Mumbai: The earnings season has been reasonably good, Anup Maheshwari of DSP BlackRock Investment Managers said in an interview, adding that he expects elevated earnings growth in the current fiscal year and the next. Edited excerpts:
What have you taken away from earnings season so far?
Positive note: Anup Maheshwari.
It’s been reasonably good. I think this is something that we have got to expect now even for the coming year, which is going to be very important. But, clearly, I think a bit of base effect of last year will also play into FY11 earnings. Overall, from an earnings point of view, I think the market should be reasonably okay.
Will the market rise higher?
I think corporate earning is a key driver for the markets in the long term. After almost two last years of earnings, which is FY09 and FY10, where we have seen flattish earnings growth, clearly we are expecting slightly elevated levels of earnings growth in FY11 and FY12. Normally, when you are heading into a higher earnings growth trajectory, you don’t tend to have deep dive type corrections. So there is something for the markets to look up to. Even if it consolidates for a while, over time it keeps getting cheaper, given the earnings growth coming through.
On the other hand, a sort of headwind for markets is interest rates rising. Interest rates are never good for markets. So I think we have two conflicting factors at work. But while the market looks reasonably range-bound for a while, the good part is there are (a) number of ideas that people are looking for and a lot of re-rating that is occurring underlying the overall index. So that’s a broadly positive perspective.
How’s the market sentiment? Do you still hear a lot of scepticism or has the mood turned euphoric?
It’s not euphoric really. I think there is a sense of caution that still exists. I guess memories of last year and the year before are still fairly fresh. In a sense, it’s good because you need some level of tempered view for the markets to keep performing. We don’t want to see over-exuberance beyond a point.
So from investor sentiment point of view, I think it’s fairly cautious and that (is) pretty much reflected in the flows that mutual funds have seen or the lack of them actually for the last eight-nine months.
There’s some big primary market action. What’s your take on it?
It does sort of come in the way of secondary market action at some level. But if you really look at it from a long-term India point of view, it’s positive because you enhance the market capitalization overall. And what it does essentially is that it attracts more and more foreign flow.