Amid the ongoing earnings season, even as major Nifty heavyweights have already reported their numbers for the quarter ended September-17, Leo Puri of UTI AMC says that earnings recovery in remains tepid, and it will take at least 18 months for companies to bounce back. In an interview to ET Now, Leo Puri, Managing Director of UTI Asset Management Company said, “ In the long-run we have to look for earnings, and earnings recovery, but that remains tepid. There are early signs, but it will take at least 12-18 months for strong earnings recovery.” In fact many analysts say that the quarter so far has seen better than anticipated earnings. In an interview to ET Now, Taher Badshah CIO (Equities), Invesco Mutual Fund said earlier this week, “ An analysis of the 35 companies of Nifty which have delivered results so far, 75% of them have actually beaten street estimates, or at least met them. This number was closer to 55% in the last four or five quarters. This is a better way to track earnings delivery versus expectation, and I believe on that front, things seem to be getting better.”
Interestingly, the quarter has also seen many stock price upgrades as compared to previous quarters. In an interview to CNBC TV18, Krishna Kumar Karwa, Managing Director at Emkay Global Securities said, “ Out of the companies under coverage at our end, almost hundred companies have announced their results. There have been target price upgrades on at least 50 companies, which is much more than what was happening on quarter or few ago. Even on the EPS upgrades, in 40-45 companies have seen them in FY-18 and FY-19. My sense is that the numbers have been better than expected.”
Leo Puri said that the investors must now look at asset allocation, as the markets maybe overvalued, if the liquidity doesn’t sustain. But where should one invest? “One should look beyond equities. There are very good opportunities in debt. Financialization must involve allocation to debt,” the expert had pointed out during an interview to BTVi earlier this week.
Explaining the impact of inflation on return expectations, Leo Puri had said, “In the past, in a high inflation regime you believed you could get 20% return on equities, 12% return on bonds. Today, you will get 12% return on equities and maybe 7% on bonds. Globally, return expectations have been aligned lower. In that context, it makes a lot of sense for the households to look at fixed income, and a rebalancing of their overall exposure.”