Bullish on 2-Wheelers, Tractors and Rural Lending Companies
Sanjay Dongre, Fund Manager, UTI Asset Company, talks about less positive on pharma and IT sectors
Poor monsoons in the last two years have impacted two wheeler and other sectors which are dependent on the rural economy. Most of the agencies now are predicting normal monsoons and therefore good earnings tractions in these sectors are expected. Tractor segments or the lending into the rural economy or the consumption of rural economy would be bullish. These are the segments of the rural economy or the consumption of rural economy which are expected to do well.
Throwing light on Q4 to be subdued for some of the commodity related sectors as well as some of the banks, last five-six quarters the earnings growth has been pretty subdued but there could be some sign of recovery in this quarter and by FY17 we could see the earnings recovery. Also looking at the revenue growth, most probably most of the companies are likely to indicate the earnings growth that will be closer to 8-10 per cent rather than 12-14 per cent. Most of the incremental IT budgets are going towards the digitalization of the businesses and therefore incremental spend, if it is going towards the digital that is where most of the Indian IT companies would be lacking.
The frontline cement industry is likely to do well with a very high operating leverage. Looking at the capacity additions which has been happening over the last two years or which are likely to happen over next two years, these capacity additions have been pretty small and therefore going forward we could expect the demand supply gap to narrow down further. The other interesting pocket would be IT which is a very defensive sector in this volatile market conditions. There has been pricing pressures in the last 4-5 quarters.
Therefore it should impact the earnings growth in the next one or two years , combined it with the valuations of five year high investors, are likely to make less money from this sector. Till then, the pharma sector is less positive.
~ END ~