We expect a good strong earnings season ahead: Ajay Bagga

"Overall, it is a strong earnings season. The decliners will be metals and cement. They will see a year-on-year very sharp earning corrections. Metals, especially more than a 50% fall from the first quarter last year. But we are expecting really strong numbers from auto," says Ajay Bagga, Market Expert.

There is going to be the IT pack declaring earnings for Q1 FY24. How are you looking at earnings? Will it beat estimates, the consensus estimates? And will it also be followed by some upgrades, downgrades? How are you looking at it?
Overall, it is a strong earnings season. The decliners will be metals and cement. They will see a year-on-year very sharp earning corrections. Metals, especially more than a 50% fall from the first quarter last year. But we are expecting really strong numbers from auto.


Auto will have an order of magnitude upwards, many times better numbers. You will have nearly a 40% jump in the financial side, mostly for the private sector banks and the consumer-facing NBFCs, the housing finance NBFCs you will have very good numbers there.

Chemicals will disappoint again and the stocks have been reflecting that. It is a broad spectrum but we are expecting softish numbers. And IT and pharma, we see year-on-year growth but the management commentary might be soft, especially in IT.

Given the global macro backdrop, we are expecting the orders to have slowed down and the hikes taken to retain employees over the last one year, those have reduced the margins.

So, topish or flattish margins and not very good order flows, weak guidance is what we are expecting on IT, even though the rupee numbers will look good year-on-year. Overall, we are expecting a good earnings season for the Nifty and broader market.

The real estate companies obviously will do very well.

Capital goods, industrials should do well. And the electronic manufacturing which has taken a lot of interest over the last two weeks, we have seen a lot of brokerages now coming out with EMS-based reports.

I think there again the valuations have run up as have defence and railway stocks. That is why we have seen a hiatus there. So, you could see good numbers but it is discounted, it is in the price. So, a very little surprise. Overall, a good strong earnings season ahead. Metals and cement are expected to be the laggards.

What a stellar listing it has been for the IdeaForge IPO, 94% premium. But coming next week, we have two more listings that is Senco IPO as well as Cyient DLM. Both of these have seen subscriptions of over 70 times. So, do you expect the rush to continue? Do you see this as a frenzy because what we are seeing is that the FIIs are kicking in getting the money back as well as the IPO market is seeing such a great subscription as well as the listing. So, what is your outlook on the IPO world and specifically from these listings, any expectation?
If you look at the year, it has been very poor globally for IPOs and mergers and acquisitions both. If you see, a lot of investment bankers are getting sacked around the world and private equity funding also has reduced considerably.
So, the IPO market and the deal market has done about $60 billion of value across the world in the first 6 months, which is a sharp fall from last year.

So, I would not say that there is a lot of froth in the IPO market and these IPOs which have done well are very small numbers. They are not even mid-tier, you can say that they have raised mid-tier kind of numbers.

Yes, subscriptions have been good, that shows the liquidity and the interest that is there. Anchor investors have come in and supported. So, there is institutional money and you are spot on the FIIs.

Rs 47,000 crores net came in June and that gives a big boost to the markets on the back of Rs 43,000 crores having come in in May and that should continue because that is a trickle of the global flow.

So, it is not that India is getting a very inordinate amount. In fact, if you look at our performance, at 6-7% year-
to-date, we are laggards as a market because till March end we were actually negative and then there has been a good rally of 12-13% from March end till June end.

So, overall, we are getting our fair share of flows. Valuations on our own comparison, we are okay but on a relative comparison to emerging market peers, we are very highly valued.

So, right now that does not matter, we are getting the trickle and that is a deluge for us.

So, it is doing well but I would not read too much into it. I would continue to stay cautious. We saw on Friday what happened with a global sell-off, a little sell-off leading to Indian markets also selling off.

Again, if you compare the mid-cap and small-caps which have done very well, just take them on a 4-6 year basis, then you realise the performance is very poor.

So, it is a catch-up performance that is happening in mid-cap and small-caps and small-caps, I keep warning that there are a lot of stocks which interested parties are hiking up without any fundamentals. So, we have to be very careful when seeing the small-cap rallies. I would be happier if the quality names are rallying.