Sonam Srivastava is the Founder of Wright Research
“September FY23 earnings have been as per expectations, with the growth in profits being led by the banking and consumption sectors. IT services have also posted good profits and revenue growth,” Sonam Srivastava, Co-Founder, Wright Research, said in an interview to Moneycontrol.
Overall, management commentaries are encouraging for the next quarter as inflationary pressures are expected to abate, and margins are expected to expand, Srivastava added.
With over nine years of experience in quantitative research and portfolio management, Srivastava is excited about the domestic business cycle due to the rising capex. She also bets on logistics and oil & gas, among others.
Are you worried about the falling forex reserves, along with a weak rupee and elevated oil prices?
India’s forex reserves have jumped on a weekly basis, and the rupee has also appreciated. But over the long term, depleting forex reserves and a weak rupee remain a concern. If you add elevated oil prices to the mix, the economic situation looks dire.
Rising US interest rates have triggered a stampede, with funds rushing towards the Dollar. In fact, the Rupee has fallen less than other global currencies. Forex reserves have been depleted as the RBI has been trying to shore up the Rupee. The Finance Ministry has recently decided to maintain the currency’s competitiveness and protect the reserves.
Such dips in the currency tend to bounce back quickly as the economic situation stabilises. If the efforts of the US Federal Reserve (the Fed) fructify and inflation calms down, so will the Dollar vis-a-vis the Rupee.
Do you think the Fed will change its stance after the November meeting?
The Fed might start tapering rate hikes over the next few months. Inflation remains elevated in the US, reflecting the supply and demand imbalances due to the pandemic, higher food and energy prices, and broader price pressures. In addition, the war in Ukraine is making things even more difficult.
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The (US) central bank’s new statement hinted at a potential change in how it will approach monetary policy to bring down inflation. However, Fed Chair Jerome Powell dismissed the idea that the Fed may be pausing rate hikes soon, though he did say that they will discuss slowing down the pace of tightening at the next meeting. We expect the Fed to be driven by data and be committed to hiking rates till they see results.
Are the FY23 September quarter earnings better than your estimates? What do you make of the management commentaries?
The September FY23 earnings have been as per expectations, with the growth in profits being led by the banking and the consumption sector. IT services have also posted good profits and revenue growth.
The commodity producers were the casualties of the season, who saw their profits decline due to the rise in commodity prices last quarter. Banks stood out as the best performers, with a 35 percent growth in profitability. Management commentaries for the next quarter are encouraging, as inflationary pressures are expected to moderate, and margins expand.
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Do you think the current equity market rally looks sustainable, or will it face a setback in the coming weeks?
This is a defensive rally in a volatile market where the blue chips are performing, but the small- and mid-caps are lagging behind. The rebound has been welcome across the global market, but there is a sense of caution because of the harsh macro-economic conditions.
While Nifty remains the top-performing broad market index for the year, it has lagged behind Dow Jones and Euro Stoxx in the past month.
Future levels of the index would depend on inflationary conditions, rate hikes, and the geo-political scenario. If things improve from here on the macro-economic front, we could see the rally sustain.
What domestic themes are you bullish on?
There are quite a few themes in the domestic market that we are excited about. Banking and financial services have been the market’s favourites, with fantastic earnings and strong projections.
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Consumption surged in the festive season, and in a moderate inflationary environment, we expect autos, electronics, and consumer discretionary spends to continue to be strong. We are also excited about the domestic business cycle due to the rising capex, which makes us bet on logistics and oil & gas.
Do you expect India’s economic growth to be robust in the coming decade, better than that of its global counterparts?
India is poised to be the growth leader. With our focus on digitisation, easy banking, and becoming a hotspot for new-age manufacturing and green energy, we will see rapid growth over the next decade.
The Indian economy is in a sweet spot. We have a large population, rising consumption, growing digitisation, entrepreneurial chops, and increased focus on ease of doing business. Much like China in the past decade, we could outperform over the next one on the back of the hard work done in the previous decade.
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