Business News

Reckoning that past experiences suggest that election results impact on markets does not last beyond six months, Mahesh Patil, CIO, Aditya Birla Sun Life AMC, says the market has a tendency to continue with its inherent trajectory based on fundamentals. “Hence, we would not try to time election outcomes and rather focus on stock picking while reducing risk in the portfolio to navigate the volatility due to election outcomes,” he says. Edited excerpts from a chat:What is your overall reading of the numbers and management commentary that we have come across in the March quarter earnings? What is catching your attention?The March quarter has seen a slowdown in the topline growth across sectors as the nominal growth has moderated on the high base of last year and cooling off of inflation. In sectors like consumer staples even the volume growth has been weak, in low single digit, due to slow recovery in rural consumption. On the positive side some consumer companies have raised hopes of a recovery in consumption in the second half of this year. Sectors like automobiles, capital goods and pharma sectors have witnessed gross margin improvement due to lower input costs, thus leading to stronger bottom-line growth. Sectors linked to the global economy and export-oriented companies have seen slowdown, especially IT and chemicals. The resurgence of manufacturing in China and their dumping in global markets has meant that the recovery will be pushed ahead in sectors like chemicals. Real estate, hotels and premium categories continued their strong growth.Companies generally continue to deleverage, and capex growth is lagging cash flow generation. Overall, the results on an aggregate basis are in line and we do not see a major downgrade to earnings in FY25. How has your view changed on IT stocks after the earnings season? Does it make sense to be a contra buyer in some of the stocks as valuations have moderated?Quarterly results for the IT companies implied extended weakness in discretionary tech spends and macro uncertainty. This has resulted in a downward reset of expectations for FY25 and additional pressure on earnings led by weaker margins. Initial expectations of recovery in FY25 have been pushed back to FY26. This has led to correction in the IT stocks and index to the extent of 13-15% in the last 3 months.Midcaps have corrected even more. Our stand on the sector has been neutral since last 1 year and was drifting figuring out indicators of any recovery in tech spends, which still remain elusive. After the recent correction, some names in the sector definitely look attractive offering almost 4% dividend yield and almost 5% FCF yield. While It is difficult to gauge the reversal in tech spends, current levels offer decent margin of safety and can be a good time for contra investing.Following a correction in February and March months, smallcaps have bounced back with a bang. As this leg of rally is largely led by retail liquidity, how careful are you while picking stocks now in the broader market? How much valuation risk do you see in the broader market in FY25?There is no doubt that the valuations in the midcap and small cap space are significantly higher than the long-term averages because of rerating driven by large liquidity chasing these stocks. The relative valuations of midcaps and small caps versus large caps are two standard deviations above long-term averages. With the growth outlook for midcaps and small caps converging with the large caps we see some mean reversion of the diversion in performance this year. So while the midcap index has created a new high after the correction earlier this year, we have seen the breadth of the market has deteriorated as there are many stocks quoting well below their recent highs. As the markets turn more volatile, we see risk to the broader market this year. This could be a year where bottom up stock picking based on earnings visibility and valuation comfort will be rewarded. We are also laying a larger emphasis on the quality of companies and are happy to ignore risky names. With investors betting on political continuity in this election season, PSUs remain a hot favourite. Do you see more re-rating if BJP comes to power?PSU companies had a dream run in FY24 which was driven by sharp rerating of multiples and better earnings growth as the core sectors have done well on the back of strong economic growth. Since the PSU stocks came from a long period of underperformance prior to 2022, there was some catch up which has happened and hence the gains look spectacular. The valuations of most PSUs are now above average and even at the higher end in sectors like defence, railways, and capital goods. One can argue for some structural rerating of PSUs since the current government has been supportive to the PSUs and is urging them to improve productivity and drive growth with right capital allocation. While we do not expect further rerating from here, if the BJP again comes to power with a larger majority in these elections, the PSUs can continue to do well driven primarily by earnings growth and even some rerating in a few sectors like power and oil n gas which are still reasonable compared to broader market.Themes like power, defence and capex have been hot favourites of both retail and institutional investors with many stocks giving multibagger returns. Do you think more steam is left in this trade?The underlying drivers for themes like power, defence and capex are robust. The power sector is seeing a renewed growth as not only the renewable space but even the traditional thermal power generation where the targets have been revised upwards three times last year as the government sees peak power shortages going forward. Défense theme is clearly overstretched on valuations notwithstanding the credible demand drivers. Capital goods sector is also stretched on valuations, but the only comfort is that we are at the beginning of capex cycle recovery and if one takes a longer term view it can still do well if earnings surprise on the positive side. Overall, these over-hyped sectors are at a risk of larger drawdown in the short term in case of any market correction. Hence, one needs to take at least a three-year view while investing in these sectors at current levels.Financial giants like Kotak Bank, HDFC Bank and Bajaj Finance have suffered a lot. Gradually, the consensus buy calls are also fading with investors choosing the likes of Axis Bank, ICICI Bank or PSU banks. Do you think patience in some of these OGs will pay off well if held for the next 2-3 years?Some of the fancied and high valued stocks in the BFSI space have seen a derating due to time correction as they struggled with growth or management challenges. The premium for charismatic leadership in the past has given away and the market is evaluating these companies on a relative basis based on their ability to drive growth and underwriting capabilities. Each company needs to be evaluated based on its own merits based on leadership, technology, product mix and valuations. Having said that, the premium for quality will also come back if we take a slightly long term view in these names.A lot of investors are sitting on the sidelines and waiting for a dip, maybe after the elections. How would you like to deal with the outcome of the election results next month?Past experiences suggest that the election results impact on markets does not last beyond six months and the market continues with its inherent trajectory based on fundamentals. Hence, we would not try to time election outcomes and rather focus on stock picking while reducing risk in the portfolio to navigate the volatility due to election outcomes. Structurally we are positive on the economy and markets and would prefer more bias towards large cap companies where the risk reward is favourable based on valuations. This is a period to cut down on the tail positions in the portfolio and consolidate in better quality stocks.

A comprehensive review of the India-UK 'Roadmap 2030' was undertaken during Foreign Secretary Vinay Kwatra's two-day visit to London, the Ministry of External Affairs (MEA) said on Saturday. The two sides also agreed to further strengthen bilateral cooperation in areas of trade, defence and security, science and technology and people-to-people exchanges. The foreign secretary visited the UK from May 16 to 17 to attend the 16th round of Foreign Office Consultations (FOC) between the two sides. In 2021, India and the UK adopted a 10-year roadmap to expand ties in the key areas of trade and economy, defence and security, climate change and people-to-people connections among others. At the FOC, the foreign secretary held talks with Sir Philip Barton, the permanent under-secretary at the UK's Foreign, Commonwealth and Development Office (FCDO). Kwatra also held meetings with Minister of State (Foreign Office) Lord Tariq Ahmad, MoS for Defence Procurement James Cartlidge, NSA Sir Tim Barrow, Home Office Permanent Secretary Matthew Rycroft, Chief Trade Negotiator Crawford Falconer and Senior Foreign Policy Advisor to the UK prime minister, John Bew. The MEA said both sides discussed the entire gamut of bilateral relations and regional and global issues of mutual interest. "The foreign secretary and permanent under-secretary undertook a detailed review of the Roadmap 2030," it said. "Welcoming good progress across all pillars, they underscored their interest to raise the level of ambition and agreed to further strengthen bilateral cooperation including in trade and economic, defence and security, science and technology, people-to-people ties and mobility, energy, and climate change, as well as health," the MEA said in a statement. It said India and the UK share a comprehensive strategic partnership which has been strengthened across all domains through regular high-level political exchanges and meetings of bilateral institutional mechanisms. The India-UK relationship was elevated to the comprehensive strategic partnership in May 2021. The two sides are currently negotiating a free trade agreement. Both sides are also keen to expand cooperation in the maritime sphere. In June 2021, the UK posted a liaison officer at the Indian Navy's Information Fusion Centre (IFC) that has emerged as a key hub in tracking movements of ships and other developments in the Indian Ocean region. The UK joined a select group of countries such as the US, Australia, Japan and France to depute officials at the Gurugram-based facility. The Indian Navy established the IFC-IOR in 2018 to effectively keep track of the shipping traffic as well as other critical developments in the region under a collaborative framework with like-minded countries.

Even amid general elections, the primary market continues to remain vibrant with the public offer of Awfis Space Solutions set to open next week. Apart from the sole mainboard IPO, one other SME issue of GSM Foils will be launched on May 24.Apart from the new issues, D-Street will see as many as 8 listings including that of the Go Digit General Insurance, which opened for subscription in the week gone by and generated significant enthusiasm among investors, reflecting the broader positive market sentiment."Looking ahead, the market is set to welcome several more IPOs, with expectations running high for their success," said Mahavir Lunawat, MD, Pantomath Capital.Here's what's on the IPO table next weekThe IPO of office sharing startup Awfis Space Solutions is set to open for subscription on May 22. The company has fixed a price band of Rs 364-383 per share.The issue will close on May 27, with the anchor book opening on May 21. The firm is anticipated to list on stock exchanges on May 30.The total size of the offering will be Rs 576 to Rs 599 crore. At the upper end of the price band, the company is valued at Rs 2,659 crore.The IPO of Awfis Space Solutions includes a fresh share sale of Rs 128 crore and an offer-for-sale (OFS) of up to 1,22,95,699 equity shares amounting to Rs 490.72 crore.Peak XV Partners will now sell up to 6.6 million shares, while Bisque, a unit of ChrysCapital, will sell 5.6 million shares. Real estate investment trust, Link Investment Trust, will sell 85,201 shares.About 75% of the offering is reserved for qualified institutional bidders (QIBs), while 15% is reserved for non-institutional investors and the remaining 10% for retail investors.The company said it plans to utilise the net proceeds from the fresh issue of shares for expansion and establishing new centres, working capital requirements and general corporate purposes.SME SegmentIn the SME segment, the sole IPO of GSM Foils will open for subscription on May 24. The issue, which closes on May 28, will fetch the company about Rs 11 crore.The company is offering its shares at Rs 32 apiece, wherein investors can bid for 4,000 shares in one lot.In the IPO, about 50% of the offer is reserved for retail investors and the rest 50% for non-retail investors.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Continuing the positive momentum for the third straight day in sync with global markets, the Indian stock market on Saturday opened on a positive note with Sensex reclaiming the 74,000 level and Nifty crossing the 22,500 mark.Volumes are expected to be low in the market on Saturday as it is a special trading day as part of a disaster recovery exercise. The session is divided into two parts — from 09:15 am to 10 am and 11:45 am-12:40 pm.Among Nifty stocks, ONGC, Power Grid and Nestle were trading higher by around 1% each while JSW Steel, which announced Q4 results on Friday, was trading around 2% lower.Shares of Zee Entertainment Enterprises, which reported a profit of Rs 13 crore vs loss YoY in the March quarter, rallied 5%. The highest positive momentum was seen in Nifty media and realty index, which went up over 1% each."Dow Jones closing in record territory above 40,000 will continue to provide global support for equity markets. However, in India, the election-related jitters might continue to cause high volatility. A significant trend now is the FIIs turning buyers on Friday, and this takes away the pressure on the markets," said Dr. V K Vijayakumar of Geojit Financial Services.At the technical level, 22,450-22,430 will act as an important support for Nifty."Till 22,430 holds, we can see the index move towards 22,530-22,550. A surge above 22,550 can take the index towards 22,590-22,610 zone. On breakdown & sustenance below 22,430, a further correction up to 22,390-22,370 will be on the cards," said SBI Securities.Global MarketsThe Dow Jones Industrial Average rose 134.21 points, or 0.34%, to 40,003.59 — a close above the 40,000 mark for the first time. For the week, the Dow gained 1.2%, the S&P 500 rose 1.5% and the Nasdaq climbed 2.1%.Data from earlier this week showing softening consumer prices in April, boosted expectations that the US central bank will be able to cut rates twice this year, beginning in September.Currency WatchThe rupee appreciated 13 paise to close at 83.37 against the US dollar on Friday, tracking positive sentiment in domestic equity markets and fresh foreign fund inflows.FII FlowForeign Institutional Investors (FIIs) turned net buyers in the capital markets on Friday, as they bought shares worth Rs 1,616.79 crore, according to exchange data.(With input fron agencies)

"If you just go over the last six months, one year, two years, three, five, it is very consistent that India and the US, these are the only two parts of the world which actually have growth and you have momentum in the markets," says Ashi Anand, Founder & CEO, IME Capital .Up till now we have seen that India was underperforming, the rest of the world was outperforming. But then now we have seen a decent set of gains on Nifty and the broader market both. But what lies ahead now. Going further again we have a fifth phase of voting on Monday. Can we say that the pre-election jitters have been put to rest or are they put on to hold? What do you make of this?In terms of pre-election jitters, I think over the next couple of weeks, you probably have optimism, pessimism coming in and out and early in June we will actually know the result and that will kind of drive market direction. But just I think if we are looking at India vis-a-vis global markets, while over the shorter term and I think again driven by jitters around election, etc, there may have been a short period of underperformance.If you just go over the last six months, one year, two years, three, five, it is very consistent that India and the US, these are the only two parts of the world which actually have growth and you have momentum in the markets. This is something that we very clearly expect to continue kind of going forward. From a global context, you have issues in Europe, you have issues in China, most other major economies are really kind of struggling. India really stands out very-very strongly in terms of our economic growth outlook. The overall outperformance of India to global markets, we think is a very clear trend. We believe that as we kind of go past elections, as consumer demand kind of comes back in and as we move towards a phase where interest rates globally finally start to move back down, you could start to again see very strong FII flows coming back into India and really very positive from a longer-term perspective.

At least nine people were burned alive and 15 injured when a moving bus caught fire near Tauru in Haryana's Nuh district early Saturday morning, according to police.The incident occurred around 2 am on the Kundli-Manesar-Palwal (KMP) Expressway. The bus was carrying around 60 people, all residents of Punjab's Hoshiarpur and Ludhiana, who were returning from pilgrim towns of Mathura and Vrindavan. All of them are relatives, police said."Nine people -- six women and three men -- were killed in the accident. Fifteen people were injured and have been hospitalised. All the injured are stable," Inspector Jitendra Kumar, Station House Officer, Sadar Tauru, told PTI.Survivors recounted noticing flames at the rear of the bus around 1:30 am on Saturday and attempted to alert the driver. Observing the escalating situation, a passing motorcycle rider trailed the bus and alerted the driver, prompting a halt. Local residents rushed to douse the flames and rescue those seated at the front of the bus.The exact cause of the fire remains under investigation.— ANI (@ANI)