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Prefer large banks, IT services; see downside risk to earnings estimates for consumer stocks: Macquarie

market | Feb 25, 2022 12:14 PM IST

Prefer large banks, IT services; see downside risk to earnings estimates for consumer stocks: Macquarie

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Aditya Suresh, Head-Research and Strategy, Macquarie, mentioned that there is a downside risk to earnings estimates particularly for consumer-based stocks. He advises investors to remain cautious in the next 6-12 months period. He also shared that his pecking order within the market would comprise of IT services stocks and large banks.

Aditya Suresh, Head-Research and Strategy, Macquarie, believes there is a risk to earnings estimates, going ahead. He mentioned that there is a downside risk to earnings estimates particularly for consumer-based stocks. He explained that their stance on stocks is going to be extremely selective and Macquarie will be adopting a bottom-up strategy.

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"We are still selective, we are still bottom-up. I think from a top-down perspective, it's not a kind of blanket buy. India comment on a 6-12 month basis- there are still a lot of earnings risk to work through.  So I think it is very selective, a bottom-up message, even with the kind of correction which you've seen recently. I think that the point is that largely, there is still a lot of earnings downgrade risk to work through here for India, but in a relative sense, the downgrades are likely to be steepest in consumer sector," he said.
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On specific sectors within the market, he mentioned that he prefers large banks and IT services stocks.
"Where we are kind of seeing relative earnings strength and if that was the proxy for where we want to be positioned, I think that's probably most still with the financials and in particular on the larger banks, as well as IT services," he said.
On market valuation, he highlighted that India is trading at a steep premium to its peers and his advice to investors at this point is to remain cautious in the next 6-12 months period.
"Valuations in itself, at a broader level, is steep. The message remains that stay fairly selective in a few sectors, at least for the next 6-12 months," he said.
Watch the video for the full interview
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