Consumer Sentiment in the Market Seems Generally Positive

An increase in H-1B salary levels can potentially impact margins for Indian IT service providers Suresh Soni CEO of Baroda BNP Paribas MF

- Ram Sahgal

Uresh Soni, CEO of Baroda BNP Paribas MF, highlights a decline in India's price-earnings premium to other emerging markets, expecting Systematic Investment Plan (SIPs) to persist as a favoured investment method despite a shift in foreign portfolio investor focus towards developed markets.

The recent market correction has meant a reduction in the price-earnings premium of India over other emerging markets from around 20% levels to 13-14%. The near-term trend of greater investor flows towards developed markets will keep the India premium in check, believes Suresh Soni, CEO, Baroda BNP Paribas MF.

This notwithstanding he expects SIPs to continue as an effective and convenient mode of investment with Indian investors having enjoyed the benefits of staying invested in volatile markets and the power of regular investments in equity markets.

The NSO first advance estimate of 6.4% GDP growth is below RBI estimate of 6.6%. What does this tell you of the earnings performance for the second half of the year given the tepidity of the Q2 earnings?

We have witnessed some slowdown in gross domestic product (GDP) growth from 6.7% in Q1 to 5.4% during Q2FY25. This was also reflected in muted earnings growth of 6% year-on-year during Q2FY25 for BSE 30 Index.

The first Advance estimate of National Statistics Office (NSO) of 6.4% GDP growth for FY25E factors in recovery during H2 to 6.7% vs 6% in H1FY25. The revival in government capex coupled with festival and wedding season should lead to better growth in H2FY25. Consequently, we also expect an uptick in Q3 earnings growth.

Consumer sentiment seems to be generally positive with a recovery in the sales of passenger vehicles, tractor sales and real estate while there is some slowdown in two-wheeler and commercial vehicle offtake.