The long term prospects of telecom companies look high and they will have a good time going ahead. Auto sector woes are likely to continue, while the outlook for real estate and insurance companies is positive, says Raamdeo Agarwal, chairman of Motilal Oswal Financial Services.
Speaking to CNBC-TV18, Agrawal said he is bullish on the telecom sector amid the new digital age.
"In the long-term, we are clearly bullish on prospects for telecom because everything we are talking about is digital. The connectivity is only through telecom. We have two, at least, most wonderful corporates, running telecom here and they have really transformed the space in last four-five years," Agrawal said.
He remains very optimistic on the longer-term outcomes, though, right now there are concerns over profitability.
"The return on assets is very low, the turnover on their assets are very low. So I am sure as time goes by, they will all correct their profitability and no new entrants are going to come so they are going to have a good time," Agrawal said.
Meanwhile, he noted that auto companies face near-term headwinds of rising cost and commodity inflation, semiconductor supply issues, high fuel prices, BS-VI and other transitions and collapse of demand during COVID-19.
"Automobile is a very integral part of the economy. Around 50 percent of all the manufacturing is the automobile. I would think that the industry has its inherent capability to come back with a gap of time, but right now, in the very near term, at least from their P&L point of view is concerned, is very depressed till this semiconductor thing gets sorted out," Agrawal said.
Further, he does not expect steel prices to see a big correction, which will result in metal companies having healthier balance sheets.
Agrawal also said he expects consolidation in realty stocks. He is positive about the outlook of large real estate companies.
"Real estate is the biggest business anywhere in the world and if there's a consolidation, it is going to do very well for well-managed companies. So I remain positive on their outlook and if the entrepreneurs play it well; instead of profiteering, they go for quick execution, and work on the Internal Rate of Return for themselves. I think the opportunity size is very large," he said.
He remains very bullish on life insurers and believes the insurance sector is a longer-term, secular opportunity for investors. He sees huge growth momentum in the high-quality asset-light business.
(Edited by : Jomy Jos Pullokaran)