Soon we’ll be counting down to the quarterly earnings. I am going to kick start with IT given the kind of traction and the resilience that we have seen from the IT sector and in particular from the midcap IT pack, what are you expecting from the earnings this time?
For the third consecutive quarter we are looking at very strong earnings growth from the IT companies and the upgrade cycle may continue and we think that given the indications from some of the US IT companies on the outsourcing front particularly Accenture, the deal flow and the overall environment for tech spend continues to look good, particularly from a outsourcing point of view. We have a positive bias on names like Infosys, HCL Tech, Cyient, MPhasis, Persistent. It would make sense to have a good amount of exposure in IT as a pack. If you leave aside yesterday, it has actually not participated much and given this good strong Q4 earnings outlook, it would make sense to have a positive bias on these names.
Is there merit in buying HUL, , or a once again?
From October-November onwards, most of these names have actually underperformed. But data points in terms of numbers from companies like Britannia, HUL, and few other names continue to look quite strong. So, we have recently upgraded our stance on Britannia at around Rs 3,350-3,400. We are seeing some positive bias there apart from that HUL actually practically has not gone anywhere for the last four-five months.
Given the fact that we are going to see a good consumer led revival over the next let us say 6-12 months, HUL could be a good stock to have in the portfolio. There is going to be some rotation in the sectors and people would want to participate in these companies where the numbers are going to look good. So, we have a positive bias on these names.
Don’t you think rich valuations could be an impediment for most of the FMCG stocks?
Commodity prices would affect many sectors and you know staple companies would not be an exception. The question here is that what is the extent of the price hike that these companies can take without disrupting demand? Are we going to see a meaningful volume growth in some of these names given that you know the overall economic revival is going to be quite strong?
We are not so worried about the commodity prices going up. Given that we are going to enter into a growth phase — 4-5% kind of a volume growth for a Lever or a 8-10% volume growth for Britannia is a pretty decent number to look at. Even in the case of McDowells, the quarterly numbers are going to be quite strong. So, these names continue to look quite attractive. No matter, the valuations are a bit higher in the overall scheme of things.
