IT sector may outperform due to weakness in rupee, says Vikas Khemani of Carnelian Capital

Vikas Khemani, the founder of Carnelian Capital Advisors, spoke to CNBC-TV18 about stock market fundamentals and select sectors.

Speaking about the stocks market, Khemani said, “It is a little bit of fragile situation and it depends on what kind of countercyclical measures have been taken by the government and the regulators to kind of arrest this situation. The biggest problem at this point in time in the economy is the availability of capital. I don’t think it is about demand, it is about anything else.”

“It is not about liquidity or rate any more. It is about flowing the economy into the real economy, into the businesses and which we are seeing not happening. The measure which was announced in the budget giving Rs 1 lakh crore to NBFC with FLDG it is still yet to see the light of the day so we need actions with a huge amount of urgency to kind of get the capital into the system. Unless that happens, unlikely we will see anything turning around in a hurry.”

According to Khemani, IT might perform better, but sentiment in the market is weak. “IT might outperform because the currency is weakening, which is providing support and businesses are decent. It might provide but right overall sentiment in the market is slightly weakened. The international situation is not giving any comfort. We have a tricky international scenario as well as the local scenario. So in this time better to be risk-averse especially from taking a fresh perspective or be watchful and pull in when the right time comes in.”

Talking about the consumption space, Khemani said, “Consumption would always be in my opinion defensive and safe space for a long period of time. Again time horizons can vary but if you see this space has held on for quite some time. In a country like India consumption will not go, it might slow down, it might accelerate, but unlikely to have a de-growth kind of a situation.”

“Risk reward is favourable in stock where a significant amount of correction has happened especially in consumer durable space or discretionary space. Probably you will see a lot more slowdown in the next one or two quarters before it starts getting corrected because the numbers might still worsen. Numbers will not improve till the time credit flows to economy and revival will take time no matter what we do,” he added.

 

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