Deepak Jasani, Head of Retail Research, HDFC Securities, believes that 2023 could end up with flat or negative returns. In an interview with MintGenie, he advised investors to keep reviewing portfolios every quarter and weed out non-performers and take part in profits in stocks that have run up sharply over the last few quarters.
What are your expectations from the March quarter earnings? Are you satisfied so far?
For Q4FY22, aggregate Nifty sales/EBITDA/PAT growth was at 23 percent/16 percent/21 percent YoY. Hence we have a high base in Q4FY23 which may make growth rates seem slower. On an overall basis, Nifty PAT could rise 10 percent YoY and 8 percent QoQ in Q4FY23.
Among outperformers, we think automobiles led by a rise in PV and CV volumes and margin improvement for OEMs partly offset by continued weakness in the 2W export market, and banks driven by robust loan growth, seasonal tailwinds and steady asset quality could do well. However, the PAT growth of metals and mining could fall sharply yoy due to lower commodity prices, slower offtake and weak realization. In terms of volume growth, FMCG companies are likely to see another subdued quarter in Q4FY23, especially as there are no clear signs of revival in rural demand. Domestic consumption growth may depend on the onset and progress of monsoon given the subdued rural consumption backdrop.
Results so far have been a mixed bag. IT companies have on an overall basis disappointed with a few exceptions. Banks have performed in line with or better than expectations.
Do you see another year of single-digit returns for the benchmarks?
The calendar year 2023 could end up with flat or negative returns after a decent first few months. The current negatives on the global front have not had much impact on equity valuations so far. The feared El Nino impact (if it materialises) and the forthcoming general elections could lead to some weakness in the last quarter of 2023.
What is a good strategy for markets for this year?
Keep rebalancing your asset allocation in line with the planned allocation. Keep reviewing your portfolio every quarter and weed out non-performers (that have not done well in the last few upruns) and take part profits in stocks that have run up sharply over the last few quarters.
Will this be a good year for IPOs? Many new IPOs have launched and many are expected to be launched in 2023. Do you have a favorite?
Only when investors make money on a few IPOs back to back, will the IPO market revive. Investors are still nursing from losses in the high-priced new-age IPOs that came in H2FY22. Secondary markets will have to be favourable and promoters will have to cut greed for better times to return for IPOs.
Is this a good time to accumulate mid and small-cap stocks? What should one look for before picking a mid/small-cap stock? Any top picks in this segment?
There could be some small/mid-cap stocks for picking in any kind of market. Key things to focus on in shortlisting such stocks include fast growth in recent times in topline and improvement in margins, decent return ratios, fair capital allocation policies, progressive corporate governance practices, presence in sectors where there are few entry barriers and fewer chances of disruption, etc.
What do you make of the recent rally as far as the FMCG pack is concerned?
The recent rally in FMCG goods is driven by decent numbers reported for the latest quarter/expectations thereof for companies that are yet to report numbers. This has been achieved by product optimisation, cost rationalisation and higher penetration in tough times. Expectations of El Nino formation could dampen expectations for FMCG companies going forward that have a larger dependence on rural sales.
What is the best way to approach IT at this point?
Till we get a handle on the expected growth rate in the developed economies and the expected budgets on IT spending by large corporates, it is prudent to be underweight on IT for some time, although going by past parameters valuations of IT stocks have become attractive. The key concern is about earnings and their growth going forward. Here, the smaller players who are in niche areas may perform better than the giants in the near term.
What is your take on autos after the solid run in the last year?
The tide may turn within the auto space. Passenger cars, tractors and CVs may underperform in the next few quarters, while 2-wheelers may do better than the recent past driven by export and new product sales (including EVs).