Ajay Srivastava, CEO at Dimensions Corporate Finance Services, on Tuesday, said that IT sector continues to be a great buy at every level. He explained that even though IT companies may face growth challenge, they are still a safer bet.
"In today's environment, the best place to be safe is IT stocks because what's going to happen to them is not going to be really impacted by the Federal Reserve interest rates. Fundamentally, that sector remains extremely robust and strong. I think IT will remain a fundamental story," he said.
"IT stocks continue to be a great buy. They give return on capital, are unaffected by interest rates except for valuation ups and downs but that doesn't change the dynamics. The only problem is they need to start growing faster. And now they're becoming so large. Can they grow at 15-20 percent year-on-year, that's the challenge. They have been growing at less than 10 percent. Industry tells us - it's a safe place to be and safe place to invest," he added.
Srivastava believes 2022 is the year of basic raw materials. He expects raw material sellers to gain in this high inflationary environment, however, that automatically spells bad news for consumption. He believes consumption will be hit over the next 2 quarters, mainly by inflation.
He said, "2022 is the year, at least for Indian investors, for the basic raw material side, not on the end consumption side. Somebody’s loss is also somebody’s gain. So if they’re going to buy expensive raw materials, then the raw material sellers will tend to gain. So it’s not going to be that all of the market is going to get hurt by inflation at this point of time."
"Consumption sectors are already hurt in India; they will get hurt severely and unless we have a severe change in the budget, in economics and policies, it will be bad news for the next two quarters, " he explained.
According to him, India falls in a different bucket altogether. He highlighted that India had a different set of problems even before the Russia-Ukraine crisis. He mentioned that individual stocks have seen a big decline vis-à-vis the Index and that has had an impact on portfolios.
"India, I would say, is a different bucket. Even before this (Russia-Ukraine) situation, we were in a crisis. They have different set of problems in the Western world. We have a different set of problems, irrespective of Ukraine," he said.
"The fact is, people invest in stocks, and Indians have invested lots in midcap and smallcap stocks. There, the damage has been severe and huge. And if you ever sit down and look at October and now, it looks enormous. So we can hide behind the fact that the index has not fallen, but the fact remains that at a portfolio level - you have got a problem," he added.
Watch the video for the full interview.
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