Assuming that the consolidation or dip in gold prices is done with and we are in for a rebound in gold, do you believe that investors should bet on Manappuram Finance and Muthoot Finance now?
They will certainly benefit largely because whenever there is an increase in prices, the cover goes up and, therefore, to some extent you may be able to lend more. But the direct beneficiary will be companies in the jewellery business because, like most assets, as the price goes up, the demand also seems to increase. It happens especially in the case of gold. It has not been that great a performer as compared to other asset classes like equities or even real estate. There is some upside left from here. If the market moves up, you are likely to see jewellery companies do better.
What about your outlook when it comes to the entire IT basket? What is it that you are expecting from TCS earnings later this week?
Most companies should perform better than the guidance. If you look at the exit run rate for most of the companies in the last quarter, they will need to deliver only some growth over the next couple of quarters to meet the guidance. I would argue that there is a significant upside possible in some of the mid-sized IT companies, even more than the larger ones. You should get reasonably robust growth. I would prefer Infosys over TCS, largely on account of valuation. But there is a significant upside left in some other companies also, assuming that the market scenario remains generally bullish.
Power is not a space that interests you.
Actually, it does. It is probably one of the few areas which is still relatively cheap. If the economy grows, power demand will come back. There has been a significant amount of write-offs for many assets. Overall, you will find most companies operating at fairly good PLFs. That said, the biggest challenge remains that most of the companies that are listed are in the thermal space, other than a few which are in the renewable space, ESG concerns dominate. Most investors, especially institutional investors, do not want coal. Therefore, to some extent it will not find that much favour from institutional money.
