Latest news with #NikhilRanka
Time of India
6 days ago
- Business
- Time of India
Not top-down, it's time to go stock specific; wait for clarity on consumption stocks: Harsha Upadhyaya
Live Events You Might Also Like: Q1 earnings most challenging; Nifty unlikely to break out in short term: Nitin Raheja You Might Also Like: Bullish position in cement and telecom; Nifty recovery likely in H2: Nikhil Ranka (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel , CIO-Equity,, says the earning season may see slow headline growth . Cement and quick commerce sectors show strength. Industrials and defence also look promising. Stock-specific bets are favored over broad sector views. Telecom and aviation sectors are expected to perform well. Select banking and financial stocks are also doing well. Within the chemical segment, specialty chemicals stand out. Individual stocks may offer better growth than the market far as the earning season is concerned, this is going to be a subdued kind of a season as far as headline earnings growth is concerned. However, certain segments of the market are delivering a good set of numbers, and that is where incremental money would probably move in. Sector-wise, cement has done well and is likely to continue doing well. We have seen quick commerce numbers coming in very strongly, and that is another subsegment where things are also believe that there are certain pockets of industrials and defence where the numbers are going to be quite strong. So, rather than taking a sectoral top-down view on the market, it is prudent to take stock specific bets depending on where the valuations are, where the earnings are expected to grow, has been a moving goalpost and we have been seeing some of these deadlines coming and going and new deadlines coming in again. We still do not know for sure which way the tariffs are going to go, when is that finally going to come out in the public, etc. However, it is very clear that probably the relative impact on Indian exporters compared to some of our peers in the Southeast Asian market and Asian markets would be relatively less worst to that extent, we should be fine and if you look at our own portfolio, we have taken some prudent measures many quarters earlier just before the US elections when we tilted our portfolios more towards domestic-oriented businesses thinking that the domestic businesses have better resilience in terms of growth and the valuations were also a lot more conducive at that point of time, and still that view continues and we have not really increased our exposure to exporters in a big way apart from chemicals which has turned around in terms of the cycle itself and also compared to China our tariff rates are expected to be to that extent, it is unlikely that we will see big negatives from tariffs on that sector. But by and large, we will still wait for full clarity, then only we will probably look at adding more is why I started saying that a top-down sectoral view at this point of time may not be the right way to construct your portfolios and within every sector you will see winners and losers as you go ahead depending on how they deliver on earnings. However, there are certain segments within the domestic businesses where there seems to be a reasonable amount of clarity in terms of earnings going example, telecom should be a good area in terms of how the earnings are going to pan out over the next couple of years. Aviation is another sector. We have seen similarly good numbers from cement and we also expect it to continue delivering better numbers as on the raw material side, there is a lot of positives and also the volume growth as per the commentary that we have seen from certain managements seem to indicate that probably things are going to improve on the volume front. So, overall, this is another banking and financials, certain names are doing well and the impact of repo rate cut on the NIMs is also probably more or less behind us. So, to that extent, things should be fine in this basket as well. There are several other sectors. Maybe from a top-down perspective, you will not find too many great stories. However, individual names will still offer better growth compared to overall average market the chemical segment, we continue to like specialty chemicals. That is where there is a competitive advantage on a relative basis even in the global market for Indian manufacturers and some of the companies have delivered on the quality, on the innovation in terms of newer molecules, etc. We have also seen inventory destocking in certain segments of specialty chemicals over the last two the impact that it had on the volume growth as well as on the margins is possibly behind us. We are slowly seeing volume growth coming back and there are expectations of better pricing in the markets as of now. When you are looking at the sector, you should be looking at specialty chemicals and also companies where management have continued to invest in capacity over the last couple of years. That is very important. If any management has continued to expand its capacity despite the cyclical downturn that we saw in the industry, that shows that they are confident in terms of medium to long-term growth and if they are already ready with the capacities, those are the names that you need to bet on as you go banking, you need to be more bottom-up at this point of time. There are certain banks which are delivering on growth as well as asset quality. There are certain other names which are finding some headwinds on either asset quality or on the growth, that is where you need to look and also keep valuation in the banking and financial sector has outperformed in the last six to nine months, it is no longer very attractive in terms of valuations. We have seen some absolute performance as well as relative performance from this basket. So, to that extent, we need to keep all of this in mind and as we discussed in the earlier part of the show as well, this is unlikely to be a season where you will see too much growth across segments and businesses. So, to that extent, you need to be careful in terms of what valuation you are paying for some of these names and how resilient the earnings growth would be as you go macro tailwinds are there for consumption and we need to see which of those baskets are likely to see tailwinds from tax cuts, inflation going down, EMI hit going down for consumers, and more. Within the overall consumption basket, we think that discretionary consumption will still continue to be better than staples, that is our view at this point of time until we see a full-fledged recovery from the rural economy which could be a couple of quarters away in our far as discretionary consumption is concerned, you need to look at some of the sectors which from an AMFI sectoral basis or from a market perception perspective, may be classified into other sectors, but they are essentially consumer discretionary segments such as hotels, travel, tourism, aviation and even quick commerce in our view is likely to do are some pockets of consumption which we are very positive on. As far as FMCG is concerned, we would probably wait for a little more clues in terms of how volume growth is likely to pick up. The valuations are not so cheap while the stocks may not have done much in the last couple of years, even the earnings have not moved to that extent, the valuations have not really changed for this basket. We would wait for a little more clarity on that side and on the white goods and other consumer discretionary including autos, the volume growth seems to be a question mark at this point of time. We would wait for probably lower levels to really look at them.
Time of India
7 days ago
- Business
- Time of India
Bullish positioned in cement and telecom; Nifty recovery likely in H2: Nikhil Ranka
Nikhil Ranka , CIO, Nuvama Asset Management , says Nifty stocks may see single-digit earnings growth due to banking sector challenges. Recovery is expected in the second half of the year. Cement and telecom sectors look promising with oligopoly structures. Reliance and Bharti dominate telecom. Tariff hikes are anticipated. Cement pricing is likely to increase. Clarity on tariffs is awaited in August, impacting exporter prospects. I saw your medium-term outlook for Nifty is 26,200, which means around 1,100 to 1,200 points rally from here. How do you gauge the market currently and when do you think that level will be achieved? Nikhil Ranka: We have put out a fair value of close to 26,000, 26,200 on Nifty. If you go back for the last seven-eight years and if you look at the broad trading range, the multiples at which indexes have traded, you will find that markets have traded between 19 and 20 times one year forward earnings. Now, we ended FY25 at closer to Rs 1,020 EPS and if you build in the consensus estimates for the next two years, we are somewhere closer to Rs 1,150 for FY26 and Rs 1,300 for FY27. Therefore if you put that same 20 times earnings to that EPS of Rs 1,300, you are potentially looking at 26,000 on the Nifty. 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So, this quarter and next, we will have a single-digit earnings growth for Nifty stocks predominantly because the banking sector is facing a lot of NIM compression given the uncertainty around tariffs, decision making has got delayed. We are banking on a recovery in the second half of this year for us to get to that Rs 1,150 of EPS for FY26 and then the earnings recovery continuing into FY27 for us to get to that 26,000 levels over the next 9 to 12 months. Markets are performing, but there are ups and downs and there is a lot of volatility which is, of course, the nature of the market, but we are still waiting for an absolute constant bullish phase. Having said so, what are the next triggers? Is it the earnings that will help the market and in particular what are the top compounding themes? You did touch base on the banks and financials, but will it be the consumption theme that will help the market? Will the automobile make a comeback? What are the themes and is the investment philosophy at present? Nikhil Ranka : Two sectors where we are relatively bullishly positioned are cement and telecom. Both the sectors are in an oligopoly structure. In telecom for example, Reliance and Bharti together account for close to 80% of the market share and global uncertainty has very little impact on the earnings for these sectors. We had a tariff hike nine months back that has more or less got absorbed and in the next three to six months, we are looking forward to one more tariff hike and the incremental flow through of EBITDA for telecom companies is almost 70% because the costs are more or less fixed in nature. For telecom, infrastructure cost is the major cost which does not change so much and therefore, we believe that it is one of the sectors where earnings visibility is high and multiples should sustain. Secondly, in cement, the replacement cost is close to $120. If you add some working capital requirements, you need the sector to make close to Rs 1,500 of EBITDA to get to that 13-15% ROCs and it is closer to Rs 1,000-1,100 and it has got consolidated between UltraTech and the Adanis, close to 350 million tonnes between these two players. My sense is the same thing that we saw in telecom 9 to 12 months back, slowly pricing has started increasing, and the same thing is likely to pan out for the cement sector also. So, we feel that there will be earnings as well as multiples rerating for that sector. Live Events You Might Also Like: How will the Indian banking scene be five years down the line? Dinesh Kumar Khara explains Coming to the earnings outlook , the market is waiting with baited breath as to what happens on 1st of August because we will get a clarity on what will be the tariff outlook going forward because what has happened is given that companies had this three-month window from April to August, a lot of shipments would have taken place in these three months and if we have a high tariff structure coming through, then Q2, Q3 could have some challenges for exporters in that sense. We are looking at single-digit earnings growth for Q1 and Q2. If something goes wrong on that front, then even Q3, Q4 become uncertain in terms of recovery. My sense is if we have clarity in August on tariffs and they are not very bad. The market should take heart from that because markets do not like uncertainty. Once we have certainty on tariffs coming through, the market should start the next leg of upward journey. You mentioned earnings season and Infosys is one of your top holdings, with results due in a couple of days. Other IT majors have posted the results which the Street has not liked much. But overall, Nifty IT has not fallen as much as the bad earnings they have posted. What is your view on it? Nikhil Ranka : We did this study for IT companies even during Covid when there was a lot of uncertainty and we saw was that during the period of initial uncertainty where there was no visibility as to how earnings would come through, for the rest of the sectors there was a 50-60% earnings downgrade, but eventually IT was one sector where revenues were more or less flat and there was very little earnings downgrade. My view is the same is happening with IT even this time around. Given the uncertainty around tariffs, Q1 and Q2 are likely to be weak because a lot of decision making has got deferred. But my sense is Q3 onwards, these stocks will start performing because we will have a visibility on revenue growth coming back and the good part about it is none of these companies are levered in terms of their balance sheet. You Might Also Like: Pankaj Pandey on 5 sectors that look good to bet on in this market IT is always a P&L issue which is a very short-term issue and very easy to repair. The problem comes with stocks where there is a big hole that happens in the balance sheet, things get levered and then it takes three-four years for the entire repair balance sheet repair to happen. That is not our base case in IT. We feel Q3 onwards, things should start coming back. Even if you look at the consensus estimates for Infosys, for rest of the players, we have seen a constant currency decline that has happened in Q1, Q2 outlook is also subdued but for Infosys the broker estimates are suggesting that they should have a closer to 2% constant currency growth this quarter and if that happens, in most probability, there will be an guidance upgrade for Infosys because they had guided for zero to 3% constant currency growth when they had come out with their outlook. That could get upgraded if we see a 2% constant currency growth in this quarter for Infosys. One of your famous market quotes is that it is not whether you are right or wrong in markets that is important, but how much money you make when you are right and how much you lose when you are wrong. I completely second the thought. What is your advice to the market participants? What should be the strategy, be it the broader markets, be the benchmarks, the midcap and smallcap while they are drawing their portfolio? Nikhil Ranka: Longer-term, markets have given returns which are more or less in line with the nominal GDP growth. One of the only things that you have to watch out for is to avoid the flavour-of-the-season stories and not get into stocks where the euphoria is built more on hype and actual numbers are just not visible. We will look for a philosophy of growth at a reasonable price. Stocks and sectors, which even if on a near-term basis look a bit expensive, but which still have the longevity of earnings. The worst case that can happen is probably for one year you do not make returns and as earnings catch up, next year onwards you still get back to your compounding of that 12% to 15% growth. We do not want stories where there is a risk of permanent loss of capital and so investors should look out for core fundamentals, cash flows, earnings visibility when they are constructing their portfolio. You Might Also Like: Nilesh Shah on how to treat smallcaps and midcaps right now In terms of guidance, you should keep expecting 10% to 12% earnings growth from largecaps because our nominal GDP growth is around that 10-11% and if you do some sort of decent stock selection and sector picking, then investors can expect 12-15% compounding to happen from markets over the medium-term. Reliance has posted earnings on Friday. What is your view on the oil and gas sector? Nikhil Ranka: Reliance can be broadly dissected into three broad segments. One is oil and gas, one is retail and the third is telecom. Telecom that is where the key stock price driver is there because they have now close to 45-47% market share on the telecom and the street is looking out for some signs of tariff hikes to come through. If we get some clarity on when the Jio listing would come at the AGM somewhere in August, that will be one of the triggers that the Street is looking out for. In terms of oil and gas, there is not much expansion happening. So that is a steady state Rs 60,000 crores EBITDA the segment is delivering for them. In terms of retail also, across the sector, be it Trent, be it DMart, growth has slowed down a bit. We have seen contraction in growth rates across the sector and it was visible for Reliance as well that retail did not grow as much as expected and that is where the disappointment of the Street is. Secondly, you have to understand that the base has become quite big for Reliance. So, we are at close to Rs 1,70,000 crore of EBITDA base for Reliance and the management has guided that by end of the decade, they will look to double their EBITDA. So, if you hold patiently for five-six years, in line with what the growth will be, one could probably look at 12% to 15% returns in the stocks from here on out.
Economic Times
30-05-2025
- Business
- Economic Times
Limited upside ahead as Nifty poised to trade in 24,200-25,500 range for next 2-3 Months: Nikhil Ranka
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel "So, this is what I would say on the hits on misses. In terms of the consensus earnings for FY27, six-eight months back we were at close to 1,380 rupees if you look at the EPS estimates for FY27, that number is now down to almost 1,300, 1,310 rupees. So, close to 5% to 6% earnings downgrade is what we have seen in the last two quarters," says Nikhil Ranka So, broadly, if you look at it, the earning season has not panned out that great. On the IT side, we have seen quite a bit of negative surprises because there was uncertainty because of this tariffs and because of that as we head into Q1 a lot of decision making has got deferred and therefore, my sense is it has seen some downgrades and over the course of the year we will continue to see some downgrades in it on the back of the pharma side also this result season has been pretty subdued and the problem there is that Revlimid was a big contributor to earnings for most of the pharma companies and it goes off patent in Jan now, we do not have the visibility as to what new drugs will be able to fill that big void that will be created by Revlimid going off patent. And therefore, pharma also should have a very challenging FY26 in that sense. On the positive side, telecom could prove to be a pretty defensive sector as we head into we are seeing problems with Vodafone not going away and therefore, the top two guys should continue to see subscriber addition and three-four months down the line we should again have some sort of tariff hike coming through. So, this is what I would say on the hits on misses. In terms of the consensus earnings for FY27, six-eight months back we were at close to 1,380 rupees if you look at the EPS estimates for FY27, that number is now down to almost 1,300, 1,310 rupees. So, close to 5% to 6% earnings downgrade is what we have seen in the last two my sense is the easy money is already off the table in market. So, we have seen markets rallying from almost 21,800, 22,000 levels that we hit in Feb end to now back to close to 24,800 level. So, we have seen a 3,000-points move on Nifty. And if I give the median multiple of 20 times, then probably we are staring at a single digit upside in index over the next nine months so to say. So, my sense is we will consolidate in this broad range of probably closer to 24,200 on the downside and 25,500 on the higher need to consolidate two-three months here. We have to see how earnings pan out for Q1 and Q2 and what commentary we get from management because right now what is happening is we are continuously seeing earnings downgrade quarter after quarter and for markets to gain momentum and re-rate from that 20x levels, we at least need one quarter where we again get to double-digit earnings growth and we start to see some sort of upgrades on the the base case clearly is that we will have a market which will consolidate here for some time, next two-three months could be pretty muted for the markets from here.
Time of India
30-05-2025
- Business
- Time of India
Limited upside ahead as Nifty poised to trade in 24,200-25,500 range for next 2-3 Months: Nikhil Ranka
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel "So, this is what I would say on the hits on misses. In terms of the consensus earnings for FY27, six-eight months back we were at close to 1,380 rupees if you look at the EPS estimates for FY27, that number is now down to almost 1,300, 1,310 rupees. So, close to 5% to 6% earnings downgrade is what we have seen in the last two quarters," says Nikhil Ranka So, broadly, if you look at it, the earning season has not panned out that great. On the IT side, we have seen quite a bit of negative surprises because there was uncertainty because of this tariffs and because of that as we head into Q1 a lot of decision making has got deferred and therefore, my sense is it has seen some downgrades and over the course of the year we will continue to see some downgrades in it on the back of the pharma side also this result season has been pretty subdued and the problem there is that Revlimid was a big contributor to earnings for most of the pharma companies and it goes off patent in Jan now, we do not have the visibility as to what new drugs will be able to fill that big void that will be created by Revlimid going off patent. And therefore, pharma also should have a very challenging FY26 in that sense. On the positive side, telecom could prove to be a pretty defensive sector as we head into we are seeing problems with Vodafone not going away and therefore, the top two guys should continue to see subscriber addition and three-four months down the line we should again have some sort of tariff hike coming through. So, this is what I would say on the hits on misses. In terms of the consensus earnings for FY27, six-eight months back we were at close to 1,380 rupees if you look at the EPS estimates for FY27, that number is now down to almost 1,300, 1,310 rupees. So, close to 5% to 6% earnings downgrade is what we have seen in the last two my sense is the easy money is already off the table in market. So, we have seen markets rallying from almost 21,800, 22,000 levels that we hit in Feb end to now back to close to 24,800 level. So, we have seen a 3,000-points move on Nifty. And if I give the median multiple of 20 times, then probably we are staring at a single digit upside in index over the next nine months so to say. So, my sense is we will consolidate in this broad range of probably closer to 24,200 on the downside and 25,500 on the higher need to consolidate two-three months here. We have to see how earnings pan out for Q1 and Q2 and what commentary we get from management because right now what is happening is we are continuously seeing earnings downgrade quarter after quarter and for markets to gain momentum and re-rate from that 20x levels, we at least need one quarter where we again get to double-digit earnings growth and we start to see some sort of upgrades on the the base case clearly is that we will have a market which will consolidate here for some time, next two-three months could be pretty muted for the markets from here.
