Short Call | Indian IT finds a Trump card, but what lies beneath the buzz?; Titan, Berger Paints in focus

Short Call

The Indian IT sector has been quietly recovering post-Q2, but Trump's return to the White House has thrown in a wildcard that's hard to ignore. On November 6, Indian benchmarks, especially the IT index, saw a notable rally as market players cheered a Trump victory in the U.S. presidential race, remembering his previous term's business-friendly approach with India, including tax cuts and deregulation across manufacturing, energy, and defence.

If history repeats itself, India might find new doors opening for defence and tech collaboration, as well as expanded export channels in pharmaceuticals and IT services. Trump's opposition to China's dominance adds another layer of promise, particularly for the IT sector. That, and expectations for a possible U.S. Federal Reserve rate cut on November 7 led the Nifty IT index to climb by 4 percent in the last trading session.

While the rally looked enticing, the story has more to it. As Ross Maxwell, Global Strategy Operations Lead at VT Markets, points out, Trump's protectionist tendencies may turn out to be a double-edged sword. Emerging markets, including India, could face headwinds if the USD strengthens, potentially sparking capital outflows and inflationary pressures back home. Then there's the immigration angle. Trump's history with strict visa policies, especially around H-1B visas, stirs up uncertainty for India’s tech sector.

For now, Indian IT seems energized by hopes for a pro-business U.S. administration under Trump. However, the reality is layered with both opportunity and risk, meaning investors need to look beyond the surface.

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Berger Paints (Rs 525, +2.26%)

Q2FY25 earnings missed estimates due to heavy monsoons and floods in key markets

Bull Case: The company is poised for strong growth driven by rising repainting demand in rural and small towns, coupled with a surge in construction activity. Its focus on premiumization, brand equity, and expanded distribution positions it well for sustained market leadership.

Bear Case: Economic slowdowns and rising crude oil prices pose significant risks to Berger’s margins and demand, particularly as repainting demand is sensitive to economic health. Additionally, intensified competition in the industrial segment could pressure pricing power.

Titan Company (Rs 3,184, +1.5%)

Reported Q2 earnings under estimates.

Bull Case: Titan's strong performance in Q2FY25, driven by the July customs duty cut, sets an optimistic outlook for the festive season, with robust growth across its sub-segments.

Bear Case: A slowdown in the macro picture will lead to lower discretionary spends. Additionally, downtrading in watches and eyeglasses will pressure the firm's margins. Any further government action on gold is also a key overhang on the stock.

(With inputs from Zoya and Harshita)