“India is doing well and would continue to do well. Despite a possible decline in growth rate, we would still be the fastest growing economy of the world. Capex will be the Key. Therefore, we like capital goods, banks, and domestic manufacturing,” Santosh Pandey, President and Head of Nuvama Professional Clients Group told Moneycontrol in an interview.
With 15 years of experience in diverse fields, Santosh believes consumption stocks can take a pause due to lower growth and expensive valuations.
“Post monsoons things would change again for consumption. And till that time there would be either a time correction or price correction. For long term, we are bullish, and I think the second half would be very good,” he said. Edited excerpts:
Do you expect more room for margin expansion in IT services sector?
Yes, depending on whether revenue growth stays stable or experiences only marginal deceleration, margins will either remain stable or most likely expand.
Do you still see Russia and China as a challenge for equity markets in next financial year (FY24)?
In my opinion, the world has absorbed these challenges and I don’t think there would be big impact due to these factors. Although these factors would keep on adding volatility in the market without causing a significant impact.
Ultimately the numbers would define the market direction. Needless to say, that Indian economy is doing great though exports can dampen due to these factors.
Which are the sectors to bet on in FY24?
India is doing well and would continue to do well. Despite a possible decline in growth rate, we would still be the fastest growing economy of the world. Capex will be the Key. Therefore, we like capital goods, banks, and domestic manufacturing. Consumption stocks can take a pause due to lower growth and expensive Valuations.
Do you think the management commentaries indicated that consumption has been sluggish?
Yes, the previous quarter (Q3-FY23) was not as strong as the earlier quarters. And as mentioned earlier, there would be a decline in Growth. So, some sluggishness was there. However, post monsoons things would change again. And till that time there would be either a time correction or price correction. For long term, we are bullish, and I think the second half would be very good.
Do you feel the rally in IT stocks is indicating that recession may not be so deep in western world?
The cause-and-effect relationship is inverse. In my opinion, IT stocks are rising because both – recession likelihood and severity expectation of recession – are subsiding. The base case is now soft-landing and/or mild recession. With the USA administration coming out with measures to induce private Investment (measures may include penalising share buyback). So, under mild recession investment in IT upgrade will sustain.
Should investors wait for a couple of quarters before buying consumption stocks?
As mentioned earlier either time has to pass, or some price correction has to occur. But this year we would focus on stock selection. For instance, we favour select names in building material, consumer durables etc.
What is your strategy of creating wealth?
We believe it is better to stick with stocks that are delivering numbers and doing better than expectations. We have seen many stocks doing well above industry expectations. These stocks would certainly deliver better returns once the market begins to rally again.
Do you think the more rate hikes will dampen the US growth in coming quarters?
Additional anticipated rate hikes and the resulting financial tightening is expected to have an implication on the economic activity, business investments and could prompt volatility in the financial markets. At the same time, although growth would be lower by historical standards there is a fair amount of resilience in the economy to derive comfort from. The strong labour markets, sturdy household consumption trend as well as declining inflation, would all support growth.
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