'Sensex earnings may grow 23% or more in FY17'

'Home loan has a long future and is one of the best growth stories in India.'

'The real upgrades will start after monsoon. If monsoon turns out as predicted, it will have a salutary effect this time.'

Raamdeo Agrawal, joint managing director at Motilal Oswal Financial Services, tells Sheetal Agarwal key trends in this earnings season and investment themes in Indian markets. Excerpts:

What strategies should investors adopt in the markets right now?

We are being very stock-specific in the current market. I think markets are in a terrific mood to reward good-performance companies and will punish the ones that did not. At the index level, things are subdued, but there is a lot of excitement at the individual company level.

How is the earnings season panning out?

So far, 19 Nifty companies have reported numbers and have combined earnings growth of four per cent in the March quarter. This is more or less in line with our expectations of five per cent earnings growth.

Only three companies have missed our earnings estimates, with nine companies reporting in-line numbers and seven beating our estimates. Overall, the trend is positive.

Is the earnings downgrades cycle behind us?

We are positive on FY17 because the low base is already formed. One of the reasons earnings were getting deflated every quarter was that commodity companies were hurting as commodity prices were falling every quarter. My sense is the base is already formed as far as commodity prices are concerned.

Thus, commodity companies in the power sector, the likes of Tata Steel, ONGC (Oil and Natural Gas Corporation) and Oil India might actually do better from here on.

The base is so low that Sensex companies may report 23 per cent or higher growth in FY17. Also, falling interest rates will slowly start having some sobering impact on interest costs and aid earnings.

The real upgrades will start after monsoon. If monsoon turns out as predicted, it will have a salutary effect this time.

What were your key takeaways from your visit to 2016 Berkshire Hathaway annual meeting at Omaha (US) this year?

I met 15-20 big clients before the AGM (annual general meeting) and realised there is a lot of appetite for Indian stocks. But, unfortunately, foreign investors have actually not made much money here in the past.

So they are trying to time the market; they are trying to see some more data; a firm trend in recovery before making investments. I think they are in a wait-and-watch mode right now. They need some breakouts such as good monsoon, industrial recovery.

Which sectors you are bullish on?

We like select companies in IT (information technology), pharmaceuticals, private sector banking, NBFC (non-banking financial companies) segment, and FMCG (fast-moving consumer goods) category. We also prefer some monopolistic companies such as Bosch, InterGlobe Aviation, and oil marketing companies.

Mortgage (home loan) has a long future and is one of the best growth stories in India. So we like HDFC (Housing Development Finance Corporation) despite the fact that its growth has slowed partly due to its large size.

Currently, IT and pharma form 30 per cent of our portfolio, while private banks and NBFCs form 25-30 per cent.

Automobile stocks contribute 20-25 per cent, with consumers and aviation being the rest. That covers 18-20 stocks. We like Britannia, Maruti Suzuki, Eicher and Max India, among others. We are staying away from highly-leveraged companies.