Abhishek Banerjee, who founded Lotusdew and serves as its chief executive officer, believes that there are more hits than misses in corporate earnings and this has been factored into the price of the stocks.

For the new-age companies, as a prudent investor, Abhishek says he would recommend that unless they have a solid track record of controlling costs and generating quarterly profits, it is better to concentrate on companies that have already established a profitable track record while growing at the same time.

With over a decade of experience in asset allocation, portfolio construction and quantitative investments, this chartered alternative investment analyst believes the pharmaceutical industry has a greater operating leverage than the IT services industry, and as a result, pharma will perform better than IT services space. Excerpts from the interview:

Do you think one should start increasing exposure to new-age companies which are focussing on improving profitability?

Traditionally listed companies had to be profitable for many years before they were allowed to take public money through IPOs. With increased investor appetite for new-age companies in public markets, such requirements have been relaxed. In fact, Amazon, which built a huge business, wasn’t profitable for many years.

However, we need to appreciate that there are many listed companies that excel at turning a profit quarter after quarter, and this is something that new-age companies are just beginning to understand.

As a prudent investor, I would still recommend that, unless they have a solid track record of controlling costs and generating quarterly profits, it is preferable to concentrate on companies that have already established a profitable track record while growing at the same time. The latitude that private equity provides in terms of growth without profitability might not be seen as an attractive bet by many public market participants.

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Therefore, unless there is a significant discount for the value that these new-age companies are bringing in, it is difficult to make a case based on, say, a few quarters of profitability.

Do you expect manufacturing to grow faster than key benchmarks in the coming years? Which are the pockets you are betting big?

I will list a number of factors why the manufacturing industry will grow. To be specific, globally, there are listed companies and countries with currency exposure in a variety of countries. Japan and the United Kingdom, for instance, face significant inflationary pressures or, you know, declining demographics.

In response, a number of these nations may be contemplating converting their currency into real tangible assets, which explains why countries such as Japan are making record-breaking project investments abroad. Therefore, in an environment where inflationary pressures are uncertain and currencies may be at risk, the strategy of most nations is to convert their currency into hard real assets, which have been a source of real financial flows.

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And, accordingly, manufacturing and EPC businesses are anticipated to prosper. In addition, if you examine the average capacity of the majority of the listed individuals, you’ll notice that they’ve reached their capacity’s upper limits. And many promoters you would encounter would, you know, essentially come to speak about their businesses.

All are contemplating capital expenditures. Some of them are already performing this action. In this scenario, capital expenditures are expected to perform well. This will primarily influence manufacturing companies.

Do you see less possibility of major correction in the market if the Fed gives confirmation over rate hike cycle, and reduction in volatility?

The Fed has an impact on the markets. In contrast, India is currently exceedingly resilient in the face of the Fed decisions. And this is predominantly due to the fact that, if you recall, the finance minister, Nirmala Sitaraman, already desires that our central banks be decoupled from global central banks.

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Consequently, there is an intention, at least within the administration and financial infrastructure of India, to be less sensitive to Fed decisions. However, there is a pass-through currency irrespective of what our central bank does. This does not rule out the possibility of achieving this objective through channels other than the currency channel.

Is it the time to add exposure to pharma space?

The pharmaceutical industry has a greater operating leverage than the IT services industry. And given the rising inflationary prints and rising bond yields, it is quite plausible that this will result in a weakening of the dollar.

Due to their operational leverage, pharma will perform better than IT services in this scenario. And evidently, because pharma is a significantly more regulated industry, the books are much clearer, allowing for a better understanding of the business, compared to traditional IT services, where costs can become muddled.

Your thoughts on corporate earnings season…

When observing the corporate earnings season this time around, I believe there are more hits than misses, which was already factored into the price of the proper stocks. We are not fundamental investors who evangelise earnings, but rather a quantitative firm that investigates alternative data indicators that may perhaps pre-empts earnings upgrades. Ultimately, I would say that what we have observed makes us bullish.

Do you still believe the flow of IPOs in rest of calendar yar will be much bigger than last entire year?

I believe that the trajectory of IPOs for the rest of the calendar year may surpass the figures of the previous year, primarily due to their sensitivity to market sentiment and momentum. The anticipated surge is grounded in the perceived resilience and growth potential of the Indian market.

However, precise projections should be informed by current market dynamics, encompassing economic indicators and investor outlook, to gauge the potential expansion of IPO activity.

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