Q1FY23: QoQ comparison not justifiable, management's commentary on inflation and growth crucial, says expert; recommends these 9 stocks

As IT behemoth Tata Consultancy Services (TCS) is all set to kick-start Q1FY23 earnings season on Friday, July 8, expert is of the view that it would not be appropriate to go for quarter-on-quarter comparison and rather a year-on-year approach is the right way to go about it as the last year's Q1 was impacted by Covid 19. The expert feels management's commentary on inflation and growth outlook are key monitorable as far as Q1 is concerned. 

Meanwhile, In the last six months as on July 7, benchmark indices Nifty50 and Sensex have corrected more than nine per cent. The drag was largely led by IT and smallcap stocks. As per technical data, Nifty IT declined more than 25%, while BSE information Technology dropped almost 23% during the same time frame. Likewise, Nifty Smallcap 50 dropped nearly 27% and Nifty Smallcap 100 fell by over 24% as on July 7.  

Q1 seasonally weak quarter  

Santosh Meena, Head of Research, Swastika Investmart Ltd, is of the view that Q1 is an important quarter as the true inflationary impact on Corporate India’s bottom line will be visible.  

"Further, the Q1 is usually a seasonally weak quarter and last year’s Q1 results were impacted by the COVID wave. So rather than QoQ, a YoY comparison, keeping an eye on the management commentary about the growth outlook and inflation impact would be more important," underlines the expert  

The current arduous times are the biggest tests of the investor’s patience and psychological strength," says Meena.  “Be greedy when others are fearful”, one of the best times to invest is during uncertain and volatile periods, thus, we recommend buying the dips strategy, he says.  

"However, investors must lower their expectations and they will never be disappointed," the expert advised.  

NIFTY 50 down 20% from peak 

NIFTY 50 has corrected approximately 20% from its peak levels and individual stocks have corrected more than that, says Swastika Investmart Ltd expert.  

"The rising inflation which has compelled central banks to hike interest rates, the Russia-Ukraine war, overvalued stock indices, and slowing down of global economic growth are some of the reasons that have led to this selloff," Meena said  

Nonetheless, the current correction provides a good opportunity to accumulate quality stocks as the valuations have turned reasonable and the Indian Economy is poised to outperform its global peers in terms of economic growth. However, the possibility of further correction of 10% to 15% can’t be ruled out. 

Sectors and stocks to watch out for 

Nevertheless, we are positive about Banking, Automobile, Capital Goods, and Infrastructure stocks, says Meena. "Our top picks are SBI Ltd, ICICI Bank Ltd, Tata Motors Ltd, Jamna Auto Industries Ltd, Siemens Ltd, Thermax Ltd, HG Infra Ltd, PNC Infra Ltd, and PSP Projects Ltd," the expert recommended.