India's power sector is in a sweet spot due to upbeat demand, said Sridhar Sivaram, Investment Director at Enam Holdings, in a conversation with CNBC-TV18. While he is optimistic about the power sector, Sivaram remained cautious about the financials sector, citing concerns that rising credit costs could impede earnings growth.
"We are bullish on the utilities sector, as India is expected to add 70-80 gigawatts of thermal energy over the next 4-5 years. Power equipment companies, in particular, are set to benefit from growing order books and increased capacities. We anticipate that these companies could see their margins expand by 100-200 basis points, boosting earnings growth by 30-40 percent," Sivaram stated.
Sivaram pointed out that the establishment of new power plants for internal use by corporates will significantly benefit companies involved in power equipment. Additionally, the rising demand for data centers, AI technology, and EV charging infrastructure is expected to further drive power requirements.
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On the other hand, Sivaram expressed caution about the financials sector due to rising credit costs, sluggish deposit growth, and high loan growth. "We expect credit costs to increase by at least 25-30 basis points this year, which could constrain earnings growth in the financial sector by 10 percent in 2024-25," he noted.
Regarding the overall market outlook, Sivaram anticipates a time-wise correction as local markets adjust to negative global news, such as higher interest rates in the US or fluctuations in the yen. However, he does not see any significant risks within India, as the macroeconomic conditions remain strong.
"India has been a standout performer compared to global peers, with only a 1-2 percent correction. We don't see major issues domestically but remain attentive to global developments," Sivaram added.
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