Whereas such valuations might be justified by excessive earnings progress, precise EPS efficiency has been disappointing. FY25 started with expectations of 15% EPS progress however ended at 3.4%, and current-year projections have been revised right down to roughly 7%, implying modest returns at finest. Given this context, Venkatesh believes significant positive factors are unlikely from the broader indices, although particular person shares should supply alternatives.
“So, earnings have gotten revised up. Equally, third quarter once more whereas on a quarter-on-quarter foundation the EPS progress can be possibly rather less of a decline and fourth quarter you will note an enchancment, however these are already factored within the numbers. I imply, it’s not like numbers for the index as an entire are getting revised up and please bear in mind banks are virtually 30% of the index,” he mentioned.
Earnings rerating seems muted, significantly as banks represent about 30% of the index. Whereas financial institution earnings have barely exceeded expectations, the broader EPS trajectory stays flat, making double-digit EPS progress this yr inconceivable. Overvalued sectors embody prescribed drugs and NBFCs, whereas Venkatesh stays underweight on infrastructure, defence, and sure industrial performs. Metals, in the meantime, are impartial.
On vitality, latest U.S. sanctions on Russian oil corporations have precipitated crude costs to rise, negatively impacting refiners like Reliance, however benefiting upstream producers equivalent to Oil India and ONGC, with a desire for Oil India in a rising oil-price situation.
Relating to IT, Venkatesh cautioned that large-cap IT progress will stay restricted (~5%) because of components like AI-driven deflation. Mid-cap IT names equivalent to Coforge may even see stronger progress (15–20%), however large-cap positive factors are already priced in, warranting a impartial stance. He favors home consumption performs, significantly autos and hospitality.In autos, Maruti Suzuki and Mahindra & Mahindra are prime picks for four-wheelers, whereas Hero MotoCorp and TVS Motor lead in two-wheelers, pushed by sturdy demand and electrical car adoption. For hospitality, Leela and Ventive are most well-liked because of sturdy demand and underinvestment in resort provide.”Consumption is powerful and there was gross underinvestment with regards to resort infrastructure in India. So, whereas demand is rising at 8%, the availability is rising solely at 5%. So, we stay very optimistic on motels. The issue with motels is everyone seems to be at all times scared when the brand new motels will come on-line,” he mentioned.
On IPOs, Venkatesh noticed that market exuberance and speedy reratings point out costly valuations, supported by mutual fund inflows regardless of FII promoting. Lastly, on financials, he has moderated his earlier damaging stance however stays cautious, awaiting full earnings outcomes earlier than probably adjusting sector allocations.
