Latest news with #ChristyMathai
Economic Times
27-05-2025
- Business
- Economic Times
Market recovery driven by easing macros and FII inflows, but valuations remain expensive: Christy Mathai
Agencies Are you able to generate a secular 18-20% sort of return on equity, that seems to be the concerns especially considering the valuations that we see. "If you were to look at the earnings trajectory, again first half was pretty bad you have seen sizable earnings cut especially if you were to look at the FY26-27 earnings. But then, this earning season is probably a bit mixed. There are some pockets which have done well, some which has not," says Christy Mathai, Fund Manager-Equity, Quantum AMC. What a move in the markets of late though the news flow was quite volatile. We have been hearing from President Trump. The earning season is in full swing and then, we had the tensions border across. But there is always saying that good price and good news does not come along. Now that we are seeing that the prices are quite looking good, the bulls are seen to be back, especially with their interest in the largecap space and the news is also turning out to be the good, help us understand what is your take on the markets, is the price still good to go ahead and chip in some money? Christy Mathai: So, clearly, as you said the markets have just recovered quite sharply if you were to look at it and possibly some of the easing that we have seen on the macros, especially global macros for that matter, some of the geopolitical tensions easing would have contributed to that and we have seen a fair bit of inflows from the FIIs also, so which has kind of propelled the market to where it is. But see, I would look at from two-three lens. One, of course, if you were to just look at the plain macros, yes, things are improving after sort of not a weak first half FY25, things are just gradually inching up though the GDP estimates has been cut, possibly some bit of easing is happening especially if you look at the RBI actions, there is lot of liquidity infusion, if you were to look at the inflation, things have just kind of come down, that is on the macros. If you were to look at the earnings trajectory, again first half was pretty bad you have seen sizable earnings cut especially if you were to look at the FY26-27 earnings. But then, this earning season is probably a bit mixed. There are some pockets which have done well, some which has not. Our sense is the ask rate in terms of earnings is around 11, 11.5 which is not so demanding. So, the earnings cut further on may not be so steep, perhaps it would have bottomed out in that sense. But the mood point is the valuations. The valuations remain expensive across most of the buckets and that is true more also in the broader end, but if you were to just look out Nifty 50 or BSE 30, the valuations at Nifty at 21.5 is expensive. So, if you were to just put it all together, yes, we are more constructive with the markets, from the levels six to eight months back, but investors have to possibly be looking at moderate returns, especially in the context of what we have seen three- to five-year returns. Now, the kind of recovery that we have seen in the past few days and also the earnings trajectory, just like you were mentioning, are there any particular pockets where you see value in currently and are there any spaces that one must avoid at this point in time? Christy Mathai: Yes, clearly, so as I said, the headline numbers especially on the valuations may look expensive, but there are, of course, pockets of opportunities that you continue to see. There was initial period of correction that we have had. So, we have broadly added into some of the pockets where the earnings growth was a bit weaker, especially in the IT because there valuations had become, especially if you were to look at FCF yield and so on and so forth, things were looking a bit better. Also, if you were to look at the whole pharma bucket, there has been lot of news flow around it, again we have used that opportunity to add into some of these names. Same as with the financials. If you look at some of the general insurers, health insurers in the past few quarters, they have not gone anywhere in that sense because there could be one headwind or the other, but broadly if you were to just look at the whole pack, it looks a very fairly underpenetrated segment for country as a whole and long-term growth is not at all at risk. So, not participating in the rally for the past few months or years, we have kind of added into some of these pockets. Pockets we avoid, again, we are a value focused fund, so anything very expensive would be an avoid for us, especially the likes of what we are seeing in the whole cap good space, the defence where things are looking very expensive, although the near-term growth looks positive is what we would typically avoid because of our value focus. Since you said that you have added to some of the pharma counters, of late. Within the earning season, what we are seeing is that the generic companies are highlighting that they are immune to the Trump's executive order. While the CDMO companies with respect to the growth that is a long pending one and the long-term growth outlook is quite robust and then there is API where still that China plus one theme still goes on. Give us some sense within the pharma pack where are you finding opportunities. Christy Mathai: So, mostly our addition is in the generic space, especially the US focused generic, although they have sizable India-centric business as well. See, the point is the executive Trump order pertains to possibly the very high value products, especially coming from innovators or possibly from other developed countries. So, maybe India you would have some exposure, but not much. If some of those pricing are coming down, would there be an impact on generics? We do not really think, but we would have to get into finer nitty-gritties which is not very known at the moment. So, we have by and large found opportunities within the generic space where the valuations were coming down and the past two-three years earnings for a lot of these companies have been driven by fairly benign US pricing environment. It is cyclical to some extent, but the pricing environment in a sense may continue for some time like that, so which would be an impetus and some high value molecules or drugs which have come into the market, some of them are going off, but the point is there is enough and more which the Indian pharma companies through their Para IV filing or first to file there could be an opportunity to replace. So, by and large, we remain constructive on the sector. Again, you have to be very stock specific, so some of them would be trading very expensive, but some of them given the near-term issues might be trading cheap is where we find an opportunity. Just a little while ago you mentioned that cap goods and defence still look a little bit expensive to you. Can I also get your view on the power space. We have been watching out for the earnings, and it has been a mixed set, but the outlook there is very strong across companies. So, what is your take on that space and any names you could help us pick and avoid? Christy Mathai: So, if you were to look at the power sector, again some of these companies have done phenomenally well. We used to own quite a few of them, especially the utility bucket, but we sold out given what we have seen in terms of the rally in the recent past. See, the power sector growth has clearly been ahead of the long-term GDP growth that we have seen and some of them is trickling into whoever lies up ahead in the value chain and there will be more value creation in that bucket as opposed to just the power companies. But again, here the concerns is if you were just to look at the utility space where you get a regulated equity returns, some of these companies are not really priced for that regulated equity returns, which would be in the vicinity of 15-16% give or take. On the other sub-segment where, let us say, you are playing in the value chain within the power sector, again here things are much and beyond because you are looking at maybe two-three years of great earnings or revenue order book growth, but what will happen post that, that is the key you able to generate a secular 18-20% sort of return on equity, that seems to be the concerns especially considering the valuations that we see. So, as I said, we used to own some of these names, but we have kind of sold out in the ensuing rally. Currently, it looks unfavourable in our view. You have told us what is looking actually good to you, but tell us which is the area which is not looking that attractive to you at this point in time. Christy Mathai: If you look at the whole financial space where things have been market linked, could be broking houses, some of the AMCs where the valuations have run up. So, these are the pockets where one has to realise things are a bit cyclical because, for example, if you take a broking house or AMC or anything within that value chain, what you see is, it is linked to the market and there is cyclicality in that. But again our concern here in some of these pockets is, is that cyclicality rightly captured? For example, if you look at a typical AMC, there will be addition in terms of what will be the fresh flows, but there is also an M2M component which kind of helps every year. So, are we baking in great M2M for the next two years? We think not. Chances are there could be correction in that theme. So, all these entities which are market linked to some extent, there could be some bit of correction. In the near term, they are doing well because we have seen a rebound. But we have to think about the next one-year, two-year, three-year what can happen. We would see some drawdowns in some of these pockets, that is our expectation.
Mint
20-05-2025
- Business
- Mint
After a spirited rebound, markets fall for third straight day
The benchmark indices fell for the third straight day on profit booking, following a rebound after India and Pakistan agreed to a ceasefire to end the four-day military conflict that stemmed from Operation Sindoor. On Tuesday, the Nifty 50 index fell 1.05% or 261.55 points to 24,683.9, while the Sensex 30 slipped 1.06%, its sharpest decline in five days, to end at 81,186.44. The market had rallied almost 5% from 24,008 on Friday (9 May), a day before the ceasefire, to a high of 25,116.25 on 15 May. From there, Nifty has fallen 0.08% and Sensex has declined 0.15% on profit booking. All the Nifty sectoral indices ended lower on Tuesday. The Nifty Auto index fell the most, closing 2.17% down, the India Consumption index dropped 1.77%, and the Nifty Financial Services index closed 1.73% lower. The Nifty Midcap 100 index settled 1.62% lower. The market sentiment remained negative on Tuesday, with 42 of 50 Nifty constituents ending in the red. The BSE market capitalisation fell by ₹ 5.4 trillion to reach ₹ 43.82 trillion. Of the 2,969 stocks traded on the NSE, 1974 declined and 915 advanced. Fund managers said that much of the negatives, including geopolitical tensions and global tariff uncertainties and earnings disappointments, were priced in. But with Moody's downgrading the US, a selloff in emerging market assets by foreign portfolio investors (FPIs) amid rising US bond yields could crimp the short-term sentiment. 'When US bond yields go up, it's always negative for India and for emerging markets because the cost of debt is moving up,' said Christy Mathai, fund manager-equity at Quantum Asset Management Co. In such cases, investors could be better off investing in local currency and local bonds as opposed to investing in emerging markets, he said. Sachin Relekar, senior equity fund manager at Axis Mutual Fund, said, 'We believe that macro headwinds are receding.' The recent geopolitical issue with 'our neighbouring country seems to be behind us', he said. There were concerns around trade and tariffs, which were steep when proposed, but the tone of negotiations—especially with China and potentially with India too—now seems more positive, he said. 'We still need to see the final details, but it doesn't look as bad as it did around before and, hence, we believe that the two issues are less of a concern going forward,' Relekar said. Most of the earnings downgrades that had to happen have happened and there is not much room for the earnings to go down further, according to Mathai. The earnings season for Q4FY25 has not been that weak and was on the expected lines, he said. 'From hereon, we might see an 11% earnings growth for FY25-26.' FIIs have been net buyers in Indian equity markets for the last five days with inflows of ₹ 15,262 crore. Asian indices closed higher with Hong Kong's Hang Seng ending 1.49% up and Japan's Nikkei 225 settling 0.8% above the previous close.
Time of India
19-05-2025
- Business
- Time of India
Market recovery driven by easing macros and FII inflows, but valuations remain expensive: Christy Mathai
"If you were to look at the earnings trajectory, again first half was pretty bad you have seen sizable earnings cut especially if you were to look at the FY26-27 earnings. But then, this earning season is probably a bit mixed. There are some pockets which have done well, some which has not," says Christy Mathai , Fund Manager-Equity, Quantum AMC. What a move in the markets of late though the news flow was quite volatile. We have been hearing from President Trump . The earning season is in full swing and then, we had the tensions border across. But there is always saying that good price and good news does not come along. Now that we are seeing that the prices are quite looking good, the bulls are seen to be back, especially with their interest in the largecap space and the news is also turning out to be the good, help us understand what is your take on the markets, is the price still good to go ahead and chip in some money? Christy Mathai: So, clearly, as you said the markets have just recovered quite sharply if you were to look at it and possibly some of the easing that we have seen on the macros, especially global macros for that matter, some of the geopolitical tensions easing would have contributed to that and we have seen a fair bit of inflows from the FIIs also, so which has kind of propelled the market to where it is. But see, I would look at from two-three lens. One, of course, if you were to just look at the plain macros, yes, things are improving after sort of not a weak first half FY25, things are just gradually inching up though the GDP estimates has been cut, possibly some bit of easing is happening especially if you look at the RBI actions, there is lot of liquidity infusion, if you were to look at the inflation, things have just kind of come down, that is on the macros. If you were to look at the earnings trajectory, again first half was pretty bad you have seen sizable earnings cut especially if you were to look at the FY26-27 earnings. But then, this earning season is probably a bit mixed. There are some pockets which have done well, some which has not. Our sense is the ask rate in terms of earnings is around 11, 11.5 which is not so demanding. So, the earnings cut further on may not be so steep, perhaps it would have bottomed out in that sense. But the mood point is the valuations . The valuations remain expensive across most of the buckets and that is true more also in the broader end, but if you were to just look out Nifty 50 or BSE 30, the valuations at Nifty at 21.5 is expensive. Live Events So, if you were to just put it all together, yes, we are more constructive with the markets, from the levels six to eight months back, but investors have to possibly be looking at moderate returns, especially in the context of what we have seen three- to five-year returns. Now, the kind of recovery that we have seen in the past few days and also the earnings trajectory, just like you were mentioning, are there any particular pockets where you see value in currently and are there any spaces that one must avoid at this point in time? Christy Mathai: Yes, clearly, so as I said, the headline numbers especially on the valuations may look expensive, but there are, of course, pockets of opportunities that you continue to see. There was initial period of correction that we have had. So, we have broadly added into some of the pockets where the earnings growth was a bit weaker, especially in the IT because there valuations had become, especially if you were to look at FCF yield and so on and so forth, things were looking a bit better. Also, if you were to look at the whole pharma bucket, there has been lot of news flow around it, again we have used that opportunity to add into some of these names. Same as with the financials. If you look at some of the general insurers, health insurers in the past few quarters, they have not gone anywhere in that sense because there could be one headwind or the other, but broadly if you were to just look at the whole pack, it looks a very fairly underpenetrated segment for country as a whole and long-term growth is not at all at risk. So, not participating in the rally for the past few months or years, we have kind of added into some of these pockets. Pockets we avoid, again, we are a value focused fund, so anything very expensive would be an avoid for us, especially the likes of what we are seeing in the whole cap good space, the defence where things are looking very expensive, although the near-term growth looks positive is what we would typically avoid because of our value focus. Since you said that you have added to some of the pharma counters, of late. Within the earning season, what we are seeing is that the generic companies are highlighting that they are immune to the Trump's executive order. While the CDMO companies with respect to the growth that is a long pending one and the long-term growth outlook is quite robust and then there is API where still that China plus one theme still goes on. Give us some sense within the pharma pack where are you finding opportunities. Christy Mathai: So, mostly our addition is in the generic space, especially the US focused generic, although they have sizable India-centric business as well. See, the point is the executive Trump order pertains to possibly the very high value products, especially coming from innovators or possibly from other developed countries. So, maybe India you would have some exposure, but not much. If some of those pricing are coming down, would there be an impact on generics? We do not really think, but we would have to get into finer nitty-gritties which is not very known at the moment. So, we have by and large found opportunities within the generic space where the valuations were coming down and the past two-three years earnings for a lot of these companies have been driven by fairly benign US pricing environment. It is cyclical to some extent, but the pricing environment in a sense may continue for some time like that, so which would be an impetus and some high value molecules or drugs which have come into the market, some of them are going off, but the point is there is enough and more which the Indian pharma companies through their Para IV filing or first to file there could be an opportunity to replace. So, by and large, we remain constructive on the sector. Again, you have to be very stock specific, so some of them would be trading very expensive, but some of them given the near-term issues might be trading cheap is where we find an opportunity. Just a little while ago you mentioned that cap goods and defence still look a little bit expensive to you. Can I also get your view on the power space. We have been watching out for the earnings, and it has been a mixed set, but the outlook there is very strong across companies. So, what is your take on that space and any names you could help us pick and avoid? Christy Mathai: So, if you were to look at the power sector, again some of these companies have done phenomenally well. We used to own quite a few of them, especially the utility bucket, but we sold out given what we have seen in terms of the rally in the recent past. See, the power sector growth has clearly been ahead of the long-term GDP growth that we have seen and some of them is trickling into whoever lies up ahead in the value chain and there will be more value creation in that bucket as opposed to just the power companies. But again, here the concerns is if you were just to look at the utility space where you get a regulated equity returns, some of these companies are not really priced for that regulated equity returns, which would be in the vicinity of 15-16% give or take. On the other sub-segment where, let us say, you are playing in the value chain within the power sector, again here things are much and beyond because you are looking at maybe two-three years of great earnings or revenue order book growth, but what will happen post that, that is the key concern. Are you able to generate a secular 18-20% sort of return on equity, that seems to be the concerns especially considering the valuations that we see. So, as I said, we used to own some of these names, but we have kind of sold out in the ensuing rally. Currently, it looks unfavourable in our view. You have told us what is looking actually good to you, but tell us which is the area which is not looking that attractive to you at this point in time. Christy Mathai: If you look at the whole financial space where things have been market linked, could be broking houses, some of the AMCs where the valuations have run up. So, these are the pockets where one has to realise things are a bit cyclical because, for example, if you take a broking house or AMC or anything within that value chain, what you see is, it is linked to the market and there is cyclicality in that. But again our concern here in some of these pockets is, is that cyclicality rightly captured? For example, if you look at a typical AMC, there will be addition in terms of what will be the fresh flows, but there is also an M2M component which kind of helps every year. So, are we baking in great M2M for the next two years? We think not. Chances are there could be correction in that theme. So, all these entities which are market linked to some extent, there could be some bit of correction. In the near term, they are doing well because we have seen a rebound. But we have to think about the next one-year, two-year, three-year what can happen. We would see some drawdowns in some of these pockets, that is our expectation.
