Daily Voice: This CEO sees positive outlook for IT sector in FY25; consumption to remain a strong driver of GDP

In an interview with Moneycontrol, Puneet Sharma, CEO and Fund Manager at Whitespace Alpha, stated that he is not worried about the IT sector as we enter FY25. He also mentioned that he would be cautious when trading in this sector, but a happy long-term investor. Puneet further added that the IT sector has experienced large spikes in volatility, which may continue to occur in line with global investment actions.

Puneet, who has over 15 years of industry experience specializing in quantitative analysis and statistical modeling, believes that consumption is one of the strongest drivers of GDP. He thinks that with the per capita income in India increasing, consumption will continue to rise.

Do you see a monetary easing in Q2FY25?

I believe the Reserve Bank will take action to relax rates in step with decisions from the US Federal Reserve. While recent commentary has seen a change from the hawkish stance, the rates being above the medium-term target of 4 percent and at the same time, the country continuing to deliver strong GDP growth should lead the MPC to be in no hurry to jump the gun and cut rates.

India continues to be the flavour of the season and all other macro parameters seem to suggest the same. These factors considered, I do not expect any out-of-the-line decisions.

Do you see a strong market recovery in the coming months and expect the Nifty at 24,000-25,000 levels in 2024 itself?

Nifty has delivered a 12-15 percent growth historically and hitting these levels would continue the trend. Also, these expectations are in line with the nominal GDP growth expected in the short term.

Also read: Top 5 Nifty outperformers, underperformers of FY24

Current market valuations are high but not as stretched as the mid and small-cap sectors. Given the India growth story where the market is piggybacking on the strong foundation of the economy and continued capex investments, this is possible, save for unforeseen extraneous shocks.

Are you super bullish on consumer discretionary, materials, and industrials segments?

I prefer to spread my investments across different sectors rather than placing large bets on specific ones. Our fund has consistently beaten the market every month by maintaining a diversified portfolio and a side pocket in derivatives. I believe this approach is more reliable than being overly bullish on a few sectors, which can be cyclical and leave investors vulnerable to unpredictable global or local events.

Also read: Higher returns with lower volatility: Select indices beat NSE Nifty 50 in past year

Do you think the buying interest is yet to be seen in the FMCG space?

It's an established trend in the Indian markets for FMCG valuations to always being richer compared to say global peers such as Coca-Cola or Pepsi.

I believe consumption is one of the strongest drivers of GDP and with the per capita income in India rising consumption will keep increasing. Couple this with a short-term phenomenon of receding El Nino and the onset of La Nina weather conditions, and we should see an improved crop harvest leading to a rise in rural consumption. This should bring back volume growth for the FMCG sector spurring overall growth.

Also read: Small-caps win FY24 fair and square. Who will ace the next round

While we can expect a lag in this scenario playing out I believe it's a sector that will deliver in the short to medium term and a good defensive bet in the long term.

Are you worried about IT space as we enter into FY25?

I am not worried. Looking at the global markets, GDP growth globally, specifically in the US market is strong and the IT sector in India which has the highest revenue shares from the US is poised to take advantage of the same.

Indian IT companies are also asking strong forays into emerging technologies that promise to open up so many more avenues for profitable growth. I do not think the entire AI wave is currently poised to take over jobs like many fear as the technology is still too primitive, unlike the call centre industry.

We have however witnessed large spikes in volatility in the sector which may continue in tandem with global investment actions. I would be a cautious trader in this sector but a happy long term investor.

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