So far, earnings are in line with expectation: Alok Singh, BOI AXA
There has been some amount of divergence in terms of margins, says the fund manager.
How are you navigating this range- bound market? The range has been clearly defined and can we expect a lot of big triggers in the next few months?
The range-bound movement suggests that market is a bit indecisive about the outcome of the lined-up events, of which the major portion is the election.
We are heading into a high-voltage election campaigning season and the result season is also almost coming to an end. Whatever the market had to infer from that, has already been there and going forward, it is these uncertainties which can go either ways. This will continue till election and , I do not see any respite from that before the election outcome.
What do you make of the Q3 earnings so far? The top line growth has been good but on the margins and profitability front, it has been a bit disappointing. What would you gauge from the numbers that have been delivered so far?
There has been some amount of divergence in terms of margins. Last quarter also saw a huge amount of commodity and currency price movement, depending on where you were at which point.
There is some impact on the margin coming out of that. But overall, I will say that as per our estimates, the earnings were more or less in line with what we were expecting. Obviously, in view of the volatility, people are not giving too much importance to that. They are more worried about other things, but overall, I will rate it as an okay season, it is not that bad.
Which is the sector that you are preferring at this point in time? Industrial and materials are interesting picks. What is making you confident about this space?
If you look at the landscape of the manufacturing activity, we are seeing capacity utilisation on the higher side. That is coming by virtue of China or the demand or whatever, but we are seeing capacity utilisation in high 70s and that is what is letting people plan for new capex. That is also what we are betting on to some extent.
If you look at the breakup of that broader industrial and materials, you will see that these are either product companies or intermediaries or consumables which are being used. They have two-way support; one is with the capacity utilisation. The need for such things is increasing and then with the new capacity coming in, we are getting growth visibility, whether it is on the chemical side, intermediaries or consumables or abrasives. These are the things which have formed more part of industrial and materials, which is in the sweet spot and their earnings commentary as well as last quarter results are quite encouraging.