IT should outperform: IL&FS Investsmart

He is very optimistic about the IT sector. "Technology should outperform. The simple reason being, all these technology companies are basically debt free companies," he argues

Excerpts from CNBC-TV18's exclusive interview with Sreesankar:

Q: What do you expect the markets to do because today's move seems quite sluggish and then picking up?

A: Our expectation is that the market would probably move in a range. Right now, it is at the top end of the range. So I do not see anything that is going to make a smart move from here to take it past the earlier levels in the short-term. The numbers have been pretty strong in terms of two-wheelers or even cement numbers.

The automobile numbers are pretty strong. According to my expectations at the moment, a lot of these things seem to be discounted by the market and there is an increasing fear of tightening of liquidity, and then the rates moving up.

If we continue to see the rates moving up, we could see a slight increase in interest outgo for companies that could probably pull down the earnings going forward. These things are going to get much more clearer probably towards the second quarter.

Q: What do you think Infosys Technologies  will deliver and do you think these tech companies, frontline have more upsides from here?

A: I think technology should outperform. The simple reason being, all these technology companies are basically debt free companies. If we look at these companies and say that one of the increasing fears going forward rising interest rates will impact earnings.

All these technology companies are fairly insulated from it. I do not see them getting impacted, one. Second, yes, the rupee-dollar exchange rate which should have benefited these companies in the first quarter.

The only question is, how many of these companies have actually had salary increase happening and to what extent that has impacted their earnings in the first quarter. I would think that technology company should be outperformers in the market today.

Q: What would you do with FMCG stocks before the results come in, Lever specifically?

A: Difficult to say for a very short period. My own expectation is that this FMCG stocks should continue to do well. Our assessment is that the domestic economy growth story is intact.

The disposable income story is very much there and I do believe that as more and more number at the entry-level people get into IT and IT enable services. One should see this FMCG stocks doing pretty well. That goes across the sectors, be it the Hindustan Lever , ITC and Dabur India , across the spectrum of FMCG, I think that is going to be on a relatively stronger wicket.  

Q: Any thought on the textile space and whether you would like to enter something there?

A: We as a house like stocks like Welspun India , Alok Industries , and Bannari Amman Spinning Mills  in that space.