Emkay Global sees 18-20% earnings growth in FY20; stay invested in quality smallcaps

India Inc delivered satisfactory earnings performance in the January-March quarter. Now, questions are being raised as to when the elusive earnings growth will return. Krishna Kumar Karwa, Chief Executive Officer and Managing Director at Emkay Global, sees double-digit number earnings growth next fiscal.

“In the last 3-4 years, we start the year with high expectations but towards the close of the earnings season, we always see earnings downgrades and sub-10 percent earnings growth. It is still early days to comment on earnings growth but we think earnings could be in the range of 18-20 percent in FY19,” he said in an interview to CNBC-TV18.

Delving deeper to the quarter gone by, he said the March quarter performance from most large companies were encouraging but the disappointments were in small companies.

He also cautioned investors to taper their earnings growth expectations as various macro headwinds could cap upside in the market. “Macro headwinds such as rising crude oil prices, weakness in the rupee versus the dollar could boost inflation and general elections in 2019. Even though there are plenty of headwinds, a normal monsoon as predicted by the India Meteorological Department and rise in Goods & Service Tax collections should aide the positive sentiment.”

Commenting on the bloodbath in the smallcap space, Karwa said mutual funds do not have great headway to invest in this segment given their current assets under management. “The one big challenge mutual funds are facing is the absence of fresh money into smallcap funds. Apart from that, there was some regulatory dispensation which has created its own set of challenges. Six months back investors wanted to buy into this segment, now they want to sell.”