We are seeing some of the counters that have gained significantly and quite a few largecap names are giving up ground. Will you nibble into a few of these or would you wait for the dust to settle?
The market is now becoming far more stock specific rather than sector specific. The overall market itself is actually not bad because there are multiple trades at a 10-year premium. On the other hand, the pandemic is more than a 10-year event. It is a very big negative event, once in a 100-year event. So for earnings to catch up with reality will take some time, till FY24 and until then, the multiples will look expensive. Capacity utilisations for companies have to move up, credit growth has to move up and there is not much downside for some of these largecap names. But they lack some of the business catalyst to take the stocks higher.
In the long run, do you believe that the best for IT or the low hanging fruit kind of gains are behind us and in the long haul, these should be bought on dips?
IT is a sector that has done phenomenally well this year and last year. When one talks to IT companies — whether it is midcap or largecap — they are struggling to fill rolls. In fact, I spoke to one of these large IT companies which are now requesting the engineering colleges that in the last year, they teach them what they would need to do on their job once they finish the college. That way they can reduce the lead time for them to start performing on the job. This is a wonderful thing to think of because obviously the companies are hiring because of demand. They are not hiring valuations.
In the IT industry, Infosys, TCS, Wipro and also the midcap hyper scalers are going to double in size over the next four, five, six years. I am not talking about market cap. I am talking about revenue and when this happens, automatically stock prices need to follow. I think we will still make a very healthy 20% per year kind of return over the next few years in IT stocks.
