FY24 earnings can be better than what the Street is estimating. Sumit Poddar explains why

Sumit Poddar, Founder & CIO, Tikona Capital, says if step back and see how the government or how Indian large institutions including RBI, the India tech stack, or even central and state government have been doing in the post-Covid era, in every adversity, we have been an anti-fragile institution whether it be on the health side, the oil crisis – we have turned that into an opportunity rather than being a threat.

You recently wrote in your newsletter that India seems to be at an inflection point of healthy earning in the second half. Can you tell us why you believe FY24 earnings can be better than what the Street is estimating?
Let us step back and see what has happened in the last 12 to 18 months. If we look at the last 12 to 18 months, it has largely been an inflation-driven thought process that has been going on for the market participants. Runaway inflation was there. On top of it, high interest rates. I mean, 475 basis points kind of increase as far as the US is concerned and 250 basis points as far as India is concerned.

So, we have seen a rapid rise in interest rates while inflation is dramatically coming down and that gives comfort as far as the inflation or rather interest rates could be stabilised. Now, the million-dollar question is when the interest rates are likely to be cut, which is what the market is waiting for. In addition to that, the world is relatively slowing down. In such a situation, India offers a green shoot where we offer a very healthy, sustainable growth.

So, let us again step back and see how the government or how Indian large institutions including RBI, the India tech stack, or even central and state government have been doing in the post-Covid era. In every adversity, we have been an anti-fragile institution whether it be on the health side, the oil crisis – we have turned that into an opportunity rather than being a threat. As we are 80% dependent on outside oil, our economy should have got crushed and the consumers should have been bearing the brunt of inflation.

Similarly we thwarted the banking crisis and the balance sheets of banks, governments, individuals, and corporates, all are in a very healthy shape.

Rather in the last two crises, Indians and Indian government and institutions have become much stronger. Yes, the first two quarters are a bit challenging. Towards the end of this particular year, we could see a very good earning growth rate coming back, on the back of the fact that most of the corporates who are going to spend appropriately are going to see a very healthy growth rate.

Just to give you an example, take the case of ICICI Bank which invested well in technology. So, we are seeing their growth being much stronger compared to the sectoral growth. Similarly, every sector would see those technology investments coming back and which is why we believe the second half of the year could be an inflection point and this is not going to be a one-off growth, possibly we are going to see a long-term sustainable growth as far as the India and Indian companies are concerned.