Expect FY19 Sensex earnings to grow at 25-26%, although some cuts are likely but not at the pace seen in the March quarter, said Neelkanth Mishra, Managing Director and India Equity Strategist, Credit Suisse.
Speaking exclusively to CNBC-TV18, he said there has been a 3.5% cut to FY19 earnings per share after the March quarter result season. The year-on-year growth is 34% in FY19, which is high due to lot of one-offs in FY18 base.
“The earnings per share at Nifty or BSE 100 level is always tricky to call, given the significant global exposure we have in our narrower indices and also because there is a positive relationship to a weaker currency," Mishra said.
The rupee has bounced back from precarious levels but there is still lot of risk to the currency, because the balance of payment situation remains negative. If the rupee continues to remain weak, the earnings for information technology, metal, pharmaceutical, and petrochemical get upgraded,” he said.
The house continues to remain overweight on information technology and metals in the portfolio, he said, adding that, information technology has done well this year and metals after having a good start have corrected.
He said metals corrected on concerns that global growth has remained slow for longer than expected and stress on emerging markets, which has resulted in their central banks raising rates to protect their currencies. So, although the stocks have corrected, the fundamentals remain intact.
However, the house has downgraded a few information technology names in the last couple of days, because of them being overbought and no fundamental improvement. So, remain selective on information technology, said Mishra.
According to him, the economic activity momentum may have peaked and there could be headwinds appearing for economic growth.
The house is underweight on consumer staples, but there are sectors where there is structural change happening like packaged food and so positive on it, Mishra added.