The froth in new-age companies has been wiped out and the valuations are looking attractive, Envision Capital's Nilesh Shah said in an interview to CNBC-TV18 on November 23, as shares of cosmetics-to-fashion retailer Nykaa and digital payments firm Paytm have been hammered in the last few days.
Shah said concerns around inflation were finally ebbing and IT layoffs in the United States would provide a better environment for hiring and wage cost. Edited excerpts of the interview:
What do you think of India's decoupling with world markets?
It's heartening to know that we have had a strong pullback from the lows that we saw in the middle of the year. It looks like there are a lot of concerns around inflation growth which seems to be finally ebbing.
We are set for one year or so from here onwards.
IT valuations are looking a bit compelling. Do you think the worst of the IT downcycle is behind the US?
I don't think we will revisit the lows that we saw in 2022. Layoffs in the United States will provide a better environment for hiring and wage cost.
That provides a strong cushion for margins for IT companies. The growth for the next year could be on the lower side of the range.
IT space will make a strong comeback in the next three quarters. IT valuations are perfect for growth investing.
What about the new-age theme companies?
Some of the new-age theme companies have mended their business models to guide the path to profitability. Some companies have continued delivering high growth.
The valuations are attractive for long-term investors. Investors will continue booking profits in the short term in these companies.
Froth seen in new-age companies has been wiped out.
We have invested in PB Fintech. There are risks for PB Fintech from BIMA Sugam but stands out clearly as a good name. Nykaa is also there on the radar. It had been there on the buying list.
Shah also believes that growth will be seen in a lot of manufacturing-oriented sectors, over the short and medium term. According to him, segments such as defence, capital goods, auto components are expected to have good margins.
He believes that the insurance sector 'is a very exciting space' and has the best longevity in terms of business opportunity. "What matters is policy selling, not whose policy sells ... PB Fintech or Policybazaar are a great proxy for the insurance space," he said.