Interview: Nilesh Shah, managing director, Kotak Mahindra AMC.
After a dream run, the benchmark indices have started moving downwards from September due to earnings disappointment and geopolitical uncertainties. However, Nilesh Shah, managing director, Kotak Mahindra AMC, believes that this is a healthy consolidation. He tells Joydeep Ghosh that foreign portfolio investors (FPI) will make a comeback once valuations come down. Excerpts:
The stock market seems to be in a correction mode at present. Besides FIIs, are you also seeing profit booking by retail investors/high net worth individuals? Also, do you see a deeper correction than what has already happened?
Markets are witnessing a healthy consolidation due to FPI selling, geopolitical uncertainty, subdued Q2FY25 results, removal of more than 1,000 scripts from eligible securities for collateral and IPO supply. The correction is coming in those stocks where valuations were stretched.
Low double-digit earnings growth, underweight of FPIs on India relative to benchmark indices and the maturity of retail investors to buy during corrections give us confidence that the correction will be an opportunity to buy selectively.
Avoid irrational exuberance in a few sectors where the Street believes that the management of these companies is like Hanumanji, who has the power to jump across the sea in one jump. We all know that Hanumanji is divine. Management is human.
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The earnings season has been weak, including the consumption story. Are things expected to get worse before they get better, or is it a one-two-quarter blip?
The earnings season is mostly below expectations. Earnings have been affected by rains, low government spending, the Shraadh period and a slowdown in exports due to a sharp increase in freight costs. We believe most of these factors are behind us, and earnings should recover in the second quarter of FY25. Undoubtedly, the estimate for Nifty EPS for FY25 will be revised downwards. The festival season is sending a mixed signal.
Do keep in mind that we can push growth through the easing of monetary policy in CY 25.
We are selectively investing in the consumer space. Companies leveraging distribution, innovative product launches and cutting costs are our preferred choices on a bottom-up basis. While there is some premiumisation (of buying habit) trade,
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