Anil Rego of Right Horizons is bullish on gold, and expects prices will continue to rise due to several key factors. "Geopolitical tensions often lead investors to seek safe-haven assets and with interest rates starting to decline demand for gold is expected to increase," he said.
On the IT space, he believes a rate cut in September 2024, along with the conclusion of the US elections, is expected to bring greater stability to tech budgets for clients starting from 2025. This should lead to further improvement in demand and an increase in enterprise spending on IT from Q4FY25 onward, said the Founder and Fund Manager of Right Horizons, who is a seasoned investor with over three decades of experience.
Which will be the winner in the next one year: large caps or mid-small caps?
Near term, narratives have caused bouts of volatility and sharp swings in the SMID (small and midcap) section. We are observing quality names in the SMID segment which is recovering sharply and expect the trend to continue.
Do you prefer to invest in gold? Do you believe gold will perform significantly better in terms of returns for the rest of the current decade?
We are bullish on gold, expecting prices to continue rising due to several key factors. When the government lowered the customs duty from 15 percent to 6 percent, the correction in price lead to increase in demand. Furthermore, geopolitical tensions often lead investors to seek safe-haven assets and with interest rates starting to decline demand for gold is expected to increase. We anticipate the momentum in gold prices to continue.
Do you think the market will consolidate for the rest of FY25 to digest the slowdown in earnings? Does this mean that a new record high won't be possible until March?
Following four years of strong double-digit growth, corporate earnings were anticipated to slow down due to pressures from rising commodity prices and fading tailwinds. As companies adjust to higher costs, interest rates, and weaker demand, earnings growth slowed down. However, a consolidative phase can be healthy for the long-term trend as it allows markets to stabilize and valuations to align more closely with the economic reality. This phase could create a stronger foundation for a potential future rally when factors driving the market improve.
Are you bullish on the EMS space, and CDMO in the pharma segment?
India's electronics production is expected to maintain a robust growth compounding ~ 20 percent+ from FY24 to FY30, potentially reaching $450 billion by FY30. Various PLI schemes amounting to approximately $20 billion are key factors that are expected to drive a significant increase in electronics production.
The global CDMO (contract development and manufacturing organization) market was valued at $224.86 billion in 2023 and is expected to grow from $242.62 billion in 2024 to $465.14 billion by 2032 compounding at ~8.5 percent CAGR. We are seeing significant opportunities in CDMO space especially due to regulatory compliance, such as the Biosecure Act, that gradually shifts supply chains away from China. In Q2 pharma companies in the CDMO space have experienced improvement in Q2 fueled by superior traction in the segment.
Are you worried about the upcoming US elections?
The upcoming US election is expected to be highly competitive, with opinion polls indicating a tight margin between the two parties. We are not concerned about the election as drivers of long term domestic economic growth are intact. We do however anticipate impact on IT services. Margins are expected to be under pressure due to increased onshoring, and a Democratic victory could be more challenging, as higher US corporate taxes might reduce discretionary spending on technology. Conversely, the Republican proposal to revoke China's MFN status could boost hiring for Global Capability Centers in India, which would benefit IT mid-cap companies.
Are you excited to invest in the IT space despite large caps signaling below 5 percent earnings growth for FY25?
A rate cut in September 2024, along with the conclusion of the US elections, is expected to bring greater stability to tech budgets for clients starting from 2025. This should lead to further improvement in demand and an increase in enterprise spending on IT from Q4FY25 onward. Long term growth remains structural for the sector and the key areas to focus currently are a) business commentary for the BFSI and healthcare verticals; b) the progress of large deal ramp-ups and the strength of the deal pipeline.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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