Earnings Season Outlook: Expert Weighs In on Banking, IT, FMCG, and More
Sandip Sabharwal, a renowned expert, recently shared his thoughts on the earnings season with ET Now. In this article, we'll delve into his views on various sectors, including banking, IT, FMCG, real estate, and microfinance.
Banking: The Bright Spot
Sabharwal's strongest conviction lies with large private banks, citing their well-managed asset quality as the key reason. With net NPA levels under control, these banks are poised to capitalize as credit demand recovers.
- ICICI Bank: Sabharwal's clear preference, driven by its impressive net interest income and high-quality operations.
- SBI: Has performed well, but its NIM trajectory this quarter will be crucial in determining the stock's future.
- HDFC Bank: Still recovering from past structural issues and unlikely to match system credit growth rates in the near term.
IT: Steady, Not Exciting
Sabharwal's read on the IT sector is neutral, with results being acceptable but not driving a fresh re-rating. Some short-covering and buying in US markets could provide a floor for select names, but largecap IT remains range-bound.
- Tier-II Names: Persistent, Coforge, and Mphasis could see better growth numbers, but valuations remain premium, and client-concentration risk is higher.
FMCG: Watch the Guidance, Not Just the Numbers
Sabharwal flags the next few quarters as the real test for FMCG companies, which have already indicated rising input costs. The sector has not taken meaningful price hikes in two to three years, giving companies some headroom to pass on cost increases.
Real Estate: Selective Value Has Emerged
The price-hike cycle in real estate has stalled, removing investor-driven demand. Sabharwal sees this as a reset to genuine end-user demand and prefers companies focused on execution over speculation.
- DLF: Sabharwal's pick in the real estate space, with a current price of around Rs 600, considered reasonably attractive.
Housing Finance and Microfinance: Staying Away
Sabharwal advises avoiding pure-play housing finance companies due to margin pressure, wholesale borrowing, and high competitive intensity. On microfinance, he cautions against the cyclically volatile nature of the space, but suggests watching banks with microfinance exposure or Manappuram Finance.