The stock market is expected to remain range-bound and may see a correction in the near term, said Sandeep Bhatia, head of cash equities-India, commodities and global markets, Macquarie Group. “The market had run-up in anticipation of all positive announcements, which were coming through and that this would have an immediate impact," said Bhatia.
"While these announcements are welcome both in terms of corporate confidence, investor demand and even consumption it is going to be 6-12 months,” said Bhatia in an interview with CNBC-TV18.
According to him, this is an age of geopolitics as much as anything else and geopolitics is working in India’s favour but what is not working in favour is the country’s own underlying issues. These issues are showing up in earnings growth issues across the board, he said.
"Consumption is weak, investment demand has been absent for more than 3 years and may recover at the earliest only by next year second half, earnings may disappoint in the current year as well. The only good thing could be that the high tax paying consumer companies will see a tax windfall gain but the market may look at topline growth than tax cuts," said Bhatia.
When asked about auto space, he said the demand revival for the space is seen to come through next year although we may see a bit of pick up because of BS-VI led discounting in January-March quarter.
With regards to telecom, he said other than Jio, Bharti Airtel would be the only other survivor. “I think the earnings and revenue stability should arrive next year and so think Bharti Airtel is a good bet and don’t think more negative newsflow can come through. The entire telecom sector should not see further revenue compression for the remaining players.”
From the consumption space, he said ITC looked decent. “We have two years of tax stability, there is new structure in place. ITC is a high-quality name and with earnings that will give you 12-15 percent underlying earnings growth. FMCG business has come to scale and will see margins expansion. So, ITC is a high quality, cash-generating business with potential for a rise in dividend payout,” said Bhatia.
The other story that needs to be looked at is Larsen and Toubro, said Bhatia, adding that it is the only play as far as domestic capex is concerned.
The house is also upbeat on private sector banks. ICICI Bank, Axis Bank and Kotak Mahindra Bank should be a core holding for any long-term investor, said Bhatia.
First Published: IST