We have been seeing an up move and it is thankfully being led by the FIIs. Can we now say conclusively that the FIIs are back in India?
Jitendra Gohil: First of all, the macro improvement in India is pretty stark and looking at the GST numbers, the way rupee has behaved, and also the falling interest rates in India, RBI is infusing liquidity. So, from a macro stability perspective, we are in a much better position compared to our peers and that gives some kind of respite to FPI who was looking at an earnings downgrade and more or less the earnings downgrades have now started to price in.
We were earlier expecting Nifty growth of 12-15%, now the consensus is expecting somewhere around 9% to 11%. Net-net, a large part of earning correction is now factored in the numbers and also the macro stability is helping some sentiment improvement for FPIs. On the other hand, if you look at the global factors, if you see the de-escalation of the tariff tension, how China and US negotiates is going to be very crucial. But over the past few weeks, we have seen that the US has taken a U-turn in terms of putting tariffs on all the countries and that has led to some kind of sentiment boost.
Hence we cannot say the FPIs will turn extremely positive on India, but at least the selling has abated and month to date, the FPI flows are flat to little bit positive. I would say it is a great sign, but to see a sustained FPI buying, we need to wait a bit till good recovery in earnings start.
Since you are highlighting the fact that the selling should stop for a bit, the selling has actually got absorbed, and given that for the earnings that we have seen so far, there has not been a big disappointment coming in. There was disappointment from the IT majors, but on the back of the valuations, the stocks were not that hammered. The selling was already done. Give us some sense of what has been your reading in the earnings so far and which were the outliers.
Jitendra Gohil: Looking at the IT sector, you are right, we have seen corrections happening there and already the market was pricing in and after the results, we have seen a mixed reaction. From a valuation perspective also, the sector has seen good downgrades and a large part of the fear is that we are going to see a US recession or a major slowdown in the developed economy. I think that is why you have seen the correction in a large part of the IT names.
So, largely, the largecaps are now looking attractive. We have started recommending a few IT names now from a 12-18 months’ perspective, remember they are not completely out of the woods. So there we see some kind of buying support happening as a large part of the negative earnings have started to priced in. Looking at the banking sector, there is still good headroom. RBI has already infused more than Rs 5 lakh crore of liquidity year to date.
So, there also the results were a little bit mixed. You have seen some corrections happening in the NBFC sectors and some of the private banks as well and there you get a good buying opportunity if it corrects another 2% to 3%. In the banking sector, as a whole, we remain positive and we think that earnings recovery is on cards in the banking stocks given liquidity support and the kind of macro improvement.
Net-net, these are the two outlier sectors where we think there could be outsized opportunities to buy. Otherwise, consumption is a little weak. We have seen some of the retail names reporting not that exciting numbers and till the time broad-based consumption recovery happens, I do not see earnings will pick up in this sector. So, avoid consumption driven names. IT, to some extent it is a value might emerge over the next few months or so and banking and financials is looking pretty strong.
Barring some other sectors such as defence, we see a lot of traction happening because whatever is happening globally as well and the government is also now going to focus more on building their defence capabilities, order inflows have started. We are seeing very divergent performance across the sectors and we need to be cognisant about all these developments on the macro front.Help us with your take on the auto counters because global OEMs are looking forward to some uncertain times. They believe that tariff uncertainty could impact the numbers, and they are just lowering their profit guidance and the sales guidance in the times ahead. Could the sentiment hit the Indian OEMs given that the April auto sales data do not look that exciting?
Jitendra Gohil: Exactly. So, we do not recommend going for globally exposed auto components companies or to some extent one or two OEMs that are willing to global auto cycle as well. We are staying away from it. Domestic auto names there also the valuation is not cheap. In our model portfolio, in our recommendations, we hardly have any auto stocks at this point of time. If you look at even the guidance for FY26, there also we see muted commentary from the companies. However, some of the auto financers probably could do well.
We prefer NBFCs because we think that is the sector where your lending rates are capped and your borrowing may fall once the interest rate starts to fall further. So, net-net, we are a little bit more positive on auto financers and auto focused banks compared to OEMs as of now.
Given that we have already seen a rapid rise in the banking space, what are the other segments in the entire financial space? Financialization is a big theme everyone has been playing with. It includes the insurance theme, and the capital market plays as well that comes into all of this. How are you looking at this and certain platform companies will benefit from what is happening around them. Are you looking at those segments?
Jitendra Gohil: Intermediaries are looking at companies in the demat space and we definitely like those kinds of platform companies. But on insurance, we are a little bit cautious. We think that there is still some headroom for valuations to correct. So, from an overall banking and financial perspective, our top preference remains for private banks followed by PSU banks and NBFCs. To some extent, intermediaries in the financial space. But not looking very aggressively in the insurance space. We think competition is going to be increasing going ahead. So, heightened competition will lead to margin compression there. So, we are not very bullish on insurance. It is just a neutral-ish kind of a view there.