BNP Paribas India's Abhiram Eleswarapu Picks Key Themes And What To Avoid
Domestic stock markets are unlikely to surge when other markets remain weak, according to Abhiram Eleswarapu of BNP Paribas India.
While India may grow even as growth slows globally, domestic stock markets are unlikely to surge when other markets remain weak, according to Abhiram Eleswarapu of BNP Paribas India.
There is an expectation of a mild recession, especially in the U.S and European markets, Eleswarapu, head of India equity at BNP Paribas India, told BQ Prime. "The growth forecast is coming down across the board."
In 2023, he expects weakness in equities across the world. "India may be okay, but I don't see how India can give major positive returns for two years in a row."
Eleswarapu said the 2022 global correction has been driven by valuations, and 2023 is expected to be all about earnings, supporting higher volatility.
Key Themes To Bet On
Eleswarapu is bullish on banking—particularly high current account-savings account banks—information technology and the pharmaceutical sector.
Credit growth is picking up and bank balance sheets haven’t been this healthy in years, he said.
According to him, the Indian information technology sector has hardly seen any red flags. "Companies did not have any issue on order book or revenues this year."
Demand for the information technology sector can be more "resilient" than what the market expects, he said.
Pharma companies are taking price increases after three to four years and demand continues to pick up, he said.
Themes To Avoid
Mass consumption—including FMCG or segments that have non-affluent buyers—as well as two-wheeler and low CASA banks are themes that Eleswarapu says investors avoid. "In mass consumption, the valuations are stretched and the earnings have a huge downside."
According to him, the two-wheeler sector may face a threat from electric vehicles over the next three to four years. Also, rural economy is yet to pick up as well, he said.
Low CASA banks have seen a significant improvement in credit growth, but not much in terms of deposit growth, according to Eleswarapu. "Avoid your bets where CASA is not exactly an edge."