Manishi Raychaudhuri, Asia Pacific Equity Strategist at BNP Paribas, shared his views and outlook on global growth, overseas flows and what lies ahead for the IT and auto sectors.
“More than a week ago, we upgraded India to overweight. Late June 2018, we had downgraded India to a neutral because of primarily three concerns. At that point of time, the concern on currency depreciation was supreme because of oil prices going up. Second, we were also seeing a declining trend in earnings estimates and quite a severe decline more than what we were seeing in Asia ex-Japan. Third, there was no sign of any of the stronger macroeconomic drivers reviving. For example, we were not seeing any sign of private capex and the cost of capital was relatively high compared to the rest of Asia. I think the last two are clearly beginning to change while the first one is clearly behind us,” Raychaudhuri told CNBC-TV18 on Tuesday.
Talking about the earnings outlook, Raychaudhuri said, “We think that the earnings estimates, which were declining recently over the last one and a half to two years, are possibly in the last leg of that declining phase. There are a few sectors where the consensus earnings estimates still appear too high for us. For India as a whole, it is still about 19-20 percent and we think it will come down to somewhere around 14-16 percent. However, the bulk of the earnings downgrades are possibly behind us. These are the factors that led us to upgrade India to overweight in late March,” he added.
“The bulk of the money would have to be directed at the large caps because that is where the larger trading volumes lie. Having said this, we think that the midcaps – primarily because of their severe underperformance in 2018 – are appearing much more attractive than they used to,” said Raychaudhuri.