Best-case scenario is a time correction in market; rebound possible in Q2: Dinshaw Irani
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India trade deal likely will get shifted to September 2, the due date for decision on Russian oil as well: Ajay Bagga
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CEO,, says the June quarter reveals single-digit top-line growth and a 7-8% bottom-line drop, impacting market performance. A rebound is anticipated in September due to a lower base for year-over-year comparison, potentially leading to healthy earnings growth. Urban recovery signs are emerging, suggesting a sideways market movement before future earnings dictate the direction.Basically, everybody is awaiting a trade deal. It is a matter of time before India also comes into the fray. We have already seen quite a few trade deals happening with the US. Japan was the last one at 15%. India should be somewhere in that ballpark of 10-15% if things go the way it is expected to go as that should be taken as a positive by the market.But the market has already built that into its stride and that is why despite all the negative news which has come in, the market has been fairly resilient because valuations are looking fairly reasonable and they are not looking stretched either. The only negative part is the quarterly numbers. We did some quick data analysis for the numbers that have been reported thus far, probably it was a day old stale data that was not looking good.For the June quarter, the numbers are not looking good at all with a single-digit growth in the top line and 7-8% drop in the bottom line. That is holding back the markets, if anything. But come September, since the base has dropped for a YoY comparison, we will start looking at healthy earnings growth. The green shoots that we take away are probably one of the results that came out yesterday from one of the consumer companies and they were calling out urban recovery which is much awaited. We do not expect the markets to go down. If anything, the best-case scenario for us is probably a time correction , a sideways movement in the market. From there, it will be a call on the earnings growth and how things move from there.If it is 26% and above, it will definitely be a negative for our markets. But my feeling is that the way things are working out, the red lines are being drawn by us rather than by the US and if we just back off a bit on the red lines, we will be in the ballpark of 15-20 odd percent which will be taken as very positive by the market.I do not have any inside knowledge as such, but I am taking off from what has happened with Vietnam, Japan, and other countries which have recently turned around. The Philippines and all that which have recently launched is in that ballpark of 15-19%. We should be somewhere there as such and that should be taken as positive by us.Frankly, the red line that we have is the GM crops which are a total no-no for us. I do not think they are also that keen on that. Let us see how that works out. But this would be our call.I changed my glasses in April and from there the market has been fairly steady and up in fact at some point in time. So having said that, actually you are right in the sense that the bulk of the results which have come out thus far are not looking that exciting. The best of the IT pack probably reported yesterday – Infosys – and they called out a better first half as compared to a second half.So, it is obvious that from here on, they are looking at a dip in growth rates and anywhere between 2.2% and 2.3% constant currency growth is not an excellent growth. We have been calling this out for a while. We have been saying that the markets will be sideways if anything, range-bound if anything, and that is why I am probably looking at the September quarter because September last year was the worst quarter that we reported. It was a down dip of 8 odd percent in earnings in that particular quarter of September 24.So, the base anyway has lowered from here on. There was a 8% dip, and then there was a mid-single-digit growth in December. Same was the case with March and I do not see any difference in the June quarter. If anything, it will be a mid to low single-digit kind of growth in earnings. Anyway our base has been set. RBI has infused liquidity in the system and normally liquidity finds its way to consumption or the other way because cheap money is what is needed by the consumer and that is what we are looking at and if that uptick happens, then we will probably see September quarter reporting a double-digit growth even if it is a flattish quarter.So, we will look at a double-digit growth and from there on, consumption picks up and that is what is awaited and probably we will see again interest coming back in stock specific names. Despite all this, we have enough stocks to work with. We have enough ideas to work with. Some of the ideas we picked up recently are looking fairly exciting and we will see them when my portfolio comes out.Even in this market we get ideas. So, it is obvious that a diligent investor is definitely going to choose this opportunity to take bets going forward and actually consolidation is the best phase when you can identify new ideas and pick them up.
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