How are you approaching this earning season? Last week we saw the markets go up 2%, factoring in may be those earnings?
The market has been factoring in earnings growth and has been supported by the liquidity inflow largely from domestic investors. Inflows from global investors have been going up as well. The immediate response of the market could be that finally when we have earnings, there could be some profit booking on the table. It may not necessarily result in the overall market going down but it might apply to individual stocks and that is one part of it.
Coming back to earnings, while top line growth expectation in general across the sector is already there except for select sectors like automobile which has seen some slowdown in the growth specifically in September for two-wheelers and things like that but the bottom line growth could be little bit of a challenge because of the continuous commodity prices that has been going up.
Metal prices are going up. Agri commodities prices are also going up and that could be a challenge specifically for capital goods, automobiles, some of the FMCG companies and some of the food product companies. Net-net, given the way the economy has been going up and online sales growth picking up, we should see good results and if the profit booking does not come, we could continue to see market as well as stock prices going up.
Reliance is moving fast in the entire clean energy space. What do you make of the string of new acquisitions which Reliance has done?
Over the last weekend Reliance has announced two acquisitions, one in the global market and second in the domestic market. It has taken up to 40% stake in Sterling & Wilson Solar. That is in line with the strategy announced by the company in its AGM wherein Chairman Mukesh Ambani clearly enunciated the plans and the ambitions of the company.
Going forward over the longer term, it is obviously going to be positive for the company. In the short term, it is difficult to say how the impact on quarterly financials will be. There could be a period of investment by the company in this sector and maybe significant profitability will emerge over a period of time. But the move is clearly in line with the announced plans of the company and positive for the longer term growth and financials and shareholder returns.
What do you make of power and coal shortage? We are going through extraordinary times of coal shortage which means there would be an uptick in energy prices. There could be a breakdown or a load-shedding in some of the industrial regions. From a market standpoint, which could be the sufferers and which could be the gainers?
Coming to the market standpoint, there is a lot of talk that the coal stock at some of the power plants is down to three or four days compared to the normal inventory of 7 to 15 days. Some part of it could be political positioning between state governments and central governments but as of now, the situation has come down but let us also keep in mind that the daily supplies are continuing and now the question is that increasing daily supplies so that inventory starts moving up from three, four days to higher.
Being such a politically sensitive subject, I do not think that there will be a situation wherein a load-shedding or power supply stoppage will happen but so be it. Keeping that aside, coming to the market point of view, globally the coal prices have been going up and clearly the imported coal prices have been going up.
One clear beneficiary from the market standpoint seems to be Coal India. Hopefully we should see increased price realisation for Coal India in the December quarter. At least for these few days of October, that will be known only in the December quarterly numbers. I do not know if the same impact came in some days of September. That will be known when the September quarter number comes. So, that is one positive for Coal India.
I do not think it is going to significantly affect any other sectors or companies because most of the companies keep some backup arrangement in case their state oriented supplies or their assured power supplies from the discoms fail for some point of time. Even if it does, it will be a very brief period of time. The other beneficiary is that because of the short-term demand going up, the volumes of power traded on India Energy Exchange have gone up.
If that has happened, then that will be another beneficiary from the market standpoint. India Energy Exchange has been doing very well with more than 90% share of the power traded and likely to continue to do well. So that will be my analysis from the market point.
