“And over the next, I would say six months, expecting 4% to 6% of a price correction and maybe six months of the time correction is something which I would be more than happy to have in the market because that would really bring back the health and the strength of the market back,” says Aniruddha Sarkar, Quest Investment Advisors.

To begin with let us discuss the market setup right now. We have seen a healthy correction that has come by in the last two to three weeks. Do you think the interim bottom has been made and from here on we will resume our so called bull trend or do you see this sideways move to continue?
Aniruddha Sarkar: So, I would say that obviously it is not that the recent correction is something which will bother me because to be honest the bull run which India is in is not like a one year or 18 months bull run, it is a multi-year bull run where we are. Short-term hiccups, profit booking, price corrections, time corrections, I think that is the way the market is built. So, to be honest, I would not be much worried about the recent correction. So, this is something I have been saying to investors over the last couple of months that from now over to the end of this financial year, do not expect any major sharp run up in the market because after an excellent year, which we had the last year, definitely some type of price correction and time correction is required to bring back the health in the market. And that is what we are seeing.

And over the next, I would say six months, expecting 4% to 6% of a price correction and maybe six months of the time correction is something which I would be more than happy to have in the market because that would really bring back the health and the strength of the market back. One thing on the earnings, given the fact that the second quarter earnings will be starting from today, what are your expectations overall from the second quarter numbers and given the fact that overall consensus expectation is that the profit growth is expected to be the lowest in the last 17 quarters, do you see analysts downgrading their FY25 EPS estimates?
Aniruddha Sarkar: I think a lot of the expectations have already built up that this quarter, as you rightly mentioned, will be the lowest quarter with regard to earnings growth in the last 16-17 quarters. Broadly, I would say we would end this year around 8% to 10% of the earnings growth in FY25, which means the first half of this year is going to be weak and the second half of the year is going to be much better.I think all eyes are what is going to be the commentary ahead because that is something which is going to be very important. This quarter anyways will be extremely bad, partly because of the base effect, partly because of elections being there wherein most of the capital goods activity has been on the back foot and also the demand has been a bit on the weaker side, I would say, the agri India part.

So, more importantly, what I am looking out is the commentary for the festive season, which is coming ahead because as you would have seen the festive demand is something which most consumer good companies are banking on.

We saw the first kind of the green shoots over there wherein the textile companies, they mentioned that demand is seen picking up in the month of September. So, more than the numbers in this quarter, I would be looking at the guidance ahead.

But what about defence as a pack and the other PSUs? Today, of course, Mazagon Dock, Garden Reach, a lot of these other public sector companies like NTPC, BEL, Power Grid are doing okay. Is it a time to look again at some of these PSU names?
Aniruddha Sarkar: The PSUs overall, I have been bullish for the last four years. If I break up the last four years, I would say the first two years I was overtly bullish. The last two years is somewhere wherein I have been taking some profits off but the last six months is wherein I have decreased my allocation overall to the PSUs, partly because of the valuations and valuation comfort is something which still is not there in many of the PSUs. Broadly still, I would be overweight on the PSUs compared to the broader index, but yes, not something which I would be wanting to go out and buy.

Many of these names which you mentioned in the defence space, whether it is HAL, BEL, I think we are in a very good structural up move as a business, which they are going to continue to see good growth on their order books execution over the next couple of years. But I would wait as an investor to get better valuations to enter.

You seem to be quite underweight on sectors like banks and FMCG specifically. Now banks valuations are cheap, then also could you explain why you are bearish and when it comes to FMCG specifically, rural recovery is expected to happen in this festive season and going forward given the fact that monsoons are strong. So, why are you bearish when it comes to FMCG and banks?
Aniruddha Sarkar: So, if I talk about the banks first, so within the banking and financials, if I have to pick up a couple of names, I would be more bullish on the non-banks and when I say non-banks, I am more bullish on different financial services companies, because that is where the growth is going to be much-much higher. So, I am more bullish and betting on companies in asset management industry, companies in the wealth management industry, companies in insurance space, because that is where the growth is going to be higher than what is going to be visible in the banks.

The main reason for being underweight on the banks is mainly because I think the loan deposit ratio, which has been a concern for a good amount of time is continued to be a pain point. Behind that, the lending growth is something which is not going to be as high as it was in the past and on top of that, if the interest rate cycle takes a turn and there is a fight among banks for deposits, I think the NIM contraction is something which most banks will have to face with.

With all these headwinds, it is not that I am negative, but yes, I do not see the banks outperforming the non-banks. So, if I have to pick within the banking and financial sector, I put my bets on the non-bank financial services companies. Coming to the FMCG space, I would put again the FMCG basket in the consumption basket.

Now, within the consumption, if I have to bet on sectors, I would rather bet on urban consumption, which is more resilient, where income and demand growth continues and that is the reason I would be more bullish on the urban consumption compared to the agri consumption. Yes, agri consumption is expected to do well, but we will have to wait and watch because the trick for the FMCG is the volume growth and not the price growth.

So, volume growth is something which I would be wanting to get more comfort on. This quarter we should be seeing around 4% approximately volume growth happening. But yes, I want to see some consistency in that volume growth over the next couple of quarters before I bet in because the valuations are not cheap even for the FMCG companies.