Good time to get back to IT stocks, advises Gautam Trivedi
Gautam Trivedi's insights provide a valuable perspective for investors navigating the current market conditions. The return of valuation comfort in the IT sector and the potential of largecaps and NBFCs present interesting opportunities for those looking to optimize their investment portfolios.
In a recent interview with CNBC-TV18, Gautam Trivedi, Co-founder & Managing Partner at Nepean Capital, expressed optimism about the Information Technology (IT) sector, suggesting that now is a favorable time for investors to re-enter IT stocks.
Trivedi reassured investors that the past 18 months have not witnessed significant developments in the IT sector that would be considered missed opportunities. Analyzing the post-results research of major players such as Tata Consultancy Services (TCS), Infosys, HCLTech, and Wipro, Trivedi noted that valuation comfort is making a comeback. Infosys, for instance, is now trading at 18 times its FY26 earnings, indicating a positive trend in the sector. Although TCS still holds a relatively higher valuation compared to Infosys, Trivedi emphasized that overall valuation comfort is on the rise. Projections for FY25-FY26 suggest a potential 12-13-14% earnings growth, making it an opportune time for investors to re-enter the IT market.
Trivedi urged caution when considering small and midcap stocks, citing their recent strong rally. With the potential for increased volatility in these segments, he suggested that investors be more discerning and careful when putting incremental money into these stocks.
Highlighting the performance of largecap stocks, Trivedi pointed out that heavyweight companies like Reliance Industries Lt (RIL), TCS, Infosys, and HDFC Bank, collectively constituting nearly 50% of the Nifty50, recorded an average return of only 9.5% in the 2023 calendar year. Based on this performance, Trivedi recommended that investors consider putting their money in largecaps as a safer and potentially more rewarding option.
On Monday, January 15, the Reserve Bank of India (RBI) issued a preliminary circular detailing a thorough examination and streamlining of regulations that are relevant to both housing finance companies (HFCs) and non-banking financial companies (NBFCs). In a significant move, the central bank has opted to synchronize HFCs with the existing regulatory framework for deposit acceptance, aligning them with deposit-taking NBFCs. A notable aspect of the proposed modifications is the stipulation that all deposit-taking HFCs must uphold liquid assets amounting to 15% of the public deposits under their purview.
Expressing a positive outlook on non-banking financial companies (NBFCs), Trivedi, without specifying his views on IRFC, suggested that this segment, including IRFC, is becoming increasingly attractive. Despite the lag in performance of the entire banking, financial services, and insurance (BFSI) space over the last 12 months, Trivedi sees potential opportunities in NBFCs and encourages investors to explore this sector.
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