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See marginal earnings downgrades; bullish financials: ILFS

Kapoor feels the investment cycle could take longer to pick up, also because of the government cutting down on expenditure to meet its fiscal deficit target

Things are improving at the macro level, but it could take some time for it to translate into corporate earnings, feels Vibhav Kapoor, Group Chief Investment Officer of IL&FS.

In an interview to CNBC-TV18, Kapoor says he expects marginal earnings downgrades. This in turn could keep the market upswing in check, he says, adding that the medium term outlook remains positive.

Part of it is because of the steep fall in crude and metal prices, which will hurt earnings of the companies in both sectors. The other reason is because of too much expectations of a recovery at the ground level, which is not playing out as expected.

Kapoor feels the investment cycle could take longer to pick up, also because of the government cutting down on expenditure to meet its fiscal deficit target.

He expects retail inflation to be around 5.5 percent in FY16 and expects the RBI to cut benchmark rates by 75-100 basis points.

He advises investors to go for cyclicals that are best place to gain from a recovering economy.

Kapoor is bullish on financials, auto and light engineering.

Interview transcript to follow

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