Neelkanth Mishra, managing director and India equity strategist, Credit Suisse in an interview with CNBC-TV18 shared his views on the medium term, long-term and what the big mandate for the BJP means for the stocks and the economy.
Talking about immediate priorities of the government from an economic angle, Mishra said the economic slowdown is not drastic enough for the government to take action and with the limited fiscal space that exists, it may not be possible for the government to take any drastic action to revive growth in the economy.
“In the early stages, the new government could accelerate the PSU bank consolidation, introduce direct tax reforms but these are not things that would change earnings in the next 12 months,“ said Mishra.
On key themes, he said one is banks, which are expected to contribute about 60 percent of Nifty earnings growth in FY20 and the eight top banks in the Nifty will together generate nearly Rs 1 trillion of profits this year.
The house is also marginally overweight on selective IT stocks because the sector is very expensive and the fundamentals are deteriorating, Mishra added.
"It is very important to get the interest rates down because we have extremely elevated levels of real repo rates and abnormally high term premiums as well as credit spreads. Interest rates have not fallen as much as expected," he said.
On earnings, Mishra said the corporate earnings cycle has begun to bottom out, adding that they expect mid-teen type earnings growth over the next two years not because the economy is going to accelerate but because of the way the market is structured.