The MPC is expected to maintain status quo on repo rates, as headline inflation is expected to come down in the coming months, says Devang Mehta of Spark Private Wealth.
According to an interview with Devang Mehta, Director of Equity Advisory at Spark Private Wealth, food prices have decreased while crude oil prices have increased, leading to inflationary expectations and a sharp rise in US treasury yields.
The Monetary Policy Committee (MPC) is expected to maintain the status quo on repo rates while considering these factors. Mehta anticipates that select industries such as banking, automobiles, infrastructure, cement, capital goods, and pharmaceuticals will report strong earnings in the upcoming quarterly earnings season, which begins next week.
Devang with more than 23 years of experience in the areas of wealth management, investment advisory, equity research, equity sales & portfolio management says the body language and commentaries of management within the companies in key indices and even broader markets are important monitorable.
Do you think the upcoming festive season is going to be strong?
The discretionary spending trend in India is at an inflexion point, with per capita GDP hovering around the $2,500 mark. Many premium brands are witnessing significant traction, indicating the emergence of strong discretionary power. Hopes ride on the perception that high inflation hasn’t discouraged discretionary spending among the upper middle class and middle class.
The festive season in India typically begins in August with Onam and Rakshabandhan and continues through December. Brands in fashion, jewellery and footwear are expecting double-digit growth. Also, this year, preparations for the wedding season, which begins in November, coincide with the festive season, leading to a high demand for Indian ethnic wear and accessories. ICC Cricket World Cup in India, beginning this week will also be a big boost for travel & tourism.
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Is the energy, as an investment opportunity, looking attractive now?
We’re witnessing a disruptive shift in the energy landscape given the market’s newfound love for all things that are ‘green’. Favourable government policies, continued peak power deficits and the country’s shift towards clean and green energy make this sector very attractive after a long period of hibernation.
The renewable energy theme has picked up pace in India, with the country quickly becoming one of the world leaders in embracing the transition. The government has set a target of 450 GW of renewable energy capacity by 2030, and some of the top business houses in the country are investing heavily in the sector.
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In this seismic shift, it’s important that you find good quality stocks with strong earnings visibility in this space because not every stock will make the cut.
Which are the sectors that can post better-than-expected earnings in the September quarter?
Select banking, Auto, Infrastructure, Cement, Capital goods and pharmaceuticals are expected to post good earnings. With crude on the rise and some commodities also showing signs of upmove, the earnings of many B2C companies may suffer.
However, the body language and commentaries of management within the companies in key indices and even broader markets are important and monitorable.
Do you think the market will end the calendar year with more than 10 per cent gains despite the current consolidation?
Global markets are going through a round of consolidation due to high inflation and and high-interest rates. This trend has resulted in substantial selling across emerging markets, including India. Maximum selling is recorded in countries like Japan, Taiwan, China, and the Euro Area, in the month of September.
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In India, the level of selling by FIIs has been relatively moderate. This can be attributed to the belief that the Indian economy is slated to deliver good growth, driven by industrialization, capex and favourable business policies. It is important to note that the impact of FIIs’ selling activity is cushioned by the positive inflows from DIIs and Retail investors, HNI’s etc. There is a high probability that our markets post this correction and consolidation might start looking northwards.
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