Macros more favourable for quality growth style than value: Krishnan VR
If the current trend of slowing government capex growth, lower inflation and recent rate cuts continues, the macro environment is more favourable for quality growth style than value, says Krishnan VR , Chief of Quantitative Research, Marcellus.Edited excerpts from a chat:We have seen improvement in market breadth due to the broad rally among small and mid-caps since March to the extent that both indices have almost recouped from the drawdown witnessed in the first two months of the year. Among factors, high beta and growth stocks have fared better over the last 3 months or so.Are high-quality franchises still delivering alpha, or is the market favouring a different style now?Quality focused indices have underperformed so called 'Value' stocks- which appear cheap on valuation multiples- both CYTD and on trailing 3-year and 5-year basis since Covid. However, if one considers a wider definition of quality style as companies having both Quality and Growth characteristics available at decent valuations, then it has held up relatively well in the current fiscal till date. Momentum as a factor has trailed a bit recently, given the sharp change in market direction between risk-on and risk-off over the last 6 months. Investors should always consider diversifying across factors for a smoother ride as individual factor performance can be bumpy.With macros turning globally, is there a recalibration happening in your quant models or factor weights?We prefer quality companies available at attractive valuations. On a relative value basis, quality stocks and some erstwhile consistent compounders look attractive today, considering the outperformance of value and cyclicals since Covid. With a slowing domestic and global economy, companies which can deliver reliable earnings growth are going to be scarcer and have lower risk of valuation derating.Any non-consensus signals or patterns your models are picking up that the broader market might be ignoring?Like I mentioned before, Value style has been among top performing factors since Covid due to different reasons like topline recovery from lockdown (FY22-23), higher government capex spends, and then from the commodity spike followed by cool-off (FY23-24). However, if the current trend of slowing government capex growth, lower inflation and recent rate cuts continues, the macro environment is more favourable for quality growth style than value.Consumer discretionary names within retail and Autos, could benefit from higher consumer spending driven by lower EMI, easing inflation and reduced income tax outgo from changes announced in the recent budget. For long term investors, companies in the broader financials service sector like insurance, wealth management offer attractive plays on the structural trend of financialization of household assets, which is underway. Our investment approach remains sector agnostic though.NBFCs especially vehicle financiers with larger exposure to fixed rate loans are well placed to benefit from recent rate cuts and easing liquidity. NBFCs with significant exposure to unsecured lending should also benefit as credit concerns abate and non-performing loans bottom out. CRR cut is marginally positive for banks though rate cuts could initially drag down their NIMs, as loan book reprices to lower rates and given the competition for deposits.The IT sector is down around 11% this year versus 5% for Nifty50. So while a case can be made based on relative valuation, I have not seen any new fundamental trigger for rerating. Most largecap IT stocks have broadly delivered single digit revenue growth. Now with the economic uncertainty in the US due to tariffs and policy changes under new administration, the growth guidance remains muted, with most managements striking a cautious note on discretionary demand pickup in 4Q results season.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fibre2Fashion
2 hours ago
- Fibre2Fashion
Bangladesh sees lowest openings of import LCs in 58 months in Jun 2025
Bangladesh saw its lowest monthly import letter of credit (LC) openings in 58 months this June, central bank data show. LC openings in the month dropped to $4.14 billion, down by 24.42 per cent year on year (YoY). Import LC settlements also significantly dropped, reaching the lowest level in nearly four and a half years. Such settlements totalled $4.59 billion in June—down by 14 per cent YoY. June's LC opening volumes were even lower than those during the COVID-19 pandemic—a wake-up call for any import-dependent economy, bankers and economists caution. Bangladesh saw its lowest monthly import letter of credit (LC) openings in 58 months this June, with such openings dropping by 24.42 per cent YoY to $4.14 billion. Import LC settlements also reached the lowest level in nearly four and a half years, totalling $4.59 billionâ€'down by 14 per cent YoY. LC openings steadily fell throughout FY25 second half due to a sustained slowdown in private investment. LC openings steadily declined throughout the second half of fiscal 2024-25 (FY25), bottoming out in June, domestic media outlets reported. The last time LC openings dropped below this level was in August 2020, when they stood at $3.7 billion. The last time monthly LC settlements were lower was in November 2020, during the pandemic's peak, when they stood at $4.41 billion. The sharp decline is being attributed to a sustained slowdown in private investment. Total imports in FY25 (July-June) stood at around $69 billion, up by just 0.18 per cent YoY. However, the growth was not across the board. Import LCs for capital machinery, essential for investment, fell by over 25 per cent YoY, while those for intermediate goods, petroleum and industrial raw materials also declined over the same period—an indication of weakening economic momentum. However, on a fiscal basis, LC settlements have increased. In FY25, Bangladesh settled $69.46 billion in import LCs—up by 4.18 per cent YoY. Fibre2Fashion News Desk (DS)
Economic Times
2 hours ago
- Economic Times
Fertiliser, Agrochem shares gain on Q1, monsoon boost
Mumbai: Shares of fertiliser and agrochemical companies were among the top gainers on Tuesday, as sentiment got a fillip after better-than-expected first-quarter results by some firms and strong monsoons. ADVERTISEMENT Paradeep Phosphates ended 8.6% higher to an all-time high of ₹216.3, after the company's profit after tax rose 4,655% from the same period a year ago. Mangalore Chemicals and Fertilisers rallied 9.5%. Other stocks like Deepak Fertilisers, Rallis India, Sumitomo Chemical, GSFC and Coromandel International were up 4-6% on Tuesday. "We've seen strong Q1 results from several companies in the agrochemicals and fertilisers space, including Coromandel International, Paradeep Phosphates, and Mangalore Chemicals & Fertilisers, driving stock gains on Tuesday," said Anita Gandhi, head of institutional broking at Arihant Capital. Gandhi said that a recent pickup in demand, following a post-Covid slowdown, along with supportive monsoon forecasts, which are expected to be 6% above normal, has improved sentiment. Shares of most of these companies have moved up strongly in recent months, with Mangalore Chemicals and Fertilisers, Sharda Cropchem, Paradeep Phosphates, Rallis and Coromandel International up 36-115% over the past six Biyani, vice president at Elara Securities, said he remains 'constructive' on phosphatic fertiliser makers from a longer-term perspective, particularly on Coromandel and Paradeep Phosphate. He said that companies like Coromandel and Paradeep represent strong import replacement plays."India imports around 8 million tonnes of phosphatic fertilisers, and domestic capacity expansions position these firms well to meet future demand," said Biyani. Elara has a price target of ₹2,737 for Coromandel International. (You can now subscribe to our ETMarkets WhatsApp channel)
Indian Express
3 hours ago
- Indian Express
Bad news for ‘cool people': For the cool, that is bad news
The global demand for matcha, the rich, strikingly green-coloured Japanese tea lighting up everybody's social media feeds in recent times, has officially outpaced its supply. The explosion in its popularity came after influencers discovered matcha, thanks to an uptick in tourism to and exports from Japan after the Covid pandemic. Since then, it has become a green flag on the road to aspiration — it is a common feature in elite cafes from Gurugram to Los Angeles. But owing to US tariffs on Japan, heatwaves impacting the production of tencha — the leaves matcha is made of — and dwindling numbers of farmers harvesting them, matcha's production and export is falling at an alarming rate. For the hashtag cool kids, that is bad news. In a world reeling from the chaos of unpredictable trade wars, the matcha story is an example of how even a niche product might be hit by the calculus of demand and supply. Brought to Japan by the Chinese at the end of the 12th century, much of matcha's popularity owes itself to an accidental technique that the Japanese embraced to allow it to grow during the country's harsh winters. They covered it with straw and reed, protecting it from frost and sun, and allowing its colour to steep. As demand escalates and retailers set limits on how much customers can buy, the Japanese government is now encouraging what was once a carefully curated process to be converted into a larger-scale production of tencha. But that risks sacrificing the quality of matcha. In the rise and fall of matcha, there is also a larger story that runs alongside the tension driven by contradictory forces in a world in transition — one that features the famous villain called climate change, already wreaking havoc on products as diverse as coffee and gin and tonic. Globalisation enabled matcha's exposure to the world; the move towards protectionism now threatens it. Whether the story will end with a promising sip of matcha is anyone's guess.
