Investor interest has moved from IT to banking, says Gautam Duggad of Motilal Oswal

Gautam Duggad, head of research, institutional equities at Motilal Oswal Financial Services, in an interview to CNBC-TV18 said they are positive on IT for the last three years.

“We have been positive on IT for last three years. The problem with IT sector however is it's a global sector and therefore always vulnerable to what is happening in the near term in the global economy. We all know there is a problem in big markets like the US, where talks about slow down, recession, Fed rate hikes are obviously muddying the field for the IT in the near term. So we are keeping the faith, we have about 200 basis points of overweight, but our entire overweight and entire allocation in IT is towards a large cap. We have zero allocation towards mid-cap IT because their valuations clearly are at a multi-year premium.”

Meanwhile, Duggad believes that investor interest has moved away from IT to banking. He said, “Investor interest right now, as one would imagine, has moved away a little bit from IT towards banking. Banking has come back into the reckoning after two to three years of underperformance and which has also amply reflected in the relative performance of banking index by almost 38 percent year-to-date in CY22 versus the IT index."

Talking about footwear space Duggad said, “What we are excited about is the room for growth, which is available for the organised footwear space. This is not a one year or a two year story, this is a next three five years story. Secondly, aspiration levels are quite high.”

He added, “I want to caution that some of these stocks have seen a very significant move already. So somebody who has a very short term view, may not find the space very attractive. But somebody who has a three to five year view, I think there is enough room for compounding in some of these stock and footwear, obviously, is one of that sub-themes in lifestyle consumption where we have initiated coverage on Metro and Campus with a ‘buy’ rating.”

Duggad bets on the consumption theme. He said the consumption space in India has a lot of legroom for growth. He said, “Some of the consumption stocks whether it's Pidilite Industries or Asian Paints or Astral, there are a variety of stocks which have been forever expensive. It is for an investor to judge what is his comfort on risk-reward, but consumption as a space in India has a lot of legroom because we are still talking about a $2,200 per capita income and if all of us believe that India as an economy is going to transition from a $3 trillion to $ 5 in the fullness of time, then clearly a lot of these talks will have enough room.”

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