EXPECT Q4 EARNINGS TO DISAPPOINT: RELIGARE SEC

EXPECT Q4 EARNINGS TO DISAPPOINT: RELIGARE SEC
Sangeeta Purushottam of Religare Securities has a view that a fair amount of uncertainty still prevails in the market though immediate rallies cannot be ruled out. Speaking to CNBC-TV18, she adds that overall market is likely to be rangebound and inflation numbers are weighing on sentiments. She further says that Q4 earnings are going to disappoint as it is likely to see impact of slowdown in last 6 months.

Excerpts from the exclusive interview with Sangeeta Purushottam: Q: Do you sense a complete lack of confidence right now in the market?

A: There is obviously a fair amount of uncertainty because we are seeing news flow which is been fairly mixed. So this phase of the market is likely to be what we will see for the next few months. I don’t rule out intermediate rallies happening in between a thousand points plus or minus but essentially the market is going to remain pretty much range bound till we have a sense overall that equities have become an asset class to be backed into. So it’s going to take a while for the whole thing to start to pan out.

Q: What do you think is the big problem now, is it just mood or sentiment, lack of liquidity or is it the macro news flow which is worsening sentiment spooking investors?

A: It’s a bit of all of these, the sentiment was bad with the fall that we saw over the last couple of months and what’s added to that has been the uncertainty led by the inflation number, so you are not really seeing consistent good news come out and that’s what needs to be happened, the bad news needs to stop and that’s what will help the market find a bottom and then we need to see a certain spate and consistency of good news coming out.

Q: Next week, we are heading into an earning’s season, there is a lot of fear going around that when the numbers tumble out, we will have a lot of disappointments because of the hits taken on derivative losses etc, do you think we will really end up this earning season with some disappointment?

A: That’s likely because if we just look at a little bit of what happened in the last earnings season, it showed results which were either in line or were a little disappointing and was in the contrast with the previous earnings season where the results are either in line or a little bit better. This quarter will also show some of the impact of the slowdown that we have been seeing over the last 6 months, so you could see some surprises on the operational front and how much of a surprise if a derivative side really throws up for companies is something we will have to actually wait and see.

I don’t really see this earnings season as something which is going to lead to a reversal in the trend for the markets. It’s possible that posts the season, is when we may actually start to bottom out because by that time hopefully there should be some stability in the global news flow also.

Q: What’s going on withBHEL, a blue chip stock, since a last couple of days has lost about 12%-13%, any thing specifically wrong with the earnings expectations there, the way its coming down?

A: It is hard to say as they did have a poor 3rd quarter, so there is some expectation building up on that the fourth quarter may not necessarily be that great, the other factor could be the possible impact that the salary increases could have on companies so I think we will just really need to wait and see.

Q: How are you reading the situation for steel companies, the market has given it a bit of a thumbs down already, do you think its an over reaction or a justified concern in steel prices?
A: Given what we saw happened with the cement sector over the last year, the concern is illegitimate and we have seen that particularly at least in the case of PSUs, the government’s been pretty strong allowing prices to rise. So in the current environment, it is a legitimate concern and the other issue is commodities is one asset class which is actually been holding on and in the wake of a slowdown in growth overall that we are likely to see, it could just be a matter of time before we start to see a correction there so this could be maybe something which just starts off and then we start to see some kind of a correction happening in the commodity space as we go along.