SVB Collapse: Too Early To Assess Impact On Risk Assets In India: Macquarie's Aditya Suresh
Aggregate valuations relative to EMs are not yet benign despite the bearish nature of current landscape, says Aditya Suresh.
Macquarie Group Ltd.'s Aditya Suresh projected a considerable impact of the Silicon Valley Bank's collapse on the deposit rate trajectory in India, but cautioned that it's too early to precisely assess the effect on risk assets.
The head of research and strategy at Macquarie Group India recalled being cautious on India's performance in the current fiscal right in the beginning of the year, premised on expectations with respect to earnings growth, valuations and fading of liquidity due to deposit rates.
Therefore, irrespective of the fears on the kind of impact SVB crisis can have on emerging markets globally, the underperforming narrative on India's projected growth in 2023 fiscal was already made in the beginning of this year, Suresh told BQ Prime's Niraj Shah during an interview.
Valuation of Indian Market
Suresh said the aggregate valuations relative to other emerging markets in the world were not yet benign despite the overall bearish nature of the current landscape, which would otherwise appear to be a good time to enter for a global investor.
Valuations and earning growth aren't moving in sync across most sectors. Financials is the one rare space where upgrades have been seen alongside high expectations, according to Suresh.
He attributed this to the credit growth story, amiable credit cost and control on net interest margins. Large cap private banks look the most optimistic.
Simply meeting expectations is not enough to rally.Aditya Suresh
Key Themes
Suresh described the IT space as "balanced" as consensus on margin estimates and growth had been fairly stable despite cuts in revenue.
In the consumer space, he said there had been very sharp margin cuts and real-time data showed that mass consumer sentiment remained fairly soft as rural indicators stood mixed.
Therefore, the challenge is the lack of clarity on which pockets of the fast-moving consumer goods space will cater to enormous earnings upgrades. Mass market consumer demand needs to be kept an eye on in order to track the direction of FMCG as a sector, according to the expert.
Suresh sounded quite supportive regarding the industrials. "Similar to financials, this is an area where we are comfortable with the earnings, driven by government capex and the projected expansion story," he said. "We are above consensus on some of the stocks."
At a time where most analysts are underweight on healthcare, the expert said "we are constructive on some selective names, especially the larger ones".