Stock Market

Don’t think a 15-16% growth in earnings is a given: Udayan

It has been a buy on dips market over the last few days. Overall, Indian markets have been on a strong wicket with the Nifty hovering around 7900 levels. 

Speaking to CNBC-TV18, Udayan Mukherjee gave his views on macro and micro issues that are trending right now.

The market shows an encouraging trend, he said, adding it has been bullish over the last 3-4 weeks. Although there were pullbacks in the market, there was a lot of resistance around the 7800 levels, he said.

“There is no momentum on the way down. Although there were pullbacks, the markets gained lost ground.”

The amended tax treaty India signed with Mauritius last week has put the foreign instituional investors (FIIs) on high alert. The treaty looks to tax their capital gains from sale of shares. P-notes, instruments issued by FIIs to overseas investors who aren’t registered with Sebi, have grabbed headlines in the light of this treaty.

It is an irritant, admits Mukherjee, adding the FIIs will take a rational call on what to do. The good news is there is transparency now, he said. 

The key determining factor would be the emerging market outlook going forward – how it pans out next year will hold the key for FIIs, he said.

FIIs will feel the jitters only when there is underperformance and a tax irritant to contend with, not otherwise, he said.

As regards the earnings season, he felt there has been a 6-8 percent growth in the bottomline and toplines of companies that have reported their results so far. 

“It’s better than the last few quarters,” he said. The question would be whether the downgrades for the corporates have come to an end.

Based on the earnings so far, Mukherjee doesn’t think a 15-16 percent growth in earnings is a given. 

Currently, India is in a trade surplus — it augurs well for the equity market and the currency.

“It is excellent news for the rupee versus against other currencies,” he said, adding that India has all the ingredients of outperformance.

India is in classic defence mode, he said, referring to the trades in the market.
“We are like Asian Paints. We didn’t rally when EMs rallied.”

Finally, on the present government completing two years in office, he said a few politicians in Delhi don’t determine the way how the market performs.

Below is the verbatim transcript of Udayan Mukherjee’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Sonia: There has been a lot of volatility in our market courtesy weak global cues and Mauritius Tax Treaty issue, but give and take everything; it has been a buy on dips market so far. Do you see that trend changing anytime soon?

A: I think the price action has been very encouraging if one has been bullish on the market. I am very positively surprised with the very shallow corrections that’s taken in given the news flow over the last few days and that can only be read optimistically if one is a screen watcher. So there is nothing wrong, the screen has not taken any wrong step over the last three-four weeks, in fact longer.

However, as I said last time, the strength of the market often is shown by the corrections and the depth of the corrections and given that yardstick this market has been remarkably strong over the last three or four weeks. We have gone close to 7,900-8,000. The market is feeling a lot of resistance, sensing a lot of resistance around those areas but the pullback, first it was 7,800 and second pullback took us to 7,700 but not further and we bounced right back within a couple of days to 7,900 zone again. So the market seems to be falling very laboriously. There is no momentum on the way down, it is almost like 150-200 point pullback and within two days the market reclaims all its lost ground.

So if you are a technical trader or you are a momentum watcher, I think you have to say that the market is in remarkably strong hands right now. What happens from here on? We will see, but going just by the price action, I think the screen has looked nothing but bullish over the last few weeks.   

More to follow…