nifty: Maintain target of 27,500 for Nifty, CAGR earnings growth of 15-16% for next 2 years: Pankaj Pandey

How do you see the overall earnings because they are a little disconcerting? There is such a divergence from what the Street was targeting and the kind of comments and the kind of results that many companies have been posting and also in general, that the slowdown seems to be quite evident. How worrying is that?
Pankaj Pandey: This was generally expected to be a weaker quarter. We are already at maximum margins of 19-20% for Nifty. Therefore, incremental margin expansion was definitely not the case. And we all know that in large sectors like IT, demand is still weak and possibly the fourth quarter is where you can expect a little bit of revival and obviously we will have elections in the US that will also affect sentiment and prices. Raw material prices will continue to be weak, regardless of whether it is for steel or for cement.

Refining margins have definitely decreased due to the global slowdown. So, to a large extent, most of it is in the prices. Our feeling is that the second half is going to be better. But Bajaj’s comment about festive season sales being in the range of 3% to 5% was a bit of a dampener and as a result of that overall, that has softened the market mood and we have seen a correction of sorts of around 6%. in the markets.

Typically, any year, you could easily get some sort of 10-12% correction, multiple corrections in the market, so 6% is already executed, at most possibly 4-5% is very possible. But our feeling is that the ideal would be for the market to bottom at current levels. The second half is expected to be better because our feeling is that there should be a lot of orders and tenders given that the first half was quite soft.

Many other sectors are expected to do well in the second half. So from that perspective, we maintain our target price of 27,500 for Nifty and earnings CAGR growth of around 15-16% over the next two years.

What has been your reading when it comes to IT now that you both wipro as well as infosys Are the results out yet? We were chatting with Wipro management, the third quarter guidance has been disappointing. The EBIT margin has not seen much of a recovery: 16.8% versus 16.5% sequentially. For Infy there are really no positive surprises either. We have seen how, in any case, ADR suffered a severe blow overnight.
Pankaj Pandey: Absolutely. If you look at the overall second half of the comments, what you get is that for most IT companies, the second half is expected to be softer. Therefore, no big fireworks are expected, especially in the second half. For example, at Infosys, the smaller deals are gaining traction but the big ones are still missing and that is why this particular quarter we are not expecting any major updates for most of these companies. Furthermore, elections are coming up in the United States and tax policies are diametrically opposed for both presidential candidates. Therefore, all this will not cause any type of positive surprises in technology stocks, at least in the short term. The fourth quarter is where we need to watch because the third quarter is largely expected to be a weaker quarter for most companies. So from that perspective, we probably have to wait another quarter for something better to happen.What do you think of automotive companies right now? It doesn’t look like, at least so far, the holiday season will be able to achieve a significant increase in demand. But looking at the way the comment was Bajaj Cars Yesterday the shares seemed to be almost perfectly priced and therefore also the biggest disappointment. What do you think of the way the stock got hit yesterday along with the others in the auto pack?
Pankaj Pandey: Bajaj Auto specifically has two challenges. First, it trades at 30 multiples, which is a pretty high number, so it’s literally twice parity, it usually trades at 1.5 times parity. So the rating was definitely higher. Also, if the festive season is expected to see moderate growth of 3-5%, that will weigh on the stock.

I am afraid that this increase in the price of gas or a lower allocation of gas to gas distribution companies will be even more negative for automotive companies because we must understand this for a company like Maruti25% of the briefcase They are vehicles powered by CNG. Bajaj Auto has just launched a CNG motorcycle and they are quite aggressive in terms of expanding into this space. Even for Tata Motorsthe comment improves in the future. This news is also negative for the automotive sector in general because CNG was one of the few portfolios that was doing very well for most automakers.

Where does the ball end? Do you think we should wait for earnings season, have complete clarity about where earnings are headed, and then invest?
Pankaj Pandey: This quarter was generally expected to be soft, so there are no magical surprises in terms of a softer set of numbers. But yes, given the fact that the markets have recovered, it is not really helping the market in terms of going up. We have already seen a cut of around 6% from above and that is the normal correction we have seen this year. And obviously, valuations are relatively higher for Indian markets compared to what is seen in global peers.

One way to approach this is that if 15-16% growth rate is expected, price performance could be slightly lower, around 1213 odd percent, to neutralize the kind of rich premium multiples we are getting now. . But our feeling is that the Indian market is not a one-quarter story because historically, the multiples have risen largely because it is the first time that we are seeing good comfort in the overall long-term growth of the economy and also the companies.

Corporate balance sheets remain good. Therefore, some softer comments will not really alter the direction of the markets. We could possibly get another 4-5% type of correction. But overall I don’t think this quarter is causing us to go negative on the markets.

Why did Hyundai’s IPO almost go ahead? I mean, the retail interest just wasn’t there. What happened?
Pankaj Pandey: We had signed up for this and it was offered 26 times. It is half the size of Maruti. Maruti trades at 30 times. So obviously there wasn’t much difference. But we like stocks from a long-term perspective, but many people invest in IPOs holding the gray market premium, which had declined. That’s the reason and it was also a pretty big IPO. So I’m not really surprised by the kind of reaction they had.