Results in Q4FY24 have been was broadly inline. IT earnings were slightly weaker while businesses with rural exposures have seen bottoming out of trends, says Abhishek Singh of DSP Mutual Fund
"General elections is a major event for the market. But the consensus is we will continue to have political stability in the country," Abhishek Singh, fund manager at DSP Mutual Fund, said in an interview to Moneycontrol.
Among the sectors, BFSI is the only one that is trading cheaper than long term averages both on absolute and relative basis, he believes. "Markets are focused too much on near term challenges in the sector and are overlooking longer term opportunity and strength of franchises," said Abhishek, who has over 14 years of experience in the asset management industry.
Do you think the market seems to be worried about the general elections results due on June 4, considering the rising volatility in the recent past?
Both Nifty 500 & Nifty Mid Cap Indices are up 18-19 percent over the last 6 months. The fall from peaks have been mid-single digit recently and they are both close to all-time highs - within a few percentage points. This is in spite of geopolitical uncertainty. Indian markets have been calm. This is not volatility.
General elections is a major event. But the consensus is we will continue to have political stability in the country.
Majority of our earnings is linked to global growth - directly or indirectly. Escalating tensions in middle east, changing political dispensations in large developed economies, central bank behaviour, commodity prices - they are all pockets of uncertainty. But please remember they have always been there and will continue to be so. What the current set up has along with that is somewhat extended valuations across equity markets.
Do you think the market has already priced in that there won't be any hike in interest rates as well as potential rate cuts in the current calendar year?
Probably. At the same time, remember, thinking about this is useful only if you get two steps right. Get the interest rate call right and market's reaction to it right. Would you have imagined that interest rates in US would be where they are and equity markets will still be at all-time highs?
Is the ongoing March quarter earnings season in line with your expectations? Any disappointments or surprises?
This was broadly inline results seasons. IT earnings were slightly weaker. Businesses with rural exposures have seen bottoming out of trends.
Have you changed your sector bets especially after FY24 earnings?
No. The portfolio continues to have significant exposures to banking & financial services (BFSI), healthcare, and autos. These have been long standing positions. BFSI is the only sector that is trading cheaper than long term averages both on absolute and relative basis. Markets are focused too much on near term challenges in the sector and are overlooking longer term opportunity and strength of franchises.
Healthcare valuations are fair and provide balance to the portfolio. The Auto exposure comprises a blend of businesses that have shown notable improvement in recent years, alongside two-wheelers, which are still in the process of recovering their 2019 volumes.
Do you see strong revival in FMCG stocks in the second half of the current calendar year?
FMCG volumes and toplines grow in a narrow band. These are large mature companies in penetrated categories. We get despondent when they report low single-digit growth and ecstatic when the report high single-digits. There has been significant stress at the bottom of the pyramid consumption. It will improve at some point - just because of the base effect if nothing else. The companies have been hopeful for multiple quarters now.
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