The kind of earnings that we have seen here, globally also there is so much of focus on earnings right now, but then what should one expect? There was one view, one part of the argument was that a heavy earnings or the earnings which could put up a decimal picture like Reliance or maybe IT, those earnings have already gone by now. Look what it looks like now. Can we say the numbers which are yet to report now, the companies which are yet to report numbers now, the growth could moderate here, understanding that the major benefit of the commodity prices environment is largely captured?
I think we are probably a little early in the earnings season to really judge too much in terms of how the earnings season is going. But broadly, if you just look at it, I do not think you can look at it as an overall broad brush. There are very clear divergent trends across sectors. So, if you are looking at sectors such as real estate, capital goods, these are very-very buoyant and they are likely to continue to do very well.
IT is weak. Banking, you are seeing a bit muted, not so much because of growth or asset quality, but because margins are under some level of pressure.
Pharma is something that we are expecting to do reasonably well. Consumption is another segment and it is a very important part of the market, but consumption growth is clearly kind of subdued. So, it is not really a market where earnings are seen across the board. You are seeing very clear sectoral divergences. There are certain parts, certain sectors that have been doing well. They have been doing well for the past couple of quarters, that should continue. But there are also certain pockets that are clearly suffering.Please help us understand how the macro environment can possibly pan out for the coming week, understanding there is a FOMC meeting next week, and can there be some jitters from that front because the way GDP growth, it was a downbeat growth in US GDP. PCE data came in higher. The hopes for a rate cut have been pushed to November now. Can there be some kind of disappointment or maybe Indian markets can react next week, FOMC meet considering?If you are just looking at the global context, it has clearly worsened a bit, not very significantly but it has worsened from where we were a couple of months back.
We started the kind of year expecting three rate cuts and the markets were confident of actually seeing that and really the whole call was how quickly are those rate cuts going to come in. What you have, however, seen is an increased kind of flare-ups in the Middle East, pushing oil prices up.
Inflation is clearly becoming more sticky than what is expected and you are now moving to an environment where clearly rate cut expectations are being pushed backward.
Like you indicated now, you probably may not see a rate cut until November. So, you are kind of I think from a global context, there are not a lot of tailwinds coming in from there and this is kind of reflected in relatively weak FII flows.
However, it is important to understand that for the last some amount of time, the Indian markets have pretty much been on its own course.
We have not really been impacted too much by what is happening globally. This can be seen by the strength in the market over the past few months and FII flows have not really been very supportive over this period either.
So, I think from a global context, do not really expect anything too positive in the coming week. Possibly some level of disappointments, but I do not necessarily see that having a negative fall through for the Indian markets.
We will talk about the stock of the week, Vodafone Idea. What an overwhelming response from both foreign and Indian investors. This post listing Vodafone Idea with a premium of a good 9%, we did see other telecom stocks also move up and the telecom sector was on a tear this week. Do you think this is going to be the long-term trend?
I amnot really sure about that because if you just look at the implications of what the Vodafone FPO really means for the sector, until Vodafone had not raised its capital, there were general concerns around the longer-term sustainability or survival of Vodafone itself, which could technically have taken what is currently a three-player market and made it a two-player market, which is kind of positive longer term for business economics of the surviving players.
With Vodafone having actually now raised this capital, Vodafone’s survival is that much more intact and therefore, the kind of chances that it is going to remain a three-player market over the longer term. More competition is not very great from a pricing perspective. So, I am not really sure whether the Vodafone FPO is necessarily positive for other telecom stocks and honestly a bit surprised to see them move up because of this move.