Markets Volatile, but Earnings Visibility Remains Strong: Insights from Mayuresh Joshi
ETMarkets.com
Despite the current market volatility, the outlook for earnings remains robust, ensuring that the landscape for Indian equities is looking increasingly favorable as we approach the next financial year. Recent sessions have shown remarkable resilience in Indian equity markets, maintaining supportive market breadth and texture, even in the face of minor weaknesses observed over the past week.
Near-Term Volatility vs. Earnings Visibility
– Current Market Situation: Although fluctuations are expected, the improving earnings outlook coupled with stabilizing trends in the financial sector suggests a more favorable environment ahead.
– Recent Performance: Indian equity markets demonstrated significant resilience recently, with strong market breadth, despite some minor weaknesses.
In an interview with ET Now, Mayuresh Joshi, Head Equity at Marketsmith India, commented on the current earnings season, which has produced mixed results:
– Earnings Report: So far, earnings have been varied. While PSU banks reported solid figures, other sectors have mostly fallen in line with estimates, or slightly below expectations.
– Future Projections: However, Joshi is optimistic that the earnings outlook could significantly improve as the year progresses. He highlighted that as the post-GST inventory rationalization occurs, particularly within consumer durables and both discretionary and staple segments, we might see a pronounced rebound.
Growth Expectations for Earnings
– Forecasted Growth: As we look forward to Q4, Joshi anticipates a strong recovery: By Q4, earnings numbers should return robustly.
– Long-Term Outlook: Earnings growth expectations over the next 12 to 15 months could be anywhere between 12% to 14%, higher than past quarters.
Impact of Global Events
While local factors paint a promising picture, Joshi warns that global developments could introduce volatility:
– Geopolitical Risks: Markets may experience fluctuations based on geopolitical events and trade-related statements from the United States, particularly those linked to tariffs and trade negotiations.
Trade Agreements as a Game Changer
Joshi also emphasized the potential positive impact of international trade agreements:
– The India-EU FTA could serve as a significant catalyst for growth, particularly if the US trade deal materializes soon.
Despite some distribution days observed by Marketsmith India, Joshi remains optimistic, citing historical trends where pessimism often paves the way for identifying valuable sectors and stocks poised for the next bull run.
The Performance of Small and Mid-sized Banks
Certain small and mid-sized banks have recently outperformed, with strong price movements following favorable earnings announcements:
– Stocks like CreditAccess Grameen, Ujjivan, and Bandhan Bank have garnered attention due to their improving fundamentals.
– Joshi noted: Expectations for small finance and payment banks are on the rise as the ecosystem begins to recover from previous stress.
Asset Quality Improvements
As growth expectations strengthen, there are indications that asset quality pressures may start to ease:
– The broader expectation is that small payment banks will smoothen out in the upcoming quarters, as prior challenges related to MSME slowdowns dissipate.
– With enhancing operational metrics and balance sheet strength, CreditAccess Grameen exemplifies this shift, showcasing a decrease in cost-to-income ratios and better management of NPA levels.
Conclusion
In summary, while near-term volatility in the market is a possibility, the enhanced earnings visibility and positive trends in the financial sector signal that the markets are well-positioned for the future. Investors can remain optimistic as these developments unfold, setting the stage for a potentially fruitful financial year ahead.