Not fully committing to IT; gung-ho on market infra stocks: Shiv Chanani
Synopsis
Shiv Chanani, Fund Manager at Baroda BNP Paribas Mutual Fund, provides insightful analysis on the IT space, auto sector, and the capital market infrastructure spaces. He further emphasizes the impact of uncertainty in the IT industry, changing dynamics in the auto space, and the growth opportunities in capital market infrastructure.
Shiv Chanani: IT is a pretty interesting space at this point of time where probably the entire space is going through what we call the corridor of uncertainty. So, when you look at one layer below which is the underlying customers of the IT companies, most of them which are in the US, one can perceive the kind of uncertainty that they are going through because you do not know when the rate cuts are going to be, how much of those rate cuts would actually take place.
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The sum and substance is that obviously that particular pent-up demand is going to come back at some point of time as and when most of these variables settle down, till that extent I think you would have to sort of play with this kind of uncertainty and say that okay like look I would probably look for certain definite signs before I go and fully commit to the IT space.
Compared with largecaps, one needs to differentiate among the midcap IT companies. There will be the usual run-of-the-mill IT services companies which are probably in a smaller format of the larger ones and then we will have a vertical focused kind of companies which probably have their own niche and will continue to do well. That is how we look at this space.
What’s your take on the auto space? What is happening in the CV part of the business. Is the tide turning, are there signs in the second half or you would stick to the bets which you have mostly in PV and two wheelers?
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Bharti, Vodafone both have spoken about an impending tariff hike in the next few months. Some kind of technological overhauling is happening at Vodafone front too. If these tariff hikes happen, could it meaningfully alter the earnings picture of this sector?
Shiv Chanani: Of course, if there is a tariff hike, that clearly puts them in a much healthier earnings as well as a balance sheet kind of positioning and do remember that when it comes to telecom you will need to sort of keep abreast with the technology and this is one sector where the technology changes are most frequent. In that sense, any bit of a price hike or better earnings will give them that kind of an ammo to sort of go ahead and spend for the future.
In your smallcap fund, there are some interesting names from the market infrastructure side. Now that the retail flows appear very structural, do you think these stocks have a long runway of compounding?
Shiv Chanani: I am glad that you brought up that particular point and we as a house are fairly excited about the capital market infrastructure plays. A lot of these plays are not highly volatile like it used to be maybe 15 or 20 years ago. A lot of them are more secular in nature. But on a relative basis, yes, the runway for growth for a lot of these companies is far longer as we go forward whether we talk about the wealth managers, asset management companies or depositories and other technology oriented companies in the capital market space. We believe that that is a pretty solid space to be in which is going to be far less volatile and will have a good growth path as we go forward.
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