Sandip Sabharwal, analyst,
asksandip sabharwal.com.
The Zomato IPO kickstarts this week. Are you subscribing?
Personally, I am not subscribing because I think the oversubscription will be high and I am not really very comfortable with the valuations at which the IPO is coming, although the grey market premium indicates a Rs 13-15 kind of premium already being there and depending on the sentiments on the listing day that kind of gain should be possible.
As of now, I am not inclined to subscribe but could do so just as a possible short-term trade to make money, I might decide to do so on the last day. But Fundamentally, I will not be doing it for a longer term at these valuations.
The US and the UK are looking at normalising from July 19. If there is any evidence of a third wave coming back, would that worry the market?
The perspective of Europe, US and UK will not have any impact. Their policymakers have stated that even if in the UK cases go to a lakh per day or even more than that, the reopening will continue. It is all about vaccination and one needs to believe in science. We cannot continuously live in fear. If you have got double vaccinated, you are 98-99% sure that you will not get hospitalised and that is the entire thing.
It is tough to predict whether India will get a third wave, but India’s vaccination has obviously been lagging behind many of these countries and we run a bigger risk of economic disruption till vaccinations pick up. That should be at the back of the mind of investors because how long can businesses take shutdowns? Two big shutdowns have already happened and in case of a third one, the impact could be more severe because this time the inflationary pressures are very high.
Even though TCS numbers were not great they have missed the mark by quite a yardstick, the reaction on Friday was not scary. What is the right way of looking at IT because this week, both Infosys and Wipro results will be out?
TCS attrition numbers are still very low and in single digits. But the attrition numbers of the rest of the IT industry will pick up significantly and that will have an impact on their margins. So, TCS remains better placed in the industry vis-à-vis Infosys and Wipro which have outperformed TCS. I will be very interested in looking at the margin picture of Infosys and Wipro. My guess is that the margin pressure will be much greater. Their attrition is much greater, they will have to give bigger wage hikes which they did not do last year to retain employees.
They will need to do new hiring and that will definitely have an impact on margin. The way to look at IT is that given the growth picture, the downside in a stock like TCS might be limited, but for Wipro and Infosys, if there is a negative surprise, the selloff could be bigger than TCS.
