Latest news with #DhirajAgarwal
Mint
5 days ago
- Business
- Mint
Macro versus micro forces battle on in markets: Ambit Investment Managers MD Dhiraj Agarwal
Nifty earnings growth, which was a dismal 6% in the previous fiscal year, could gather momentum in the second half of the current fiscal year. This is when the full benefits of the ₹1 trillion cut in personal income tax rate alongside the sharp interest rate cuts by the Reserve Bank of India (RBI) began to spur demand and result in stronger corporate earnings, becoming the next trigger for markets, believes Dhiraj Agarwal, manging director (MD), Ambit Investment Managers. He also adds that after the sharp market correction between September and early April this year, 'we've entered a themeless or stock picker's market," a phase that would test the true acumen of finfluencers. That's the million-dollar question. Right now, we're witnessing a fascinating tug-of-war between the macro and micro forces in the market. The macro picture is very positive and has certainly been the dominant driver, fuelling this impressive rally from the April lows. We had that six-year low inflation print of 2.8%, lower than RBI's comfort zone, which then paved the way for that significant 50-basis-point rate cut. Plus, the ongoing global tariff discussions genuinely present a compelling 'China +1' opportunity for India. However, 'micro' or earnings growth needs to catch up, both for further upside and even to sustain these current levels. We saw a rather dismal 6% Nifty EPS (earnings per share) growth in FY25. For the market to hold its ground, I believe we need to see that growth accelerate to at least 10% and ideally climb into the 12-14% range for any meaningful upside. While earnings growth for the Nifty 50 and Nifty 500 did surprise us positively last quarter, it's fair to say it was still relatively muted, leading to some downward revisions in overall estimates. For Q1(April-June quarter)of this fiscal year, we're anticipating a continued softness in earnings. However, the real story, in my view, begins to unfold from Q2 FY26 onwards. That's when we expect to see the full benefits of the ₹1 trillion income tax reduction for consumers, alongside the sharp rate cuts, truly beginning to stimulate demand and translate into stronger corporate results. We should see earnings gather significant momentum in the second half of FY26. We are now in a 'themeless' market, very different from the 'theme-driven' market of the past decade. (The period)2015-2020 was all about consumption and private banks, then 2021-2024 saw the rise of capex-linked sectors and PSUs(public sector undertakings). If you picked the right theme, making money felt relatively easy. However, post that sharp correction we experienced from September 2024 to April 2025, I truly believe we've entered what I'd call a 'themeless' phase. This means it's no longer about simply betting on an entire sector. Moving forward, every sector will have its winners and losers, and success will largely hinge on the individual earnings trajectory of specific companies. We're going to see much higher earnings dispersion even within every sector. This is a significant shift, and investors will need to adapt. This is now, unequivocally, a true stock-picker's market. It's a phase where the acumen of 'finfluencers' will be rigorously tested, and it's certainly an environment where analysts committed to deep, fundamental research will truly shine. My expectation is that credit growth will see a gradual (and not a sharp) pickup from the second half of the fiscal year. There are a couple of factors at play here. First, that ₹1 trillion in additional disposable income from tax cuts for consumers is likely to be utilised for immediate consumption or savings before we see a significant surge in new borrowings. We also have to remember that household balance sheets are quite a bit more leveraged today than they have been in the past, which could lead to some caution. Second, when it comes to corporate investments, while I do anticipate a pick-up, I expect it to be a measured one. It's not going to be an immediate explosion of demand. Absolutely. The government has certainly been the primary driver of GDP growth over the last five years, and the question of private sector participation is paramount for sustainable, broad-based growth. Currently, corporate investments are navigating a significant dilemma. On one hand, there's a strong, unwavering conviction in India's long-term domestic growth story. The potential is immense. On the other hand, we're still grappling with some perplexing near-term demand weakness. Furthermore, while the 'China +1' opportunity is genuinely large and exciting for Indian manufacturing and exports, we cannot simply wish away the current global risks stemming from potential economic slowdowns due to tariff wars. So, my take is that the private sector will likely proceed with 'cautious optimism' rather than 'irrational exuberance.' We should indeed see private capex and, consequently, credit demand gradually pick up in the second half of this fiscal year. However, I wouldn't expect 'animal spirits' to return anytime soon—it will be a measured pick-up. That said, if we zoom out and take a five-year view, I'm much more optimistic. The inherent structural strength of our domestic economy, combined with that significant global supply chain opportunity, should absolutely spur a more robust and sustained private capex cycle. A fascinating observation on the world today: we're witnessing a rather unique phenomenon where markets appear to be compartmentalising economics and geopolitics into two separate silos. Historically, significant geopolitical tensions like those we're seeing today would typically trigger a 'risk-off' sentiment across financial assets. Yet, surprisingly, beyond a brief knee-jerk reaction, it hasn't fundamentally impacted global markets, including some surprising cases like Israel, where equities are actually at a lifetime high, up over 50% in the last 12 months! From an India market perspective, the primary geopolitical risk remains what happens to the crude prices. As of now, they seem to be holding within a relatively stable range, which is positive for us. However, global trade is an entirely different matter, and this is where I see a more tangible risk. There's a very real possibility of global trade, and consequently global growth, slowing down due to the current developments. This would undoubtedly have a negative impact on Indian growth, and by extension, on earnings and the broader markets. Our export sectors are crucial employment generators and have significant linkages to domestic demand, so any slowdown there would certainly be felt. While the crude import bill has indeed come down relative to our GDP, in my opinion, the larger relevance is the crude bill's relationship to our current account deficit (CAD). The net crude import bill still hovers in the range of 3% of GDP (about $100-105 billion), and CAD in the range of 1-2% of GDP. Hence, a large—let us say 30%—move in crude prices can add almost 100 basis points to our CAD, making an impact of 40-50% in absolute terms. This is meaningful and does impact the currency and the global flows. However, I must say that due to a rising denominator (GDP), smaller swings (of 5-15%) are relatively easier to absorb. While some might dismiss promoter exits as minor in the grand scheme of overall market cap, I prefer to look at them in relation to the total institutional inflows into the market. And from that perspective, it's actually quite significant. For the April-June quarter, for instance, we saw total institutional inflows—from both Domestic Institutional Investors (DIIs) and foreign institutional investors (FIIs)—amounting to approximately ₹1.6 trillion. Based on market estimates, the total exits by promoters and founder-shareholder groups exceeded ₹1 trillion. So, in that context, it represents a substantial draw on liquidity. It is definitely not something that can be ignored when we're trying to form a comprehensive view on the market outlook. My advice for investors looking at the current pipeline of public issues is really no different from the advice I'd give for stock-picking in the secondary market. IPOs and public issues are incredibly valuable for expanding our market and completing that crucial risk-capital loop by providing liquidity to early-stage investors. This vibrant IPO market has, in turn, attracted more risk and venture capital, playing a significant role in helping India build a truly dynamic and innovative startup ecosystem, bringing in new products, technologies, and disruption. And for the public market investor, it offers access to exciting new-age companies, further expanding the breadth of our markets. However, the fundamental principle of diligently looking at fundamentals and valuations applies just as strongly to IPOs as it does to any stock you'd consider in the secondary market. Don't get swept up in the hype; focus on the underlying business, its long-term prospects, and whether the valuation makes sense for your investment goals.
Economic Times
26-06-2025
- Business
- Economic Times
Strong earnings recovery expected in H2, seeing rotation in IT, banks: Dhiraj Agarwal
Dhiraj Agarwal, MD, Ambit Investment Managers, says despite weak recent earnings, the Indian market is optimistic, anticipating a strong recovery in the second half going into FY27. Investors are currently prioritizing long-term prospects over short-term challenges. Performance dispersion is evident across sectors, with certain IT second liners outperforming mega-caps and a rotation occurring from PSU banks to private banks due to economic slowdown. ADVERTISEMENT I am looking at this trade setup for Indian markets and for US markets. While the Indian market is holding on nicely, US markets are where the real strength is, despite all the tariff concerns, debt concerns and also concerns centred around immigration laws. The US markets have made a remarkable comeback. Why is that? Dhiraj Agarwal: I read a very interesting article in last weekend's Economist. The new buzzword apparently in the market is nothing ever happens. So, the article basically says that most of the large, mega, macro, and geopolitical events have absolutely had no impact on the markets and the markets are just focused on bottom-up stories, on earnings and on funds flow at this point of time. We have seen this before. We have seen many times before that in one phase of the market, it tends to ignore all negative macro or geopolitical news, and it continues for a while more. Maybe we are in that phase where markets are ignoring some of the negatives and this will eventually come to bite or on a more optimistic note, maybe the negatives will wash themselves away at some point of time. Even in the Indian context, the March quarter earnings have been very weak. In fact, the last four quarters' earnings have been weak but the market has bounced back, just a shade away from all-time highs because it is looking forward. We are expecting that in the second half, there will be a strong recovery going into FY27, although the first half looks like a little bit of a washout. At this point of time, investors are taking a longer-term view and ignoring the short-term stress. What is a prudent strategy right now when earnings are not there? The truth is I don't know whether it will come back or not. Today, they are not there and markets have gone up. Should one exercise caution or wait for a better tomorrow? Dhiraj Agarwal: This question has two answers. One is at the index level and one is at the stock or the company level. At the index level, one should be slightly cautious. Whether the upside is there in large, small or momentum stocks, one should be cautious. But at the company level, the market is seeing a huge amount of polarisation in performance as well as stock prices, which in turn is driven by polarisation in earnings. Let us say, the Nifty earnings last year was about 7% YoY, but there are a bunch of companies growing at 15-20% and there are a bunch of companies not able to grow or even decline in earnings. This is a great stock pickers' market. One can find ideas and make a portfolio of companies which have market beating and sector beating earnings growth and that space is doing well and may continue to do well. ADVERTISEMENT We have a bit of an interesting patch where flows are strong and supply is also strong. Where will it settle? Will supplies start reducing or will demand start coming back? Dhiraj Agarwal: Liquidity flows on both sides are impossible to predict. So, it is a million dollar question. But at this point of time, if the market continues to be buoyant the way it is, I will not be surprised if the mutual fund inflows, which have dropped down from Rs 40,000-50,000 crore per month average down to about Rs 20,000-25,000 crore right now, climb back to Rs 40,000-45,000 crore. The supply is there. But on an aggregate level, this year the supply will be lesser than what it was last year. Last year was massive. If in FY25, give or take, you had 60-65 million of total supply, it will be a bit lesser this year. What could be called reasonable and fairly priced, where earnings will surprise us? What is that criteria or group for you? Dhiraj Agarwal: I typically do not comment on stocks, but what is happening at this point of time is that within every single sector, we are finding a few companies which are earnings outliers and few companies which are not able to grow very strongly. I will just illustrate that with an example. In IT, for example, there are a bunch of second liners. They are no longer midcaps, I think they are largecap – second liners which are delivering strong earnings growth. These are companies like Persistent, Coforge, etc. The stocks have done significantly better than the mega caps like Infosys and TCS where earnings growth are now sub-10%. ADVERTISEMENT We are seeing that in banking as well, where a massive rotation is happening. The last three or four years belong to PSU banks while the private banks underperformed. We are seeing a massive rotation this year back into private banks and PSU banks are facing slight struggle. The macro thesis for that is whenever the economy slows down, whenever credit growth slows down, private banks tend to do better on business metrics, on valuations, and on stock prices compared to PSU banks. Now, PSU banks tend to do a lot better when the economy is very strong and it is easy to do business. So, we are seeing a lot of dispersion in fundamental performance and stock price performance within the sector and I do not think that will change for the next year or two. (You can now subscribe to our ETMarkets WhatsApp channel)
Mint
05-05-2025
- Automotive
- Mint
E-bus demand surpasses target, states may have to settle for less
New Delhi: After a tepid year, the government's scheme for subsidized electric buses has generated such an overwhelming response that states may have to settle for fewer units than they sought, according to two people aware of the development. The Centre has already received requests for over 15,000 e-buses from various states under the Prime Minister's E-drive scheme against the targeted 14,028 units, the people quoted earlier said on the condition of anonymity. Maharashtra, West Bengal, and Tamil Nadu are yet to submit their demand for e-buses in Mumbai, Pune, Kolkata, and Chennai, said one of the people quoted earlier. 'The government is still awaiting clarity on demands from some cities, which will make the total demand even higher. The number of buses to be tendered in each city may have to be lowered," said this person. Also read | Mahindra looks to use its EV playbook to strengthen foray into electric bus space via SML Isuzu acquisition The number of electric buses sold in the country fell 5.7% on-year to 3,314 in FY25, the Vahan portal data showed. Mint reported on 16 March 2025 that the adoption of electric buses in FY25 at 4.72% was the lowest since 9.34% in FY22. But the response from states this year suggests a pick-up in demand. The overwhelming response to the scheme 'demonstrates that public transport stakeholders are willing to transition to zero-emission fleets if adequate financial support systems are in place", said Dhiraj Agarwal, chief business officer at Mufin Green Finance, which lends to businesses and individuals for electric vehicle purchases. The government has allocated about 40% of its ₹ 10,900-crore PM E-drive outlay to subsidize e-buses. This allocation of nearly ₹ 4,400 crore—to be spent till FY26—is aimed at bolstering intra-city green mobility in nine cities with populations above 4 million. These include New Delhi, Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Ahmedabad, Surat, and Pune. Manufacturers receive incentives for selling electric two- or three-wheelers. They will receive similar subsidy for electric trucks and ambulances after the government notifies production incentives for these categories. However, the procedure is more complicated for e-buses. The government first assesses demand from states. Then state or municipal transport utilities receive incentives for procuring e-buses under a gross cost contract or an operational expense (opex) model. Read this | Electric bus makers Tata Motors, PMI Elctro, JBM Auto set for a joyride as Delhi eyes full fleet electrification In a gross cost contract model for e-bus procurement, the bus operator will procure, service, and operate the units for a fixed rate. Under the opex model, the state transport utility will procure the buses and outsource the operations to a third-party operator. Utilities can then purchase e-buses from manufacturers in a competitive bidding process conducted by state-run Convergence Energy Services Ltd . CareEgde Ratings Ltd, in an 11 March note, projects annual e-bus sales to hit the 17,000 mark by FY27. The rating firm said this would be driven by a robust subsidy mechanism and a 15-20% lower cost of operating an electric air-conditioned bus than a similar fossil fuel-run unit, the rating firm said. 'It [growing demand] indicates not just interest, but preparedness among states to deploy zero-emission fleets at scale, supported by clear policy signals from the Centre," said a spokesperson at PMI Electro, adding that the overwhelming response validated the company's long-term investment in electric mobility solutions. Agrawal of Mufin Green Finance said lending for electric buses requires special considerations, including government subsidies, to ensure affordability and scalability. 'Structured financing mechanisms, such as payment guarantees and viability gap finance, are being adopted to improve bankability," he said, adding that subsidies help bridge the viability gap and make projects more attractive to private financing. CareEdge also flagged the need for a robust security mechanism to ensure timely payments from state transport utilities. The Union cabinet approved the ₹ 3,500-crore PM eSewa Payment Security Mechanism (PSM) in September 2024, the same day the PM E-drive scheme was approved. And this | JSW Group doubles down on EVs with plans for e-buses and e-trucks Policy consistency and sustained public-private partnerships will aid electric bus makers to meet demand in the country, said Nishant Arya, vice chairman and managing director, JBM Auto . 'Subsidies act as catalyst to kickstart adoption of e-buses, especially in large-scale e-bus deployment projects," Arya told Mint , adding that the payment security mechanism makes e-bus sales bankable even in tier-2 cities. India has significant e-bus manufacturing capacity, but the ecosystem needs continued scaling and support, the PMI Electro spokesperson said. 'Current installed capacity across major OEMs is adequate to meet near-term demand, but rapid scaling will be essential as more cities and states come on board."
