Electronic board indicating the latest stock figures are reflected in a glass facade at the National Stock Exchange of India. (Photographer: Dhiraj Singh/Bloomberg)

Ambit Capital On Earnings, Private Sector Banks And Commodity Rally

Like it or not, volatility is here to stay. That’s according to Pramod Gubbi, MD and head of institutional equities at Ambit Capital who recommends investing in private sector lenders and metal stocks.

We think private sector banks with strong CASA franchise will suddenly become increasingly competitive and start taking [more] market share. That can underpin their loan book growth and margin expansion and will drive earnings over the next 12-18 months.
Pramod Gubbi of Ambit Capital To BloombergQuint

Here are some key highlights from the interview

On earnings

  • We are on an upward trajectory in terms of earnings.
  • Expect fourth quarter earnings to be better than the previous even on a year-on-year basis but may not meet the high expectations of the market.

On rupee-dollar equation

  • Expect U.S. dollar to strengthen against most emerging market currencies, including the Indian rupee.
  • Emerging markets, as an asset class, may take a breather.
  • Bullish on Indian information technology shares.

On consumer stocks

  • Investors are moving towards quality [i.e. consumption-based stocks] after the Feb. correction.
  • However, valuations are not particularly attractive despite assuming strong earnings growth.

On interest rate scenario

  • A couple of rate hikes will not make much of a difference.
  • RBI needs to make sure it is not “too ahead of the curve”.
  • Expect investment cycle to pick up post elections in 2019.

On the commodity markets

  • Don’t think the commodity rally has peaked yet, may sustain for another 12 months.
  • All portfolios should have an exposure to the metal sector at least from a one-year perspective.