Stick to largecaps and you should be okay for next 12 months: Hemang Jani, Sharekhan

Even though the earnings growth is not so great, and we do not have any major support coming from the glob al markets, a very sharp correction in the market is unlikely, said Hemang Jani, Senior Vice President, Sharekhan, in an interview with ETNOW.

Edited excerpts:

We are almost in the middle of the earning season and it has not really given us too much to go on. Yet markets are fairly range-bound or cautious especially ahead of elections. What are the themes that may move from here?

Barring certain IT names, banking and select cement stocks, we have not really seen any meaningful growth in earnings. Even the expectations remain by and large muted because there are no underlying drivers to change for the better. Given the under-ownership in the market and the fact that liquidity through the mutual fund route could be extremely strong over the next couple of years, means that even though the earnings growth is not so great, and we do not have any major support coming from the global markets, a very sharp correction in the market is unlikely.

So, we should stay focussed on the largecap names where there is a decent amount of stability in earnings and do not wait for any specific level to enter or event like elections to decide when to enter. If you stay focussed on these names, you should be okay from a 12-month perspective.


Last evening, RBI made it mandatory for banks to disclose their exposure to IL&FS and the provisioning thereof as well. Is this one hurdle out of the way and good for investors?

The regulatory changes, by and large, have been positive for the banking sector. More importantly, now that this entire steel and other power related issues are behind us, one is looking at a significant growth for large banks, in particular the corporate banks.

But, more importantly, what is required in terms of reforms is on the debt side because we have some issues in terms of the market and the kind of exposure mutual funds have as also the overall yield movement that we are seeing particularly after that September-October episode. Once those issues have been addressed, the market would feel more comfortable taking a big call on this particular sector.

Axis Bank has seen an extraordinary run-up. If Axis Bank numbers are even marginally better, do you think the stock could run into resistance?

The last one and a half-two years have been extremely difficult for corporate banks and there is a significant turnaround both in terms of slippages and loan growth. There is a new management at the helm. I do not think the market is going to be worried about in line performance of some of the corporate banks, Rather the market probably is focussing on the fact that because of a combination of factors, what kind of real growth are we really looking at. More importantly, because of their very strong CASA franchise and access to funds, they will be in a better position to grow vis-à-vis some of the NBFCs and PSU banks.

From that perspective, despite these stocks having run up, we have been extremely positive on their earnings growth for next two years. If you have a bit of a knee-jerk reaction because of inline numbers, one should really be accumulating Axis Bank from a 12-month perspective.

How are you reading into UltraTech’s numbers vis-à-vis ACC and what is the call on earnings within cement?

Compared with some of the other names, UltraTech performance is looking much better. It’s EBITDA per tonne is at Rs 1,039. The company also is also trying to reduce debt and they have repaid in excess of Rs 2,000 crore. After all the acquisitions that they have done for various cement portfolio over the last 12 months, if they are able to focus on the debt repayment and the fact that we are seeing a bit of an uptick in the pricing, works well for UltraTech and this being the largest cement play, the industry is going to be in upcycle for the next couple of years.

This means that there is going to be a decent amount of earnings visibility. We are extremely positive on UltraTech and we have post numbers revise our target upwards to about 5000 so extremely positive on UltraTech from investment perspective.