With no earnings rebound in sight, stick to bottom-up approach: Nitin Raheja

In a chat with ET Now, Nitin Raheja, Co-Founder, AQF Advisors, shares his view on what investors should do this earnings season.

ET Now: A number of companies including TCS, MindTree and Gruh Finance have so far announced quarterly numbers. Can we expect some disappointments from the forthcoming earnings? I am not asking for a specific reaction to the TCS stock, but a broader view. Could all of these disappointments trigger fall?

Nitin Raheja: Absolutely. IT companies had by and large set the tone for the Q4 earnings season by lowering their expectations. The market has visibly entered into into a trading range post March. We are going through some kind of time consolidation. One must note that, the pick up on the economic front has been slower than anticipations.

You saw a convergence of investments happening in few companies where growth visibility was high. This has led to a rise in their premium valuations.

Whenever you are in such a situation, valuations start acting as a hurdle even if there is a slightest of disappointment.

So, although we might be in a long term bull market, stocks of a lot of companies — where the valuations have touched premium levels — will turn volatile this results season, in case there is any scope for disappointment.

Meanwhile, there will be investors searching for ideas on a bottom-up basis. In my view, in the absence of a large scale economic revival or rebound, it is going to be a bottom up market. You are going to see good performing companies getting premium valuations amid lack of choices.