in the domestic market and US branded generics, Vikram Kasat, head of the client and partner advisory desk at Prabhudas Lilladher, said in an interview to Moneycontrol.
As the second-quarter earnings season starts, Kasat expects good news on margin recovery, volume expansion or capacity launches.
With more than 13 years of experience, Kasat says India’s wise handling of inflation, coupled with a good monsoon and the festive season, should make the equity market perform better. Edited excerpts:
As the market focus shifts to earnings, what are your broad expectations? Will it be a better season than the previous one?
Currently, the global scenario is not well and India has become a shining star by rising above all headwinds. And as we enter results season, we should hear some good news on margin recovery or volume expansion or capacity launches owing to a slip in input costs.
Considering the provisional numbers, do you expect better quarterly numbers from banks?
Banks should gain this quarter. With economic activity improving, domestic credit demand has been strong despite the banking system witnessing de-growth in the first quarter. Credit growth is expected to continue owing to strong fundamentals, although there could be minor hiccups due to global macros.
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Another lever to sustaining credit growth is tightened system liquidity, which would make companies turn towards banks for their credit requirements.
Have IT stocks moved into the value zone, especially after a severe correction this year? Are you thinking of gradual buying in the space?
After Covid, IT had a straight rally but now it seems to be an overestimation, given that whenever the rupee weakens, sectors like IT and pharma outperform as these are export-oriented. Now if they come up with a clear growth trajectory in their performances, they will clearly get a boost.
Do you think the US Fed will be less hawkish from the next policy meeting onwards?
Investors are assessing the likelihood of another 75 basis point rate hike at the Fed’s November meeting. The Fed’s policy rate is now in the 3-3.25 percent range, a full 3 percentage points higher than where it was at the start of 2022, and officials have pencilled in another increase in December after the forthcoming one in November.
Do you expect the equity market to remain volatile and will it be difficult to catch record highs in the coming months?
The market seems to be in consolidation in a range between 16,700-17,400. But we have combated inflation very wisely, and, coupled with a good monsoon and the festive season, going ahead, we should see the market performing better. But also on the other side, it is good to go sector-specific and with individual company performances.
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Every sector participated in the recent correction but pharma managed to outshine. Is it time to bet on the pharma space?
The pharma sector has gained 2 percent month-on-month compared to a fall of 4 percent in the Nifty 50. We should see growth continuity as USFDA (US Food and Drug Administration) issues are now minuscule in terms of plant observations and as we can see the rupee weakening, export revenue should drive growth, along with new launches in the domestic market and US branded generics.
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