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BNP PARIBAS says India is better positioned amid global uncertainty

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Mumbai: BNP PARIBAS (BNPP), Head of India Equity Research Kunal Vora in their India Strategy has written on trends in corporate earnings, global and domestic macro-outlook where they have laid out their sector and stock preferences.

The global outlook remains abnormally uncertain but India better positioned

They have mentioned in their report that their team of economists has lowered the global growth forecast, raised the inflation expectation, and embedded higher monetary tightening going ahead. The team highlighted that recessionary fears present a weaker backdrop for global risk assets and that the global outlook remains abnormally uncertain. But they also mentioned that India was slightly better positioned but was not immune to global issues. India’s inflation is lower compared to developed economies due to the composition of the CPI index. Plus, raw material costs have also cooled, which they think should ease the trade deficit, and another normal monsoon should keep food inflation in check.

Nifty witnessing 4% Consensus earnings estimates cuts

Further in their report, they mentioned that Nifty FY23E/FY24E consensus EPS was lowered by 4%/2% through the earnings season. The report also further mentioned that Nifty earnings have ended lower than the consensus forecast for every year in the last decade. For FY23, consensus expects overall earnings growth of 12.6% y-y, with the bulk of the share coming from financials (6.9%), energy (4.1%), and consumer discretionary (3.9%).

Remain cautious with a bias for growth at reasonable price

They mentioned Nifty has outperformed most peers YTD but they remain cautious on back of slowing global demand, lofty market valuations, and slowdown in retail flows. They were selectively OVERWEIGHT (OW) on the banking sector and are defensively positioning with an OW on IT and pharma instead of Auto. Despite moderation in commodity costs, they were UNDERWEIGHT (UW) on consumer staples and consumer durables due to the recent run-up in prices and thus see these sectors trading at a steep premium to their historical valuations. They are also UW on the energy and materials sector. Their top picks are Axis Bank, HDFC Bank, Infosys, Bharti Airtel, Sun Pharma, ITC, and Whirlpool.

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