‘There’s opportunity for strong earnings growth for many years’

livemint.com:

NEW DELHI : Domestic markets are not far ahead of fundamentals, and there is opportunity for strong earnings growth for several years, Nirav Sheth, chief executive officer, institutional equities at Emkay Global Financial Services Ltd, said in an interview. Barring consumer staples and commodities, he is positive about most sectors including banks, but with varying levels of confidence. Edited excerpts: Does the valuation comfort persist in the markets or is it time to book profits? Markets are not far ahead of fundamentals.

We have very strong bottom-up economic fundamentals and very strong top-down fundamentals. Both macro and micro economic fundamentals are also in sync. There is an opportunity for very strong earnings gro-wth rate for many years.

There are pockets of euphoria, but that happens in any market. What are your views on the bank index as it led the rally till the recent correction? Valuation of banks is lower than pre-covid levels. There is a substantial scope for credit growth and asset quality is improving.

We are very constructive on banking, including public sector banks. With HDFC Bank and HDFC merger, there may be some impact on margins in transition period but it remains discounted. We are positive on the merged entity as well.

We are constructive on the entire space including non-banking financial companies. Will sectoral rotation happen now? Which sectors hold promise, and which are to be avoided? We are comfortable with most sectors. In the software space, we believe it is more of a macro play, and developments in the US, where real growth numbers are being upgraded even by the Fed as is reflected in projections after the recent US Federal Reserve meeting.