You have to observe or two-minute silence these days before you start talking about markets.
Ashish Gupta: We should actually look at the underlying data and it is quite clear that data is starting to improve whether you look at the market data, you look at some of the numbers that you guys have been talking for the last 10 minutes. So, we should not be too pessimistic at this point of time. If you see the December quarter gdp, it came in, there was a sequential improvement compared to September of nearly 60-70 basis points. And clearly, it looks that the March quarter will be a further sequential 60-70 basis points improvement. In fact, the government estimate is of more than a 1% improvement, nearly 7.5% GDP growth for the fourth quarter. So, we have to take cognisance of the fact that the economy is bottoming out and that is really the message for the market also. So, if the economy is going to bottom out, we should expect the markets should also find a support. I also do not think there is a huge amount of leverage or accidents waiting to happen in terms of either corporate balance sheet or banking sector balance sheets or even the leverage levels in the market.
So, I am not really very pessimistic at this point of time. Of course, there are a lot of global uncertainties that are still out and about. But I am more positive on the markets compared to a couple of months ago.
Interesting you say that. But what about that one focal point, earnings? Do you think that is going to make a comeback or not?
Ashish Gupta: So, at least the expectations have already moderated. So, what we saw actually from middle of last year, while the earnings growth was starting to slow down, the market expectations were still elevated. And again, this quarter earnings growth, December quarter was not much better than the previous two quarters. So, it was around mid-single digit, but it was largely in line with expectations for the quarter.
But we, of course, did see moderation in commentary of corporate India and we have seen significant cut in FY26 earnings. So, FY26 earnings that six months ago, people were forecasting at about 18% growth, that is moderated to about 12-13% growth. So, the scope for earning disappointment has significantly come down and that is why I think really the fundamentals of the market are looking better than when they were six months ago. I, of course, believe that it is not going to be easy to get back to the 18-20% earnings growth very quickly. There are still challenges.
If you see the data coming out, several data, whether it is auto sales, GST, even power demand growth, so all of those have turned more positive.
Even for this month, power demand growth was about 7%. So, these have turned positive. But if you see some other indicator that still continue to be lukewarm.
Credit growth month on month for February was still only about 0.7%, YoY it was about 11%. So, we need a broader recovery in the macro data to really go back to that 18-20% earnings growth.
That is lack of disappointment, which I agree would be enough trigger for the markets. But where do you see earnings upside coming in? Where is the capex? Where is the cash flow? Do you think it is going to be very company specific this time as opposed to more sectoral and broad based as was the case up until October last year?
Ashish Gupta: So, you are right. A lot of the thematic top-down may not work as well. And you will have more bottom-up confidence in company earnings that is going to start to play through. But we have to be cognisant that many of these companies where there is more visibility on earnings and earnings growth continue to trade at fairly rich multiples.
And so, whether it is the EMS companies, whether it is select industrial companies, real estate companies, telecom, you do have better visibility of earnings growth, but again the multiples are not cheap and they are still elevated compared to historic level. So, you need to in this kind of market balance out the earnings visibility as well as really the multiples that some of these names are at.
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