Domestic market a bottom-up story; pick up in earnings still couple of quarters away: Pramod Gubbi

In a chat with ET Now, Pramod Gubbi, VP, Institutional Equity, Ambit Capital, shares his view on the June quarter earnings season.

ET Now: Do you think that we should not really look at the aggregate picture as it is looking subdued, but there are a lot of individual companies which would continue to forge ahead whether it is Bharat Forge or Infosys? Do you think it is impossible to generalise the earnings season?

Pramod Gubbi: True. India has always been a bottom-up market where certain companies always tend to ignore the macro and tend to perform in a different direction, but such stocks constitute only a minority.

The majority still lends itself for generalisation. The earning season has continued to remain weak from demand’s standpoint. Whatever, little benefit we were getting from low input cost has flowed through the margins.

It has kept earnings at somewhat respectable levels. We will have to wait and see on how long that is going to remain. In fact, the demand situation requires many companies to actually pass on the benefits of input cost deflation by cutting prices and trying to boost demand then retail the benefits through margins directly. But it will take at least another couple of quarters, before we see any meaningful recovery in earnings.

The demand situation at the macro level needs visibility of at least a quarter or two, before earnings start tracking the macro recovery.