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Why Motilal Oswal’s Gautam Duggad Is Worried About FY21 Earnings

For 2019-20, Motilal Oswal expects 8-9% earnings growth—a target which will likely be achieved due to higher earnings in Q4.

A customer counts Indian rupee banknotes at the Mayuresh Watches and Traders watch and mobile phone store in the Byculla. (Photographer: Dhiraj Singh/Bloomberg)
A customer counts Indian rupee banknotes at the Mayuresh Watches and Traders watch and mobile phone store in the Byculla. (Photographer: Dhiraj Singh/Bloomberg)

Most of India Inc. managed to meet expectations of earnings growth in the quarter ended December—a positive development in the current macroeconomic climate. But Motilal Oswal Financial Securities Ltd.’s Gautam Duggad thinks the corporates won’t be able to sustain the trend in the next financial year.

“Earnings upgrade to downgrade is still tilting more towards downgrade for FY21 and that’s a bit concerning because the expectations for the market for FY21, including ours, is quite high,” the head of research (institutional equities) at the brokerage told BloombergQuint in an interview.

Motilal Oswal expects corporate India’s earnings to grow 24-25 percent in 2020-21, from a top-down perspective. On a bottom-up approach, however, Duggad sees some downside as reality sinks into the market over the next six months.

“If you look at the ground reality and commentary coming from various sectors, it’s not yet suggesting that we are looking at a V-shaped recovery in consumption, investment or even export-oriented sectors,” he said.

For the current financial year, Motilal Oswal expects 8-9 percent earnings growth—a target which will likely be achieved due to higher earnings in the fourth quarter. “The expectations from fourth quarter are high because of some base-related factors in some large caps.”

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