Divam Sharma is the Founder of Green Portfolio
This seems to be a year of consolidation for the IT sector as the economic slowdown and potential recession in some of the developed nations will impact the sentiments and order flows for the industry, says Divam Sharma of Green Portfolio in an interview to Moneycontrol.
The portfolio management and advisory firm believes that over the coming quarters, the IT sector will continue to face pressure on margins and from high attrition.
On the themes to track, with more than 13 years of experience in investment management in stock markets, Divam says sectors like pharma, chemicals, textile-garments, automobiles, cement, steel, and capital goods are showing good investment opportunities from near-term growth and valuations standpoint.
Excerpts from the interview:
Do you think the actual GDP growth for FY23 and FY24 would be higher than consensus expectations?
With the consumer confidence revival we are seeing in sectors like automobile, capital goods, and infrastructure, high capital inflow in the form of FPI and FDI capital, strong outlook for capex, manufacturing, and exports, India is going to witness the kind of growth that China had seen in the last 2 decades.
Do you think the risks to India story are far less from internal factors and largely emanate from global issues?
Also read – Remain cautious on markets; Overweight on urban consumption stocks: Mahesh Nandurkar, Jefferies
India reflects a huge growth potential over this decade. Some key factors contributing to this opportunity include favourable demographics as India has a median age of below 30 with a high availability of efficient and cheap labour; infrastructure thrust that we have seen over the last few years specially in roads, ports, and power; ease of doing business efforts; favourable geopolitical relations and thrust towards local manufacturing through PLI (production-linked incentive), anti-dumping and other Government policies.
The global developments in terms of China plus one, and supply chain issues have added to the positives for India. We believe that the internal factors are the foundation for the India story and the external factors are the icing on the cake.
Do you expect a secular increase in energy and defence spending over the next few years?
Energy is attracting a lot of capital from large domestic corporates and global funds. The thrust on renewables will increase drastically over the coming years. Ethanol blending, transmission, renewables, electric vehicle (EV) batteries are the key themes where the world will be focusing.
Also read – Kotak Mahindra AMC sees these 3 key areas catalysing global growth in the years ahead, says Anshul Saigal
Domestic manufacturing and export for defense sector is a very interesting development to track. With a lot of talks and efforts being put towards the sector, we are finally seeing light at the end of the tunnel. This will be a good theme for investors over the coming years.
Do you think the travel and leisure segment is a strong catalyst to global growth going ahead?
We have seen a huge comeback for the sector over the last few quarters. This was also visible in the results of many hotel and travel-related companies. The growth in air traffic is strong, however, we are yet to reach the pre-Covid levels yet.
Foreign travel for leisure, education, and business has opened up and we are seeing huge growth there. This strong trend is going to continue and will drive GDP for a lot of economies going ahead.
Do you expect this year to be a year of consolidation for IT space?
This year seems to be a year of consolidation for the sector. The economic slowdown and potential recession in some of the developed nations will impact the sentiments and order flows for the sector. Also, we believe that over the coming quarters, the sector will continue to face pressure on margins and from high attrition.
What are the sectors that look attractive enough now?
Sectors like pharma, chemicals, textile- garments, automobiles, cement, steel, and capital goods are showing good investment opportunities from near-term growth and valuations standpoint. We are witnessing an above 20 percent capital expenditure to total expenditure and this also includes the impact of PLI related capex. Infrastructure implementation thrust, a positive outlook for manufacturing, exports, and consumption will drive investments over the coming quarters.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
