Nilesh Shah, managing director and chief executive officer at Envision Capital is bullish on both information technology and capital expenditure-linked stocks.
The asset manager believes that the IT space is still in a long-term structural bull market despite the correction in the sector in the past three months.
“Current correction in IT presents a good opportunity for investors especially in second tier IT stocks,” Shah told CNBC-TV18 in an interview on April 28.
Shares of information technology companies have come under pressure in 2022 triggered by rising global yields and concerns that margins of these companies will shrink dramatically in the coming quarters.
Besides IT, Shah sees a large opportunity in stocks that will benefit from the expected revival in the capital expenditure cycle of the private sector. After nearly a decade of no major capital expenditure, investors believe conditions are ripe for a new wave of capex announcements by Indian companies in the coming years.
“Capex seems to be a very big opportunity for the next 3-5 years and investors need to watch out for huge earnings growth there,” Shah said.
The asset manager, however, advised investors to avoid shares of two-wheeler companies as the demand scenario for such companies still remains weak. That said, Shah is optimistic on auto-ancillary companies given their diversified client base, which provides comfort on earnings growth.
Shah believes even at the market level, risk-reward is turning favourable for investos after nearly 8 percent correction in the benchmark indices from their lifetime highs hit in October 2021.
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