In an interview with ET Now, SandipBandyopadhyay, Group Chairman, Inditrade Capital talks about the earnings expectations from IT and banking sector. Edited excerpts:
ET Now: What are your expectations from IT in terms of earnings? Do you think while the cross currency tailwind is on the end there is also scope for a bigger disappointment considering IT has had a fair share of outperformance in the last six months?
Sudip Bandyopadhyay: Well there are a couple of things that we have to keep in mind here – one, as you rightly said, is the cross currency tailwind. Apart from that what is helping is the way rupee has been moving. Every move in rupee over the last couple of weeks has been helping the cause of the Indian IT companies. If you leave aside the Donald Trump noises overall, the US business has been recovering and that is helping Indian IT companies in a big manner. We are bullish on IT and I think IT companies should do well in the current calendar year. Of course, as you said, the IT companies prices have already run up, so if there is some disappointment in other IT companies earnings there may be a bit of a setback but by and large if you take a one-year time horizon IT is in a safe zone.
ET Now: How do you approach corporate banks? We are seeing trading rebound in place but would you say that you can stretch your hand out and start nibbling into these names now or would you still clear from these names?
Sudip Bandyopadhyay: You have used the right word – trading rebound for the corporate banks. Yes, they were beaten down and market was kind of wary of these stocks with Ms Shikha Sharma agreeing to step down before the tenure. I think market is excited and is expecting good things in the future. A similar action or situation is being expected at ICICI but on ground things are not yet clear. The management change has not happened.
We are not sure who will be the new person to lead Axis Bank. The asset quality issues are still not behind these two banks so we have to be a little careful. If you ask me about the corporate banks, I will still avoid these large corporate banks. If I have to take exposure in a corporate bank I would probably go for State Bank of India and IndusInd Bank. I will still avoid ICICI and Axis Bank.
ET Now: We are headed in for another hectic Nifty earnings week with TCS, Infosys reaction coming in on Monday morning. Then there is Indiabulls Housing, HDFC Bank and IndusInd Bank. Do you think the tilt of the market would continue to favour the private banks? Can we again expect a steady quarter from both HDFC Bank as well as IndusInd?
Sudip Bandyopadhyay: There is absolutely no doubt that private banks will continue to outperform the PSU banking pack. The banks which are coming out with results have been consistently meeting the market expectations, rather beating them. HDFC and IndusInd Bank results coming out in the beginning of earnings period always does well for the private sector banks. Over the next week, the same momentum on private sector banks will be maintained. One has to be wary when PSU banks start announcing results because although bond losses are being managed because of RBIs recent announcements, asset quality still continues to remain an issue.