While macro’s uncertainties are worsening and the policy momentum takes, the lost link remains with corporate earnings, which he expects to make sense in the second half of FY26. Until then Bhattacharya believes the market will continue, supported by improved consumption drivers and investor sentiments, but there is no major part.
Edited quotations from a chat:
How do you see markets leading to Q4 income in Q4?
Markets now close to September 2024 levels. Our income development is likely to be returned to the second half of FY26. And then there is also an effect at the time of the season. For the next 3-4 months, income growth takes time to return.
With the uncertainties of the macro, we look forward to correcting the weather in markets from here to the atmosphere. If we say correct time, it is in the order of 5%.
We have previously said at the beginning of this year the markets climbing the wall of anxiety. In January, we didn’t know where India spends, and we didn’t know what Trump would do in terms of policies. And 2024 were dominated by national elections, so earnings took a backseat. The only thing that is lost is the income.policy paralysis, which is at 2024, has now been decided. And in the first quarter of the calendar year, economic commencement begins. You can see that in the form of order notifications. It will instill in earnings, it is a small quarters – which the second hypothesis is located. So mainly, the market has moved from a more uncertain macro-unsure that one has a reasonable macro. But we are standing without the support of earnings. Until then, we may see a little fixture in time.
So you don’t see the possibility of a primary reduction?
Not more than a 5% range. While the macro is more controlled in the past 2-3 months, three or four positives have occurred, not to be ignored. Oil prices correct 25%, which is a great enthusiasm for consumption. Second, inflation is lost at around 100 basic points, also increasing consumer pockets.
Third, cutting rates occur, and the excavation disappeared. And finally, the budget, the minister effectively gave the financial increase for the salary of urban consriers in the tune of 5-7%.
It all makes a reasonable case for consumption to start taking the second half of this year. We have a strong case for earnings to return.
The only danger to this general scenario is when Trump is too much. Then we see a global shrinkage starting in the United States, with the world’s implications.
How comfortable are you with valuations today?
Large contrasts in line with, or in a 5% premium of, the 10-year average. The middle and smaller little ones are between a 17% to 25% premium of 10-year average.
At the end of the day, we are bottles in the stock below and we are well with AADCAP information. Within the middle and smallcap, we advise a strategy – in the sense that somewhere there is a premium valuation, we make sure there is a premium in income growth.
Stocks in the middle and small ones in which growth is struggling but the values are still high in the penalty box. That’s those avoids. And in reality, we have done this, so why, if you look at the ratios of Peg to our portfolios, as if we were suggested that we have a balance between adaptation.
Which sectors are you interested in this stage?
At the beginning of the year, we called the black horse’s consumption of 2025. In fact we also launched a consumer fund in the first quarter of the year.
The second is the financial. Within them, we’re cold NBFCS In particular, one of the beneficiaries of cutting the rate and whose valuations is reasonable. Earning growth is likely to stay strong as we go to FY26.
The third place where we are overweight is defense. The recent conflict between India and Pakistan opens the opportunity for exports. That’s something to play in medium term. In the near term, valuations earned a full set of positives.
And finally, it has to do with the services of it, it’s a place where we have a weight. But we have gradually neutral because we think that expectations are just right now. The valuations around long average averages.
If you look at it, things will be better from here. This, of course, blocks a scenario where we have a global shrinkage.
The market is not as fast as staples, because numbers are not very good, but better than ever. Do you agree?
This is why we call consumption to make the dark horse 2025. We are positive in consumer discretion, but not in staples. The important staples did not take much because they were facing mass consumption, hit with long inflation and interest in interest.
Now inflation begins, and we see more cuts that are happening. It works as an enthusiasm. A little better expected monsoon can be positive for mass consumption.
Staples gradually make a comeback. In the last 2-3 years, consumption is not very well done.
We say premiumasization is a big theme, but that doesn’t seem to play a lot. Why?
Without playing because the growth of real income is lower than that part in the last years.
The growth of city revenue has difficulty different factors – jobs, inflations, and others our true growth in income, and so the budget provides tax benefits. This means it’s effective, the net tead-home salary will increase a place between 5-7%, which is the annual increase in salary for an urban consumer.
So it effectively gives them an increased increase in salary, which is optimistic to inspire the profits of consumption companies as we go to the second half of this year.
Some funds each other sits a lot of money. But as a fund house, Edelweiss doesn’t make cash calls. In this case, how do you deal with the appreciation problem?
Money in our portfolio is usually less than 5%. But even inside it, we have a danger that we have held the minimum money because we are not more negative in the market since the beginning of the year.
The overall management risk management method is by moving our allocations into different market dimensions. Between the Great, Middle, and any part, whoso places us more appreciating the relief that has changed for growth – we gradually grow.
My two pieces of cash calls so we don’t want to mix asset allocation with stock selection. Your job is to choose the stock, not asset assocation. The asset allocation is about how much I need to put in equities vs how much cash I hold. Usually the best of a distributor who knows the client’s cashflow profile.
