The commentary of software companies assumes significance as most of the business comes from abroad, explains Rahul Shah, AVP, Group Leader-Equity Advisory Group, MOFSL. He spoke to ETNow.
Edited excerpts:
First week of 2019 started on a cautious note. What to watch out for?
We have been just following the global front and we saw a selloff on the back of it. Obviously, things have been better for India as the macros have been improving. We have been discussing this a couple of times.
My sense is obviously metal is one we need to watch out for. Earnings season will be starting from next week. It is to be followed initially by private banks and tech companies.
These are two important events which are going to start from the next week and obviously how the global market shape up. So these are the few things for the next week one should look at.
Earnings season would come next week. Do you think particularly this will be a quarter where it will be tough to predict earnings? The currency was absolutely volatile, markets were volatile in October. You had issues as far as bond markets are concerned and then you had the festive season which was not that great?
I do not think there should be a problem. The only issue — as you mentioned — is with NBFCs or maybe, oil marketing companies where rupee-dollar and crude were very volatile.
These two sectors are to be looked at. Rest I think more or less should be okay. That is where earnings should be in line with what Street is estimating.
Let's talk about IT companies, how they are likely to report earnings. Q3 is a soft quarter, but do you think this will be the first quarter where they will get any indication about 2019 spending from their clients and that is why commentary would become important?
We have seen good numbers from most IT companies. It will be interesting to note that we have seen the US markets correcting. Also in the UK and other countries, we have seen the negative part.
It would be very important to note the commentary because most of the business comes from abroad. Definitely, it will make more sense for hearing the commentary and the outlook for 2019 from the companies.
Any view on the metal pack and the sort of correction you have seen in steel names, non-steel names?
The correction has been steep and I think we have seen 20 per cent. That much has been shaved off from recent highs for most metal companies. Going forward, it is important to look at how the prices fare as the downside looks limited.
The most important thing is how the metal prices fare. Friday's trade saw some bounceback in metals pack towards closing. Next week may be interesting from that perspective. JSW Steel and Tata Steel will offer a good value proposition from here. This could be temporary in nature in terms of metal prices. I would look at buying the stocks.
What are your stock picks?
One clear winner in the entire market in the last few sessions is all corporate banks. My sense is corporate banks will continue to do well. The top pick will be ICICI Bank from my side and SBI remains. These two are the large two banks on the corporate side which looks interesting going ahead.
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