Interview with Hemang Jani, Head — Advisory, Sharekhan.
The Indian market is likely to remain volatile going ahead, but there is no panic-like situation. Earnings will pick up in FY2019 which could support the Street ahead, Hemang Jani, Head — Advisory, Sharekhan said in an interview to Moneycontrol's Sunil Shankar Matkar.
The Indian market has not even corrected 10 percent and yet it is still underperforming global markets. Do you think the current fall is a reason to panic?
We believe that the Indian market is likely to remain volatile going ahead, but we don’t expect a panic-like situation due to sustainable and strong mutual fund flows and improved earnings trajectory for FY2019.
Are your year-end Nifty and Sensex targets still the same or have they changed?
We believe that earnings will pick up in FY2019 which could support market going ahead. Expectation on returns from market could sober down in FY2019 vis-à-vis FY2018, but it would be still possible to make double digit returns.
Is this the right time to buy for investors who missed the bus earlier or is it a 'Sell on Rally' market?
We have to be careful while picking up stocks in current market and need to follow bottoms up approach. Few stocks that we like in volatile times for gradual accumulation are Arvind, Persistent Systems, Godrej Consumer, Relaxo Footwear, HCL Technologies and Supreme Industries.
What is your view on the PNB fraud case? Are you keen on buying PNB and other PSU bank stocks after this sharp correction or do you want to wait for it to fall further before jumping on board?
We think the recent PNB scam has dented sentiments towards PSU banks and there is uncertainty on the credibility of their risk management process. We strongly advise investors to stay away from this space until more clarity emerges.
How do you read third quarter earnings performance of companies in general? Has there been any recovery on the ground, and what is your outlook for Q4 and FY19?
The Q3FY18 earnings season has so far been broadly in line with ours, as well as market expectations, on headline numbers. Majority of Sensex companies’ earnings declared so far have been in-line or better than estimates. Many data points like MHCV sales, tractor sales, hotel occupancy, air traffic, exports data indicate some sort of improvement at ground level.
What are the major risks for India going ahead, domestically and globally?
Globally, spike in bond yields (across markets), strengthening of dollar and volatility in crypto currency may impact sentiments towards equities and flows into emerging markets.
Locally, the concerns related to fiscal slippages – resulting from need to spend more on infra and rural India + impact of rising crude prices – and its fallout on bond yield and yield valuations could be a drag on markets.
After a correction of more than 6 percent in frontline indices and around 8 percent in broader markets, what are the five best picks?
Arvind posted decent performance in Q3FY2018 with revenues and PAT growing by 16 percent and 8 percent, respectively.
Q3 was yet another quarter of strong performance by Branded & Retail business of Arvind with around 24 percent growth in revenues and more than 300bps improvement in the operating profit margin (OPM).
Demerger into separate entities will enhance shareholders value in near future.
It posted strong Q3FY18 results with robust operating performance and steady spreads and net interest margins (NIMs), strong loan book growth of 19.3 percent YoY and 5.6 percent QoQ growth.
HDFC’s attractive bouquet of associates/subsidiaries provides further value.
It has delivered strong performance driven by margin expansion. For Q3FY18, GCPL registered a strong bottom-line growth of 23.8 percent driven by 210bps expansion in the OPM.
The domestic business registered strong comparable revenue growth of 17 percent with the soap segment and hair colour segment growing by 24 percent and 33 percent respectively (on comparable basis) during the quarter.
Recovery in rural demand, addition to product portfolio will aid further revenue growth on the domestic front while improvement in African and Indonesian businesses will spur international business ahead in the forthcoming quarters.
It is the key beneficiary of the commercial vehicle (CV) upcycle.
Double digit growth in medium and heavy commercial vehicle (MHCV) will continue. Ashok Leyland (ALL), the key beneficiary as MHCV contributes 70 percent of revenues.
ALL is set to grow in the light commercial vehicle (LCV) business and plans to launch a new product every quarter.
Earnings of ALL are expected to grow by robust 20 percent in FY18-20.
It is a well etched growth trajectory. In Q3FY18, L&T delivers margin expansion and strong bottom line growth due to cost curtailment and robust execution capabilities.
L&T is the best play on the domestic capex cycle recovery and will be able to enhance order book growth given its execution efficiency.
