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Last Updated : Sep 21, 2020 01:57 PM IST | Source: Moneycontrol.com

IT sector is healthy to invest in, don't see any bubble; CAMS IPO looks attractive: Sumit Bilgaiyan

I definitely believe that tech industry can be a long term story from here.

Sunil Shankar Matkar

IT is a really healthy industry to invest as they have shown resilience in financial performance even in the worst times, and rupee depreciation also helps them in a big way. Our top picks are HCL Technologies, TCS, L&T Infotech, L&T Technology Services and NIIT Technologies, Sumit Bilgaiyan, Founder of Equity99 said in an interview to Moneycontrol's Sunil Shankar Matkar.

Edited excerpts:

Q: This week there are three IPOs - Chemcon, CAMS and Angel Broking. Should one invest in all or favour one of them in current market conditions?

Close

All the companies that are coming for IPO have a lot of positives by their side. I believe the investor should think of his preference of the company based on the fundamentals and valuation and take decision of investing. If the company is a quality player with a reasonable valuation, one should invest. I believe CAMS IPO is a very attractive company to buy in, as it is a market leader in the registrar and transfer space, with top class promoters like NSE, HDFC and Warburg. It is a tech company with long runway for growth because of BFSI sector exposure.

Q: After hitting highest levels since February this year, the market has been rangebound. What does it indicate, what is your thought on current market situation as well as outlook? Also should one be worried about expected correction?

The markets have run up really fast much before the fundamentals improving, that is the issue, and hence, major market performance is dependent on the financial performance of the companies. The on ground revival is not as healthy as the markets are reflecting and hence, as the financial performance is lower-than-expected, street estimates will take a hit which might impact the stock prices. If the investors are sure about quality of their holdings and they have the appetite to hold it for longer terms, then they should not be worried of the expected market correction.

Q: Ministry said the vaccine is possible initially in the next year and on other side, infections count has also been increasing. Is it really a major risk considering the current steps taken by the government bodies to control the virus? Also what are other risks (global and domestic) that one should keep in mind before investing?

The steps government has taken to control the spread of virus is really impressive and the way everything is starting off with precautions will really help to reduce the spread of virus, hence, I don't see it as a major risk. In global risks, investors should consider that certain geographies may face regional lockdowns due to multiple waves, global trade slowdown and reduction of liquidity. In domestic risks, investors should consider slower revival in business and economic scenario, regional lockdowns due to increasing cases and weakening demand scenario.

Q: Most analysts feel the IT is a great story to invest. What is your take on it? Are you really bullish on IT stocks, and why? What is your pecking order?

IT is a really healthy industry to invest as they have shown resilience in financial performance even in the worst times, and rupee depreciation also helps them in a big way. IT industry is not a no brainer at the same time as their revenue growth depends on global demand scenario which is not predictable, but albeit this issue, their relatively better performance and asset light models along with healthy dividend payouts make them a compelling buy for the longer term. Our top picks are HCL Technologies, TCS, L&T Infotech, L&T Technology Services and NIIT Technologies.

Q: Also do you expect any kind of tech bubble in coming months like Dot-com bubble seen 20 years ago, due to increase in tech startups globally with latest euphoria in listing of Snowflake on NYSE?

I do not expect any bubble in tech stocks as the industry participants have also evolved much more over the past 20 years. They focus on all the aspects of the business and the industry before investing in a company, which makes the market more efficient. I definitely believe that tech industry can be a long term story from here.

Q: Do you feel the midcaps and smallcaps in terms of valuations are still lagging largecaps?

I feel all good quality midcaps and smallcaps have seen a good run up in the past 2 months which shows that market is rewarding the quality stocks. Sub-par quality stocks have not run up which they also deserve, hence, I don't feel that they are lagging largecaps.

Q: Should one invest in pharma stocks now given the 45 percent rally year-to-date and 85 percent from March lows? Why, and what is your pecking order?

Investors should be aware of investing in pharma stocks as they have seen a massive rally in the past 6 months. Basically, now pharma stocks are getting a top multiple at high earnings which leads to disappointment in future. But some stocks are still there at a reasonable valuation which investors might consider. Our top pick in pharma would be Sun Pharma as it is trading at healthy valuations with upside for growth.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Sep 21, 2020 01:30 pm
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