Markets in overbought zone; Wait for another quarter before investing in IT: Andrew Holland

Andrew Holland

Amidst the rally in Indian equities, Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies, spoke to Moneycontrol about potential investment opportunities in the current market conditions and the short-term challenges faced by certain sectors. Holland touched on various sectors, including IT, life insurance, manufacturing, and new-age companies.

Holland believes that the next two to three quarters might pose difficulties for IT giants. Therefore, he says, it may be prudent to wait for another quarter before nibbling at the IT sector. He doesn’t rule out chances of potential, 5-10% downgrades in the coming months.

The market expert sees a promising long-term growth trajectory for the life insurance segment. Holland cited the increasing demand for life and medical insurance in the post COVID-19 era as a contributing factor to the surge in share prices. The market veteran has endorsed investment portfolios having life insurance holdings, given the positive outlook for the sector.

Holland also underscored the growth prospects of the manufacturing sector, particularly the defence and renewables segments. Defence, he said, is a long-term story, though the options appear fairly limited in this sector at the current juncture. However, he anticipates an increase in manufacturing efforts within India as companies try to gain market share through alliances or by building on their own. Even though it is currently a limited play in the listed space, he anticipates more listings over the next 1-2 years.

Holland advised caution on investments in much-debated new-age companies such as Paytm, Nykaa, and Zomato. Despite their growth potential, intense competition in the sector has made him wary about their short-term prospects. His advice: observe market dynamics and competition before making substantial investments in these stocks. “If I look at Paytm, for example, they’ve now delivered what the market has been asking, which is that move towards profitability. I think with Nykaa and Zomato, there is more intensive competition at the moment. I'd like to see how that plays out a little bit more before going fully into those stocks,” says Holland.

“Overbought and awaiting potential headwinds” is Holland’s stance on the overall market outlook. The market veteran remains cautious about the recent surge on the bourses and emphasised the need for a correction or consolidation. His message to investors: carefully consider your time horizons and individual needs before entering the market.