Metal stocks will drive 60 percent of Nifty earnings per share (EPS) growth in Q2 of FY22, said Gautam Duggad, head of research-institutional equities at Motilal Oswal Financial Services, on Friday.
“The only disappointing thing in this quarter is it is a much skewed quarter where metals are driving almost 70 percent of the incremental profit growth for our coverage and 60 percent for Nifty. Apart from metal, if you add up private banks and IT then these 3 sectors account for almost 85 percent of the incremental earnings growth, there is a very clear margin pressure which is evident across cement, auto, consumer and even for tech for that matter,” he told CNBC-TV18.
On real estate space, Duggad said, “Right now we do not have coverage on real estate. However, we will know only in hindsight, this could be the beginning of a multi-year cycle in the real estate space and it will, of course, benefit many other ancillary sectors along with it like cement, durables, home decorators, painting. So, there are a lot of areas which you can still play along with the real estate space.”
Motilal Oswal has been overweight on IT and continue to maintain that view, he added.
On Reliance Industries, Duggad said, “We are expecting a strong quarter for Reliance, but now the story in Reliance has clearly changed over the last 3 years from just oil and gas to telecom and retail and Jio itself is now accounting for about Rs 875 per share, sum-of-the-parts valuation (SOTP) for Reliance.”
“However, any good news on the oil and gas side definitely helps their cash flows very strong. So to that extent, it's a very positive development and we are seeing some positivity also happening in the telecom space over the last 40-45 days with relief package coming from the government and now there is news about the government trying to reduce the litigation in that sector. So headwinds seem to be moderating in that sector and that obviously augurs very well for even Reliance being a big participant in that sector,” said Duggad.
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