Chart of the day: Jet fuel cracks crash in Asia as airlines cut back China routes amid COVID-19 outbreak

[wealthdesk shortname="PNB" isinid="INE160A01022" bseid="532461" nseid="PNB" sector="Banks - Public Sector" exchange="nse"]

Punjab National Bank (PNB) will report its financial results on Thursday. The public sector lender is likely to take a hit on profitability due to a treasury loss
— or a loss emanating from a fall in bond prices. Investors will closely look out for a stable margin and signs of sustained improvement in asset quality.

Analysts in a CNBC-TV18 poll expect PNB's net profit for the April-June period to come in at Rs 736.3 crore, which would mean a 28.1 percent fall compared with the previous three months.

They estimate the PSU bank's net interest income (NII) — or the difference between interest earned and interest paid — at Rs 7,534.1 crore for the three-month period. That would translate to an increase of 4.3 percent compared with the quarter ended March.

The analysts peg the bank's loan growth — a key metric of demand for lenders — to come in at two percent sequentially.

PNB's asset quality — measured by the proportion of bad loans in total loans — is expected to improve.

Punjab National Bank's financial results come in a tightening monetary policy environment, with major central banks having lined up aggressive hikes in COVID-era interest rates.

The RBI has raised the repo rate  — or the key rate at which it lends funds to commercial banks — by 90 basis points since early May. Its Monetary Policy Committee — or the rate-deciding panel chaired by the RBI Governor — is scheduled to meet next week.

<a style="font-size: 1rem;" href="http://www.cnbctv18.com/market/stock-market-live-update-share-today-nifty-sensex-maruti-tata-motors-bajaj-fin-14264072.htm">Catch latest market updates with CNBCTV18.com's blog</a>

Punjab National Bank likely to take 28% hit in profit — here's why

Nilesh Shah of Envision Capital views the recent correction in the midcap IT space as a good opportunity to enter, especially to investors who didn't have a good measure of investment in IT. In an interview to CNBC-TV18, he said: "Some of the Tier-II companies, which essentially are doing extreme cutting edge work, will see higher growth rates over the course of the next 2-3 years."

His remarks come at a time when the IT sector has taken a backseat in 2022 so far, after outperforming the market for much of 2021.
<table width="364">
<tbody>
<tr>
<td style="text-align: center;" width="161">Index</td>
<td style="text-align: center;" width="109">Return 2022 YTD (%)</td>
<td style="text-align: center;" width="94">Return 2021 (%)</td>
</tr>
<tr>
<td style="text-align: center;">Nifty50</td>
<td style="text-align: center;">-0.6</td>
<td style="text-align: center;">24.1</td>
</tr>
<tr>
<td style="text-align: center;">Nifty IT</td>
<td style="text-align: center;">-17.5</td>
<td style="text-align: center;">59.6</td>
</tr>
</tbody>
</table>
One sector that has largely remained insulated from the fallout from the COVID-19 pandemic is the IT space. It has only grown exponentially, as companies spearheaded the much-needed scale-up while riding the digital wave.

The current quarterly earnings season has been a mixed bag for the sector, with IT behemoths like TCS, Infosys and HCL Tech largely exceeding Street expectations on the revenue front. However, margins felt squeezed for most of the companies owing to wage inflation and attrition.

<img class="aligncenter size-full wp-image-13316822" src="http://cms.cnbctv18.com/wp-content/uploads/2022/04/Apr-28-IT-stocks.jpeg" alt="" width="796" height="575" />

However, this hasn’t deterred Shah the slightest from the IT space. He is of the view that the sector looks promising for the next 2-3 years. “Maybe 2-3 quarters will still continue to be challenging for the IT pack,” he added.

<a href="http://www.cnbctv18.com/market/stocks/stock-market-news-live-updates-nifty50-bse-sensex-axis-bank-maruti-wipro-sbi-cards-vedanta-brent-crude-bitcoin-gold-rate-13324032.htm">Catch latest stock market updates with CNBCTV18.com's blog</a>

Correction in midcap IT provides a good entry point: Nilesh Shah

Indian equity benchmarks Sensex and Nifty50 started Tuesday's session on a negative note tracking weakness across most global markets but made a comeback in the afternoon, helped by an across-the-board recovery. 

Broader markets also bounced back sharply, giving the bulls a sigh of relief.

Here’s what veterans have to say about the market

Shankar Sharma, vice-chairman and joint managing director of First Global

The market veteran told CNBC-TV18 that the market has to take a breather and there is still a long way to go before one should start to get seriously worried. According to him, what happened in the last few sessions was nothing more than a small correction.

“We have had a vertical rally in the last 18 odd months and where do we go from here? The short answer to that is that<a href="https://www.cnbctv18.com/market/market-correction-long-way-to-go-before-we-get-seriously-worried-says-shankar-sharma-11562722.htm"> we still have a long way to go before we should start getting seriously worried</a>," Sharma said.

Steve Brice, Chief Information Officer at Standard Chartered Wealth Management 

He believes this is the buying on dips environment in the market.

“Usually when you get to November through April, we see significant gains for global equities, so seasonally this is the strongest period of the year. We have been in an unprecedented environment for two years and seasonality hasn’t worked that well but overall we should continue to see volatility pick up but ultimately we do believe<a href="https://www.cnbctv18.com/market/recommend-buying-on-dips-positive-on-india-neutral-on-asia-standard-chartered-wealth-11547752.htm"> it is a buying on dips environment as we go into the end of the year</a>,” he said.

Within neutral allocation to Asia, he would be overweight India. He said, “We are neutral Asia as a whole. We still believe that US and Europe are going to outperform. Within Asia we still have preference for India. We believe growth dynamics there and also with COVID-19 vaccinations picking up etc – overall story is still pretty positive for investors.”

Also Read:<a href="https://www.cnbctv18.com/business/vedanta-a-risky-bet-if-commodity-cycle-turns-jittery-hindalco-better-placed-go-india-advisors-11561842.htm"> Vedanta a risky bet if commodity cycle turns jittery, Hindalco better placed: Go India Advisors</a>

Dipan Mehta, Director, Elixir Equities 

Mehta is positive on Vedanta. He believes the company is a good trading play at this point of time and the current correction may be a good opportunity.

“By and large, I am positive on Vedanta and a correction like this may be a good opportunity. But one should keep in mind that these are great trading stocks, you can hold them for a few months also, but not part of a core holding,” he said.

Harish Krishnan, EVP and Senior Fund Manager-Equities of Kotak AMC

He said equity is a long term asset. “I would imagine that the kind of corrections (market is currently seeing) made at the stock level or at the index level, do provide an opportunity for a lot of investors who are underweight equities as an asset class, to participate into the asset class,” he said.

Also Read:<a href="https://www.cnbctv18.com/personal-finance/new-age-businesses-buy-first-then-test-model-should-change-says-axis-amc-11563972.htm"> New age businesses: 'Buy first, then test' model should change, says Axis AMC</a>

He said the next 18 to 24 months are going to be a lot more polarized. He said it is unlikely to be what was seen in the last 18 months, wherein all stocks did well. 

“It is going to be somewhat of a stock specific kind of approach and therefore one will have to take very calculated bets going ahead to participate in the next 18-24 months,” he explained.

Sushil Kedia Founder of Kedianomics 

Kedia remained bullish on telecom stock. He said "they did not come down at all in this market correction. So we will continue to ride them with trailing stops," he said. 

Mehraboon J Irani of Gini Gems Consultants

The market expert too remained positive on the country's telecom story. "The question is whether you buy Bharti Airtel as a trading bet. The answer is: Certainly not. But if one has it in the portfolio, and one wants a proxy for the telecom sector, I think certainly one will continue to hold on to it. Will the stock be higher than where it is right now or the next one? Yes. They have taken care of the liquidity problem with the recent rights issue.” 

He said the tariff hike was also a welcome move and should definitely help the company as far as the incremental revenue to EBITDA goes. 

Catch all market highlights <a href="https://www.cnbctv18.com/market/stocks/stock-market-news-live-updates-bse-sensex-nse-nifty50-bank-nifty-bitcoin-price-gold-rate-sbi-bharti-airtel-latent-view-analytics-ipo-market-11559312.htm">here</a>.

Buy the dip or sell the bounce? Here's what experts advise

The United States Securities and Exchange Commission (SEC) said that it suspended trading in the securities of 15 companies on Friday because of “questionable trading and social media activity”. The latest step is the third and largest in a series of temporary trading halts in response to social media activity amid volatile trading in “meme stocks”.

One of the firms, Blue Sphere Corp — a penny stock — was recently highlighted in a report after its spike in value following a barrage of online posts.

Melissa Hodgman, acting director of the SEC’s enforcement division, has said in a statement that they proactively monitor social media for suspicious trading activities related to stock promotions. Frenzy on social media has increased retail interest in a range of stocks. This has led to volatile trading. The SEC is reviewing the market and trading data, the agency has said.

Some of the suspended stocks are Bebida Beverage Co., Ehouse Global Inc., Eventure Interactive Inc., and Eyes on the Go Inc., apart from Blue Sphere Corp.

The regulators ventured further into targeting penny stocks driven into price and volume frenzies by incessant social media pumping.

About 90 billion shares changed hands daily in February on venues operated by “over-the-counter” markets group, which added up to 1.7 trillion shares in the month, data compiled by Bloomberg Intelligence shows.

Blue Sphere is one such example that vaulted from obscurity to viral sensation.

Few days ago, SEC suspended trading in SpectraScience, whose shares had surged 633 per cent in 2021. An SEC order noted that while the company hadn’t filed reports in years and its phone number didn’t work, “social media accounts may be engaged in coordinated attempt to artificially influence” its share price.

Similarly, none of the companies suspended on Friday have filed any information with the SEC for over a year. Under the federal securities laws, the SEC can prohibit trading for 10 days and bar a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.

US securities watchdog suspends trading in 15 stocks over hyped social media activity

Indian equity benchmarks BSE Sensex and NSE Nifty 50 opened with gains, but gave up gains few minutes in the trade. The financial and telecommunication shares are in the red, dragging the headline indices lower. IT stocks on the other hand traded in the green.

According to Mahesh Patil, Chief Investment Officer of Aditya Birla Sun Life Asset Management Company (AMC), a notable earnings growth is anticipated in the upcoming financial year, FY24.

“We are seeing a fairly decent earnings growth in FY24. The <a href="https://www.cnbctv18.com/market/dont-expect-narrow-us-market-rally-to-last-much-geosphere-capital-us-debt-ceiling-us-fed-16824071.htm">markets should be steady</a>,” he said.

In a recent interview with CNBC-TV18, he emphasised the sectors that show promising potential for growth and mentioned the positive developments in the IT industry. Furthermore, he discussed the ongoing recovery of rural demand and its potential impact on the automotive sector.

Patil identified the <a href="https://www.cnbctv18.com/market/kotak-mf-expects-banks-financials-to-outperform-cement-industrials-16813871.htm">banking, financial services, and insurance (BFSI) sector</a> as one of the key areas of focus for investment. Additionally, he highlighted the positive outlook for the automotive, realty, and capital goods sectors.

“We are pretty much focused on the domestic sectors in a big way, be it banking and financials, the auto sector, the industrial capital goods sector, the real estate sector, all the sectors are showing signs of improvement, we don’t see any major stress or slowdown over there,” he said.

Among the sectors showing positive momentum, Patil specifically mentioned the automotive sector. He noted that automobiles, commercial vehicles (CVs), and premium vehicles are performing well, indicating a healthy demand in the market.

“The commercial vehicles and the upper end of the <a href="https://www.cnbctv18.com/auto/bajaj-auto-expresses-concern-over-ev-growth-slowdown-after-fame-subsidy-cut-16765861.htm" target="_blank" rel="noopener noreferrer">auto sector</a> like the premium vehicle – both in four-wheelers and two-wheelers, recovered early,” he said.

Highlighting the impact of the previous year's challenges, Patil acknowledged the slow recovery of rural demand. However, he expressed optimism about the future prospects of rural areas and their potential contribution to overall economic growth. Patil explained that as rural demand picks up, there will be a significant revival in the demand for two-wheelers, contributing to the growth of the automotive industry.

“Next coming months or next quarters or so, if the rural demand picks up, two-wheeler space will see a revival going forward. We are slightly constructive on the overall rural demand,” he said.

“We believe that as we move into the end of this fiscal year second half looking at elections next year – this is the pocket of the market where the government probably tries to do something and provides some stimulus, so I think that should aid overall auto sector going forward,” he added.

Discussing the global IT sector, Patil observed a significant upswing in recent times, especially over the past month. This surge in the IT industry's performance indicates the sector's resilience and its ability to adapt to changing market dynamics.

In line with the positive performance of the IT industry, Patil predicted that the growth in this sector would surpass the pre-pandemic levels. The increased reliance on technology and digital transformation across various industries creates a favorable environment for the IT sector to thrive.

“The overall spend on digital, which has started around two-three years back, will continue,” he said.

For more details, watch the accompanying video

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Aditya Birla Sun Life AMC sees decent earnings growth for IT, BFSI, auto and realty companies in FY24

There is no Christmas cheer on Dalal Street as the markets fall for the fourth straight day, recording its biggest losing streak in close to about three months. The Nifty and the Sensex see their biggest one-day fall in three months.

In the last three days, the BSE companies have erased market-cap gains of the last three months. What led to the fall on Dalal Street and will the IT sector recover in 2023?

Mihir Vora, director, and CIO at Max Life Insurance believes it is just one of those weeks where the market is probably overreacting to global events. "It may be a bit of year-end lack of buying from FIIs is what it looks like," he said.

Also Read: <a href="https://www.cnbctv18.com/market/nifty-psu-bank-top-sectoral-loser-sbi-iob-bob-pnb-canara-uco-union-bank-15494511.htm">Nifty PSU Bank index sees its second biggest drop of 2022, ends as top sectoral loser</a>

According to him, it is natural that in a rising interest rate scenario, the smaller companies tend to get hit more and that is probably one of the reasons why small-caps are not performing in the last two-three months.

Vora is negative on IT, "I would rather buy into the domestic stocks which have fallen more. Some of the financials have fallen quite a lot in the last couple of months. So I am more bullish on the domestic recovery theme."

Public sector undertaking (PSU) banks are more of a tactical play and he would stick to the private sector banks, he mentioned. He prefers private sector banks versus non-banking financial companies (NBFCs) given the funding costs.

Also Read: <a href="https://www.cnbctv18.com/market/one-lakh-crore-mcap-club-surpasses-50-for-the-first-time-15496951.htm">One lakh crore Mcap club surpasses 50 for the first time</a>

He believes in the last couple of months, things have become more attractive for new-age companies, "We are nibbling into the space."

Most of the defence stocks are now down 15-20 percent in the last week. Sharing his views on this sector, Vora said, "It is a secular story, which has just started in the last couple of years and can last for many years."

For the entire discussion, watch the accompanying video

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Fall on Dalal Street | Market is probably overreacting to global events, says Mihir Vora

In a CNBC-TV18 special show, 'Wizards of the Street', BSE Member Ramesh Damani spoke with Shridatta Bhandwaldar, Head of Equities at Canara Robeco AMC, on his journey from an engineer to a fund manager.

He believes all businesses are cyclical however, the intensity of cycles are different.

"It is not that I have been aversion to cyclical businesses because fundamentally all businesses are cyclical. The intensity of cycles are different, some are deep cyclicals, some are narrow cyclicals, so one will have cyclicality in the earnings or in the balancsheets in most of the businesses," he explained.

Bhandwaldar is an avid reader. “Reading is something that goes beyond geographies and so in a way, one gets to explore the world in a faster way”, he said.

Also Read: <a href="https://www.cnbctv18.com/videos/economy/wizards-of-dalal-street--harsha-raghavans-take-on-india-a-33-trillion-gdp-by-2050-15401891.htm">Wizards of the Street | Harsha Raghavan's take on India a $33 trillion GDP by 2050</a>

Bhandwaldar started his career as an engineer and then switched mid-stream to equities. He not only manages multiple schemes and over Rs 35,000 crore in assets, but he is also an award-winning fund manager.

Find out how a boy from a small town Aurangabad took on the big boys and the culture of Dalal Street.

For the entire interview, watch the accompanying video

Also Read: <a href="https://www.cnbctv18.com/market/rondure-global-advisors-laura-geritz-optimistic-on-india-long-term-potential-15333421.htm">Rondure Global Advisors' Laura Geritz optimistic on India's long-term potential</a>

Check out our in-depth <a class="jsx-1348155723" title="Market Coverage" href="https://www.cnbctv18.com/market/">Market Coverage</a>, <a class="jsx-1348155723" title="Business News" href="https://www.cnbctv18.com/business/">Business News</a> &amp; get real-time <a class="jsx-1348155723" title="Stock Market" href="https://www.cnbctv18.com/market-live/">Stock Market</a> Updates on CNBC-TV18. Also, Watch our channels <a class="jsx-1348155723" title="CNBC-TV18" href="https://www.cnbctv18.com/live-tv/">CNBC-TV18</a>, <a class="jsx-1348155723" title="CNBC Awaaz" href="https://www.cnbctv18.com/awaaz/live-tv/">CNBC Awaaz</a> and <a class="jsx-1348155723" title="CNBC Bajar" href="https://www.cnbctv18.com/bajar/live-tv/">CNBC Bajar</a> Live on-the-go!

Wizards of the Street | All business are cyclical, says Shridatta Bhandwaldar of Canara Robeco AMC

Timothy Moe, Chief Asia Pacific Strategist at Goldman Sachs, says that the longer-term strategic prospects for India and for the Indian stock market are actually among the best if not the best in Asia,  in an  interview  with Prashant Nair and Sonia Shenoy of CNBC TV18.  

&nbsp;

Q: The Reserve Bank of India (RBI) governor said that we've seen the worst of inflation. About maybe a little over 10 days back, you put out a note in which you said, without the comfort of depressed valuations for markets to do well, we need to see the peak in inflation. So that remains, I'm assuming to your mind the big call for equities as we head into 2023. So let's just start there. What do you think? Have you seen the worst of inflation? Worst of high yields or not yet.

A: We may have seen the worst of inflation, but we think maybe following on director Das’ comments that we are expecting two more 25 basis point (bps) hikes for the RBI to have a peak repo rate of 6.75 percent. So we still think there's a little bit further tightening that we have to go even if the inflation is crested, there's still needs to be further tightening of monetary policy in order to make sure that inflation continues to subside. And if I could just extend that comment one point further, I think you mentioned in your question that there's an issue with valuations, if we get straight to the equity market. We are very optimistic about the prospects fundamentally in terms of growth and in terms of earnings and so forth, in absolute terms and also in comparison to other markets in the region. But the valuations are elevated, just given India's tremendous success in terms of how the equity market has done. So that plus further increases in rates suggests that it may be challenging for India to continue to outperform to the same extent that it did this year.

Q: I was going through your note where you are bullish on India's long term prospects, but you're wary of high valuations. And that seems to be the concern, not just particularly to India, but even if you compare it to peers, like say, China or other emerging markets. In that context, what would the ideal strategy be for an equity market investor here in India for 2023?

A: I guess, in a simple context, we can say that the longer-term strategic prospects for India and for the Indian stock market, we think, are actually among the best if not the best in Asia. Just to give a couple of numbers here, our long term view on gross domestic product (GDP) growth for India at 6 percent or a bit above, is one of the highest if not the highest in the region. You asked about China and our longer term view, there is more like 4 percent GDP growth and probably maybe some downward pressure there. So I think there's a gap opening up between the potential growth rates for these two very large and very populous economies. Now in terms of how the markets done and how things are priced, that's where things get a little bit more challenging for equity investors, because, of course, equity market is about both the fundamentals, but also about how much is priced into them. And in this case, the fundamentals are excellent. We have 15 percent, EPS growth for this coming year, and for 2024, as well. And that compound 15 percent growth is actually among the highest that we will see the region. We're actually looking for declines in parts of North Asia next year in 2023 because of their greater reliance on global sort of declare greater global cyclicality, and sensitivity and also very high concentration in the semiconductor space. And then there'll be a strong recovery in 2024, we think, but the compound growth will certainly be somewhat lower than we were expecting for India. So I think on a fundamental basis, from earning standpoint, India is really one of the leaders.

That being said, there's also a question of how much you're paying for that. And here, I think that the nod has to go towards some of the North Asian markets, particularly China and Korea and just to give, again, a bit of an elaboration of this, India is currently trading in round numbers at about 22 times forward earnings. That's at the very high end of its 20 year valuation range. It was at a 90 percent premium to the region with China having rallied in November that premium has come down but it's still at the high end of its longer term range and about 70 percent. So both in absolute relative terms - and third thing we can throw in is relative to domestic interest rates also the market is looking on the stress side ---not sure about this part in bold---- so it doesn't mean we're bearish far from it, but we just think that it may be tougher for India to outperform to the same very significant extent that it did in 2022, in the year to come. Just the final point I'd make, in contrast to that, in China's case, China having fallen so far, and even with a very robust recovery of actually the best month in November since July of 1999. So that's nearly 25 years ago, we had the best month, it's just this past month, we still think that coming off a very low level where China at its lowest was at 8.7 times forward earnings. Now we're about 10-10.5 times earnings, but we still think there's some further upside to fair valuation, plus some earnings recovery. So we still think there is further to go for the for China equities. That's why we're overweight there, at least to begin the year.

Q: How significant is that? As you said, longer term, you're very bullish on India and valuations maybe in the short term or a bit of a problem. On the same lines, if I were to ask you about China, is it the opposite there tactically, because valuations are very cheap - short term, medium term, maybe expect bounces, but long run there are there are issues there, property market and other issues politically as well if you have a view.

A: We have a lot of views on this. And we can dig into this a bit. So there are at least two or three key points we'd like to enumerate. The first is that having fallen very substantially, we do think that Chinese equities are undervalued. And with the clear and emerging catalyst of a reopening from the self-imposed zero COVID policy, which is suppressed growth this year to about 3 percent is what our full year 2022 GDP forecast is. We think that China as it gradually reopens and our timing, by the way for when reopening takes place will be we think it will really kick into gear in the second quarter of next year - for some reasons I can describe if you wish. But the key point as we think that growth in the early part of 2023 will be somewhat suppressed as you go through some of the challenges when you reopen, you tend to get an increase in cases and maybe some suppression of economic activity. But the second half, we think will actually be quite robust. And overall, we think China's GDP growth will accelerate to a full year number of about 4.5 percent next year, and that will also drive a pickup in earnings, which had been suppressed this year, we actually think earnings will probably be flat to down 2 percent this year for China. And next year, we're below consensus but still think we'll see a recovery to about 8 percent EPS growth, and then maybe some further increase into 2024.

As I mentioned just a few moments ago, the offshore stocks, the aggregate MSCI China index, valuations fell to about 8.7 times at the low. They've since recovered, given that very sharp recovery that we've seen for the market in November to about 10-105 times, but even accounting for some geopolitical risks, which I'll mention in just a moment we think fair value for the China market, offshore market is about 11 times earnings. So the point is that we still think we can see some moderate valuation expansion. Perhaps there could be some overshoot to that, and also some recovery in earnings. And the combination of those two can give us we think still sort of 15 percent to possibly even 20 percent upside from current levels, especially if the market corrects a bit of its rally in November, which it did today, offshore stocks down about 3 percent today. So that's really kind of the argument for the offshore stocks.

I do want to take just a moment, if I may, to clarify that we have quite different views in terms of the of the onshore China stocks, which are the so called A-shares, versus the offshore China stocks, which are colloquially known as the H-shares. The H-shares which I was just describing, we think have a very good recovery potential. But there are some challenges to your question going forward. Number one, is there some uncertainty about the degree of profits that private owned enterprises will be allowed or encouraged to produce? So in a recent reports, we've done some analysis, which assesses the extent to which private owned enterprise returns of equity may converge to those of the state enterprise.

Cutting through all the analysis, the punch line is that we think that overall the private-owned enterprise (POE) returns in equity may converge to the state-owned enterprises (SOE), which is about 12 percent. So that's kind of suggest that perhaps the longer term growth potential may be somewhat less than it has been before. And then secondly, in terms of valuation, we've actually formally introduced into our valuation models, a geopolitical risk elements that we have some statistical support for doing so. And the end result of that is that we have lowered our fair value for the China equity market from 12 times earnings to 11 times and that's how we get our offshore expectations.

The final point I want to make is that we have a much stronger strategic view on the onshore circle – A-shares. And the reason there's that a lot more of them are in the industries that are supported by government policy. And if there's one cardinal rule for investing in China is that you want to follow and be aligned with what the government policy is indicating, without going into too much detail. There are certain policies, which are very clear and have been enumerated by President Xi in the last 10 years, and we think will still remain in effect. Those include the common prosperity theme, the theme of dual circulation and the theme of technology upgrading the theme of import substitution. And we find that many of the stocks that are in the Asia market are aligned with that. And indeed, one of our favorite themes is the theme of the so called Little Giants, which are small to mid-cap companies in the technology space that have the over backing of the government in terms of driving their innovation. So that's really kind of a view on China. And that suggests that your question to wrap this up, that's for the offshore stocks, it's a bit more of a tactical overweight that we have, we think that there's a good recovery driven by the reopening. But if, if the market runs up too far, then we would perhaps be inclined to moderate some of the view there and then rotate elsewhere there may where there may be clear longer term growth opportunities, including India.

Q: You were talking to us about how you're bullish on India's long term prospects. But you're a little wary about valuations. In terms of individual sectors or pockets of interest, where do you see both valuation as well as growth headroom, particularly for India?

A: Well, within the market, we've got some very clear views which we've expressed in a recent report. I will just single out a few things. We're very much encouraged on the banks. We think it is a terrific story and our bank analyst in in Mumbai, has been very clear about his views there. I think the key story is that we are seeing clearly recovery in private credit issuance and private credit demand, the increase in rates that we've seen, which obviously has been discussed today, suggests that margins still have some potential to expand. And additionally, we are at the early stage of any sort of a credit cycle. So we're not at all worried about significant write-offs. So it's a pretty powerful combination of opportunities, we think, for the banks. So we're certainly very favorable there.

On the insurance sector, we have we've also significant positive views, and that I'd say that we have a broader a positive view on the industrial cyclicals, again, because of this recovery in investment and the need for continued investment in India. So we think there's lots of opportunity, at the more micro level when you start to drill down into different sectors, to different themes.

Q: Cement would be a part of that?

A: Absolutely. I didn't want to enumerate everything, but definitely cement is there and we've reaffirmed that - I was in Mumbai last week. We had our India Chief Investment Officer conference there and spent time with our analysts and with various business leaders, and certainly the bet that cement or part of that supply chain for infrastructure, investment and development, we think generally looks very attractive.

Q: Another space which Goldman has coverage on at least a few names is these New Age - maybe not all of them are platform companies. But names like Paytm, PB FinTech. Companies, which have come to the listed space a year to a year and a half ago all are down between 50 and 70 percent. Any thoughts? Valuations come off, we were looking at valuations and where they're trading compared to some of their global peers, listed both in China and the US. In many cases, valuations have come off. Any thoughts?

A: Absolutely and you've really hit the nail on the head in that. We have to separate between the fundamental growth outlook versus the valuation. And I think it's fair to say that the private sector valuations for many of these digital companies, which have been developed and India has produced the greatest number of unicorns in the private sector space, I believe, of any economy, we did a big report of that about a year or so ago. And at that point, India had developed 60 unicorns and that number swelled to close to 100 subsequently. So I think that there was kind of a gold rush, which took place in the private sector, and some of the companies actually got elevated valuations, particularly in an environment of low interest rates. Now, obviously, with interest rates rising globally, we've seen the so called long duration part of the market come off, and that would very much include some of these more early stage startup companies, which are being valued on their future growth prospects. So when rates go up, and your discount rate increases, then that tends to put greater pressure on those so called long duration assets and India was no different than what we've seen in the US or other areas where there is sort of high growth and sometimes not yet profitable growth part of the market came under significant pressure. So fast forward to today, when, as you said, we've had significant decline in valuation, I think it suggests there's an opportunity to reengage in the still very encouraging fundamental growth story.

Q: And one final question. You have pointed out to some risks in the near term, some cyclical issues in the Indian markets, whether it's higher inflation, whether it's RBI policy hikes and a weaker rupee as well. Do you think these are enough to derail the Indian equity markets? Or will the resilience continue despite all of these headwinds?

A: I think the resilience continues. I think these are just sort of headwinds or speed bumps along the way, but we don't think that they will deflect India from either fundamentally growing or the equity market from still having a very favorable, longer-term prospects. You've enumerated some of them. Higher oil prices are another thing, which we would point to, those have happily come off somewhat. But overall, there still are some cyclical issues that that we need to contend with. But I really think these are kind of more, speed bumps along the way, it's not something which will significantly derail the story given the flat pattern that we have.

Q&A: We're very much encouraged on the banks within the Indian market, says Timothy Moe of Goldman Sachs

The Indian markets have performed better than their peers in the past few months and market veteran Samir Arora reckons that the healthy domestic investor base should get credit for it.

"The domestic investor base has done well and has held through the bad phase of COVID and after that. This has led to Nifty outperformance," the founder of Helios Capital told CNBC-TV18.

Arora though bullish on the India growth story says that one should not take the market performance for granted.

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Equity allocations are high in developed markets whereas in India it is still in a building phase as more and more people are taking up investments in markets.

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Arora believes that 2023 will see equities outperform other asset classes like real estate and gold. The markets in November have seen the return of Initial Public Offerings or IPOs which is the process for listing on the exchanges.

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“Everybody should invest in equities, over time equities outperform fixed income, over time equities outperform property for most of the investors. Therefore there should be a reasonable allocation to equities,” he reasoned.

Also Read: <a href="https://www.cnbctv18.com/personal-finance/now-you-can-buy-gold-at-atms-heres-how-it-works-15337731.htm">Now, you can buy gold at ATMs — Here's how it works</a>

The market veteran expects to see mid-teen returns going forward and said that once the US market stops falling – which he believes will take 2-3 months – global investors will go back to Wall Street.

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For more, watch the accompanying video

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Samir Arora credits domestic investors for Nifty outperformance

Indian equity benchmarks succumbed to selling pressure following a positive start on Friday, as Dalal Street entered a new monthly derivatives series after finishing the previous one more than four percent higher. Losses in IT, FMCG and consumer durable shares weighed on the market though gains in financial and oil and gas stocks lent some support.

Dhiraj Agarwal, Co-Head-Equities at Ambit Capital believes the market is trending up and it can go a little bit higher but it is broadly reaching a valuation that one shouldn’t get extremely excited about.

According to him, the market sentiment starts from disbelief and keeps on going down the quality chain. It is slightly unsustainable where people are not focusing on any quality and all kinds of stocks are moving up, he added.

Pramod Gubbi, Co-Founder, Marcellus Investment Managers India is seen as the most favoured market and economy to invest in.

“There are longer-term perspectives being built where India is considered as a more stable economy, more stable market to invest in from a private capital perspective and that flow will come irrespective of the valuations.”

He believes India’s super valuations to other emerging markets are justified by the better quality companies in the Indian index.

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Gubbi further sees commodity price inflation as a bigger risk to India story. “People will see through the headline price to earnings multiple but more than the valuations, I would think the commodity price inflation is a bigger risk for the India story.”

Also Read: <a href="https://www.cnbctv18.com/market/sensex-nifty-india-stock-market-dragged-by-infosys-tcs-bajaj-fin-hul-itc-15256981.htm">Sensex drops over 300 pts from day's high and Nifty50 slips below 18,450 as D-Street enters December F&amp;O series</a>

Agarwal continues to maintain buy call on Zomato and PolicyBazaar. “We always believe they were great businesses from a 10-20 year point of view. We continue to remain constructive and positive on both these names,” he said.

According to him, it is going to be a stock-pickers markets.

For the entire discussion, watch the accompanying video
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Market watchers divided on current Indian market valuations

Today, the focus is on equity market deals which rise as soon as the market gains some momentum. But there are many headwinds that are facing the economy which has kept the markets volatile and this particular factor changes the deal scenario.

Deepak Ramachandra, MD and co-head of equities at Axis Capital, and Rahul Arora, CEO of Nirmal Bang Institutional Equities discussed the equity market scenario in a CNBC-TV18 special show Big Deal.

For the entire discussion, watch the accompanying video

Big Deal: Experts discuss market volatility and valuations

This past week, the Street has heard a bullish medium-term view from Morgan Stanley though in the absolute near-term, even MS is less bullish. Today, the street is getting a slightly opposing point of view from UBS, which is worried both about the near-term macros like the global slowdown, and about the rich valuations of Indian stocks. Ahead of the bank's investor conference, the top UBS securities' team — Tanvee Gupta Jain, India Economist; Sunil Tirumalai, Strategist; and Vishal Goyal, Head of Research and Bank Analyst at UBS Securities — discussed the India outlook in an interview with CNBC-TV18.

According to Tirumalai, from the global perspective, India is completely priced out. “It is at the top of the charts with respect to valuations,” he said.

Any incremental improvements in other markets or geopolitical settlements could lead to underperformance for India, he added.

The worry for the market is more from the valuations perspective.

As far as earnings are concerned, there is 9-10 percent growth for the ongoing fiscal and a similar kind of growth next fiscal too. That probably means some downside to where the consensus currently is.

The world's largest and most popular virtual currency, Bitcoin, slumped 11.1 percent to $16,115.1. Its market value stood at $310.8 billion. The trade volume was at $106.1 billion. The token has fallen to two-year low.

The second largest virtual currency, Ethererum or Ether, slumped 11.9 percent to $1,141 with a market capitalisation of $139.6 billion. The trade volume of Ethereum stood at $40.1 billion in the last 24 hours.

From the Indian market perspective, Tirumalai isn’t worried about the cryptocurrency. “These are the things which are unfolding. So from an Indian market perspective, I wouldn’t be too worried about that as its direct rub-off on the Indian market would be fairly less.”

Also Read: <a href="https://www.cnbctv18.com/economy/india-will-hit-8-growth-in-fy23-niti-aayog-arvind-panagariya-15129481.htm">Optimistic that India will hit 8% growth in FY23, says Former VC of NITI Aayog</a>

UBS’ global economics team is forecasting a 2.1 percent year-on-year global GDP growth for 2023. It will be the lowest since 1993, excluding the pandemic and GFC.

So, while Tanvi Gupta Jain agrees with the fact that India is going to be the among lesser affected economies due to the spill-over effect of a global slowdown, her view is that the country is not immune.

“So, factoring in the delayed impact of monetary tightening on domestic demand and a slowing global growth, we are estimating India's GDP growth to slow down to 5.5 percent for the 2023-24 fiscal. And the consensus is still at 6.2 percent, where I do see that there could be more downside over the coming months, which will be visible on the numbers,” she explained.

For the entire discussion, watch the accompanying video

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India at top of the chart in terms of valuations, says UBS Securities

Market watchers like Anup Maheshwari and Ajay Srivastava are bullish about the pharma space because of the falling rupee rate. Maheshwari, who is the co-founder and CIO of IIFL Asset Management sees some interesting opportunities in the sector.

“We have a bit of a soft spot for pharma although it has not done very well. I think as a sector, it does tend to create long-term value. So within pharma, we are finding some interesting opportunities,” he said.

Ajay Srivastava, the CEO of Dimensions Corporate Finance Services believes that the sector is like a flower which blossoms once in 20 years.

“You need to catch it at once in a 20-year phenomenon,” he said.

“I think there are a lot of companies, which are very undervalued in the pharma space. Most companies have been valued in the single-digit piece kind of stock and they will gain tremendously from rupee dollar depreciation. There is no doubt about it,” Srivastava added.

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In the last 20 years or 15 years, pharma has been the biggest loser in his portfolio in terms of return to capital employed. So the fact remains that the sector has underperformed.

According to Srivastava, the rupee-dollar is going to give the biggest kick to them just like it'll give the kick to commodity companies no matter what you do.

He thinks the rupee dollar should give a clear 10-15 percent edge to all pharma companies no matter what the growth rate is.

Maheshwari is also focused on consumer discretionary space going forward. “Some of the consumer discretionary names look interesting,” he added.

He doesn’t have much exposure to the real estate space. “It is not an area that we focus much on in our portfolio for the simple reason that we struggle to find companies in that sector that are capable of delivering more than 15-20 percent return on equity,” he said.

Rising interest rates will incrementally impact demand in the real estate space, Maheshwari added.

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According to Maheshwari, two sectors in India matter a lot - Financials and IT makes up 50 percent of India’s wage bill. “Financials is doing quite well and things continue to be on a fairly good trajectory for financials. Financials remains one of the long-term sectors to – if you are investing in India, this has to be a core part of your portfolio,” he said.

Srivastava believes that themes like power transmission investment trusts, etc. have given phenomenal returns. So if those products – the newer ones - come to the market, they become better. “I know it's less exciting. I know it is not the thing which gives you the kicks but if you want kicks go skydiving, equity markets perhaps is not the place,” he mentioned.

Also Read: <a href="https://www.cnbctv18.com/business/companies/hdfc-securities-top-stock-picks-for-diwali-2022-samvat-2079-14967381.htm">Samvat 2079: The 10 stocks for the new year from HDFC Securities</a>

For the entire discussion, watch the accompanying video

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These market watchers are excited about the pharma space - Here are their other near-term bets

It's the end of another eventful year for Dalal Street. While Nifty is marginally in the red for the year, India has managed to outperform most of its peers as the Ukraine war, soaring inflation and monetary tightening roiled sentiment across the world.

Also Read:<a href="https://www.cnbctv18.com/economy/samvat-2079-economists-evaluate-india-and-growth-ahead-14980261.htm">Samvat 2079: Economists evaluate India and growth ahead</a>

A bunch of stocks delivered double-digit and even triple-digit returns. This episode of, ‘Editor’s Round Table’ will look back at the year that was and preview how the new year is likely to pan out with Madhu Kela, founder of MK Ventures, and Sunil Singhania, founder of Abakkus Asset Management.

For the entire discussion, watch the accompanying video

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