Gaurav Dua is the Senior VP, Head – Capital Market Strategy & Investments, Sharekhan by BNP Paribas
Gaurav Dua of Sharekhan by BNP Paribas believes banking, auto and engineering (especially defence companies) sectors are set for a multi-year rallies going ahead after underperforming over the last 3-5 years.
This Head of Capital Market Strategy at Sharekhan by BNP Paribas, who has over 20 years of experience in equity research, asset management and investment strategy, expects sideways consolidation in the Indian market.
“We see better times for Indian equity markets in CY2023 & beyond,” Gaurav Dua told Moneycontrol’s Sunil Shankar Matkar.
Will the September quarter FY23 earnings look better than year-ago?
After eight consecutive quarters of healthy growth in corporate earnings, the sequential momentum is expected to soften a bit in Q2FY23. However, the growth would appear impressive in comparison to Q2 of last fiscal due to low base effect.
In terms of performance, we expect banks, auto, engineering companies to do well while there would be pressure on steel, cement and IT services sectors.
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Have you spotted any new themes that can generate significant returns in the coming quarters?
As an investor, it would be prudent to focus on companies that have domestic growth-focussed business model with sectors like banks, autos, real estate, and engineering to play the multi-year upcycle in the Indian economy.
Do you see significant uptrend in banking & financial services space and are the provisional numbers for Q2FY23 backing your decision?
We are positive on banks, auto and engineering (especially defence companies) from investment point of view. These sectors are set for a multi-year rally after underperforming over the last 3-5 years.
Consequently, we are advising at least 50-60 percent of portfolio exposure to these three sectors with investment horizon of at least 18-24 months.
Is there a possibility of 10-15 percent market correction by end of this financial year?
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It is very difficult to predict short-term market movement on fundamentals. Our base case assumption is sideways consolidation movement for Indian markets amid extremely volatile global markets. We see better times for Indian equity markets in CY2023 & beyond.
Given the expected slowdown in western nations, will the RBI cut down its growth forecast for FY23 in coming policy meetings?
Though RBI has cut the real GDP growth forecast in its policy meet now, the consensus has already done it few months back. Majority of analysts are looking at GDP growth in range of 6.8-7 percent range for FY2023. Thus, it is already factored by the markets.
Also, the real GDP growth of 7 percent is quite healthy in the prevailing global backdrop and puts India as one of the fastest growing large economies in the world.
The risk of further downgrade would depend a lot on global scenario. A steep slowdown or a recession in minor developed economies is already expected by markets, however, a hard landing with major disruptions in global financial systems could further impact growth in Indian economy too.
Is there any possibility of US Federal Reserve slowing down its liquidity tightening process amid expected financial risks?
The dramatic move by UK government to buy bonds and revert back to quantitative easing rather than mandated policy guidance of quantitative tightening has given some of sort of hope to global financial markets that central bankers could ease the hawkish stance if the market condition demand for it.
So if the brewing trouble with some large banks in Europe reaches shore of USA too, it would not be surprising to see US Federal Reserve take preventive action to limit spread of contagion. However, the mandate seem to be tilted towards anchoring inflation as of now.
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