In a conversation with ET Now, market expert Narendra Solanki from Anand Rathi Shares & Stock Brokers shared his perspective on the earnings trajectory and market reactions so far.
“Yes, definitely, right now the kind of recovery we have seen from 22,000 levels of about almost 2000 points, so the market has recovered smartly and we just entered with that kind of recovery into the result season and the markets were hoping for the result season to be largely in line. But there has been some disappointment from a few large names in the IT, especially from the guidance point of view for at least the next two to three quarters wherein we can see some subdued growth which is less than expectations, so that has actually taken the market by surprise on the negative side.”
The disappointment, particularly around forward guidance, has weighed heavily on IT stocks. According to Solanki, the Nifty IT index has slipped back to levels last seen during the peak of the March downturn, effectively erasing its recent gains.
“If you see the Nifty IT index, it is now trading at the lows which were seen in mid-March, which was at the peak of the crisis. So, the complete recovery in the IT sector is washed out.”
Despite this, the broader market has displayed resilience. With most heavyweight sectors—especially IT and banking—having already reported earnings, the focus is now shifting toward a wider set of companies.“From next week onwards, the earnings and the results will be more broad-based, including some in financials and some in manufacturing. So, the market would still be reacting to the results but because the heavyweights are out and the earnings would spread out within large sectors, it should consolidate from here onwards.”Solanki expects markets to remain range-bound in the near term, with no sharp directional moves.
“Right now, we do not see any significant run-up on either side. So, we do not see any runaway rally, neither do we see a very sharp selloff, but we see a 2% to 3% kind of range of consolidation happening and the remaining move would be decided by the kind of earnings we see in the quarter.”
On the investment front, the current environment is prompting a strategic shift toward segments with higher agility and domestic exposure.
“We are more focused on smallcaps and midcaps because that is where the companies are more agile and that is where the bases are low, so it really helps them in order to turn around and strategise in a fast manner in comparison with their largecap peers.”
A key theme emerging from Solanki’s outlook is the strong potential in domestically driven sectors, particularly power and infrastructure.
“If you see especially in the power sector, not only on the power generation side but also on the transmission and distribution side, we have a lot of underinvestment there in those spaces and with the kind of renewable targets the government is setting up, there has been a lack of capacity to evacuate the power from the renewable sites. So, there has to be a very huge investment coming up for the next three to five years in the transmission and distribution segment.”
He adds that this opportunity extends beyond core players to ancillary companies supplying equipment to the sector.
Autos—especially two-wheelers and related ancillaries—also feature prominently in his strategy, alongside a cautiously optimistic stance on financials.
“We are also positive on autos, especially two-wheelers and ancillaries. And other sectors like financials we are positive; however, there is a bit of a conscious positiveness into it because right now the macro situation which is there at the moment, it is increasingly becoming hard for the central bank to stay on the current policy and there has to be some relook in terms of inflation trajectory. This crisis is already almost for two months and it is going to linger on for some more time, so that is creating some tight fiscal space for the country.”
As earnings season progresses, the market’s next move will likely hinge on how broader sectors perform and whether domestic growth themes can offset global uncertainties.
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