Why does the market seem gung-ho on real estate & not on banks? Andrew Holland answers

Avendus Capital CEO, Andrew Holland, optimistic about banking sector recovery. IT sector linked to US interest rates. Global factors influence market sentiment. Nifty levels may rise pre-election. Confidence returning post-turmoil, with focus on consumer spending and small banks. Holland further says: The largecap banks will perform and if the commentary in the results season is more positive that the worst is over,

Banking and financial stocks are not expected to have a smooth ride as market experts hold contrarian views on the ability of the sector to sustain growth, despite Jefferies' Global Head of Equities Christopher Wood adding Axis Bank to his India Long-only portfolio in May. Small case managers and investors suggest asset quality and margin issues for some banks while FidelFolio Investments' Founder Kislay Upadhyay predicted a high interest rate scenario would impact access to capital, curb the ability to grow and maintain capital efficiency. Meanwhile, Devendra Phadk at Purnartha Investment Advisers said credit penetration at society's lowest strata has increased considerably over the last decade, which could cause credit issues both at the retail and enterprise levels.

A gauge of the countrys top 12 biggest banks is set for its worst week since September, erasing around $21 billion in market value through Thursdays close. HDFC Banks earnings has now raised concern about reports from peers ICICI Bank Ltd, Kotak Mahindra Bank Ltd and Axis Bank Ltd.

Deviations in actual conditions from expectations of the consensus tend to rattle markets, resulting in sharp moves up and down. This explains the current volatility in global and domestic markets.

Since a year, there has been a noticeable drop in rural volume due to inflation and erratic monsoons. While the demand in cities is leading the overall growth with urban incomes more resilient, companies expect rural volume to recover on the back on a decent monsoon, which generally translates into higher sales after a quarter lag.

“Fortunately, in our funds and with our investors, we have kept a significant amount of cash in the portfolio. This kind of a correction brings up the opportunity to buy. We may not buy all at once, but selectively in some of the stocks, we would like to buy in this particular fall.”

Jiten Parmar, believes that inflation and interest rates have started trending down in FY24, making it a more constructive year for investments than the previous year. Parmar believes that chemicals, which have corrected margins, are back on the radar due to their long-term tailwinds, and he is constructive on midcap cement due to the sector's capacity utilization, margin of safety, and expected OPM improvement.

Canada's big banks are likely to wrap up a challenging financial year with another quarter of declining profits and rising bad debt provisions amid a slowing economy.

“I would rather play a little bit more carefully at this point of time. We love the price correction happening in some of the counters. That is where probably we will accumulate some of the bigger companies. The medium, small sized companies are relatively more vulnerable to the liquidity-led push in the market. And we are slightly more concerned there.”

The headwind that we are also seeing currently in chemicals is that there is a slowdown in Europe. A lot of clients in Europe are holding back orders. So, there is a short-term challenge that the space is seeing. But if you take a little longer-term view of at least the next one, one-and-a-half, two years, clearly there are very interesting plays that reside in the sector. There is a stickiness to the business. Clients do not really change their suppliers very often.