Market remains stock-specific as earnings divergence widens across sectors: Dharmesh Kant

On Bajaj Finance, he said the company has delivered a very strong set of numbers across all parameters, including AUM growth, net interest income, stable asset quality, and strong disbursement trends. He highlighted that the management has maintained its guidance of 22–23% growth, while credit costs are also expected to moderate going forward. He also pointed out an improvement in return ratios, with ROE rising to 4.7% from around 4%. According to him, there is nothing to complain about in the results and the stock still has room for appreciation, although it is already trading at premium valuation multiples. However, he cautioned that macro headwinds could weigh on performance in the near term, especially in Q1 and more significantly in Q2. He noted that Middle East-related stress is gradually impacting MSME, SME, and small retail borrowers, which may reflect in upcoming earnings. While he remains positive on the stock given its pedigree, he advised a “buy on declines” approach rather than chasing it at higher levels.

On the IT sector, he said Cognizant’s latest results and muted guidance reflect a broader trend of sluggish growth and weak discretionary spending across global IT companies. He observed that large Indian IT firms have also reported slow growth with limited visibility on demand recovery. While there is optimism that AI-driven productivity gains may offset some deflationary pressures, he believes the sector is largely evolving into a gap-filling role rather than a strong growth engine. He added that 2–3% revenue growth with stable margins appears manageable, but meaningful upside is missing. Currency tailwinds continue to be a key support factor for the sector. He reiterated his cautious stance, saying his outlook on IT has remained bearish for the past one and a half years and the firm continues to stay largely away from the space, except for a few selective names.

On FMCG, he said companies like Nestle have reported strong numbers, and even retailers such as DMart have shown healthy business updates. He noted that Q4 benefited from macro tailwinds such as rate cuts, tax benefits, and GST-related triggers, which supported consumption. However, he warned that going forward, input costs are rising due to higher global commodity prices and increased packaging costs linked to petrochemicals. Since FMCG companies operate on thin margins, this could pressure Q1 earnings, and potentially Q2 as well if monsoon conditions remain weak. While he expects some trading rallies, he maintained that his house has never taken a structural buy or sell view on FMCG and continues to remain neutral, advising profit-taking on trading positions.

On Larsen & Toubro, he said the sale of its stake in the Hyderabad Metro project is a positive development, as the asset had been a drag on profitability. The transaction is expected to improve returns by around 50–70 basis points and help reduce debt at the SPV level. He added that even before the announcement, L&T looked attractive after its recent correction. With a strong order book of over ₹7 lakh crore and limited impact from Middle East challenges, he remains positive on the company. He noted that global activity, particularly in the Middle East, is gradually improving as geopolitical tensions ease, which should support growth ahead. While refraining from giving a near-term price target, he said the stock remains a long-term portfolio holding and should be accumulated on declines given its leadership position across verticals such as engineering and energy.

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