Pankaj Tibrewal, Sr Executive VP and Equity Fund Manager at Kotak Mahindra AMC, August was a good month in terms of broader market underperforming and it was needed because one-way rally is never healthy from a longer-term perspective.

Tibrewal said, “So in a way, the divergence, which we saw between Nifty and the broader market was a welcome one.”

On the earnings cycle, he said, “We all know that stock prices are finally slave of earnings, sentiments can play its role in the short term, but over the medium and long term earnings is the core driver of stock prices. When I look at the earnings cycle, almost till 2020, we were one way down. From 7.50 percent corporate profitability to GDP, we came down to 1.6 percent. COVID came as a blessing in disguise for the formal sector."

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"Corporate India did an excellent job and that 1.6 became 2.6. If analyst estimates were to be true this year, I think this number could be more like 3.50- 4 percent in terms of corporate profitability to GDP. So, clearly, we are not towards the peak of the earnings cycle. We are somewhere either at the start or somewhere midway on the earnings cycle front.”

On sectors and stocks, he said, “One theme, which we are very positive on for last couple of years, big getting bigger, strong getting stronger. Look at some of the data, which will probably give you a sense what I am talking about incrementally over the last three years in NBFC, housing finance space the top two companies are 90 percent of the market share."

"In steel and cement, the top five companies are 60-70 percent of the incremental market share. In banking, which is more of a commodity business the top 6 banks are 70 percent of loan growth market share. Similar trends we are seeing across electrical cables, wire, tyres, tiles, plywood, grocery, luggage, retailing and I think this consolidation is happening right in front of us.”

On manufacturing, he said, “On the manufacturing our senses that 15-16 percent, which is the weightage of manufacturing in GDP today can expand to about 20-22 percent over the next decade. That means that $400 billion can actually be tripled to $1.2-1.5 trillion over the next decade. So I think this is another powerful theme and we have to go bottom of basis to select the right companies, right businesses, right management who can ride this expansion in manufacturing.”

For full interview, watch accompanying video...

(Edited by : Bivekananda Biswas)

First Published:Sept 3, 2021 6:07 PM IST