![]() ![]() Some of these MNCs have announced higher investment in their Indian businesses and commentaries in general are highly positive. With an improving capex atmosphere, including industrial capex and also industry 4.0 initiatives, MNCs in the capital goods segment will be exhibiting strong profit growth for the next three-four years. In the near term, they may remain sideways as in base building mode for the next two quarters but one must start taking stock-specific investment decisions in the sector.Īlso read: FOMC meeting | How correlated are Indian and US markets after rate action?ĭo MNCs in the capital goods segment look attractive?Ĭapital goods companies including MNCs were witnessing mid-single-digit revenue growth during for last 10 years, while fixed costs like manpower costs were growing at higher rates, denting their margins and suppressing their profit growth even further.īut we are seeing strong improvements in their fortune order books have rapidly grown and with operating leverage kicking in their profits are growing at strong 20 percent+ rates. In aggregate, surely the sector is down due to the higher weightage of large IT companies but there, too, with recent valuation multiple de-rating, stocks have become value buys. So in IT, being stock-specific is a better strategy. Growth deceleration has happened mostly to large IT companies with higher exposure to large global corporations.Ĭompanies having higher exposure to public infrastructure, engineering design, electronics and mid-sized companies are doing very well. We have already seen niche small IT companies exhibiting strong double-digit growth during the ongoing results season. The IT sector is no more a homogeneous space in the stock market. Will the correction continue in the information technology (IT) space? Should one start building a portfolio in the sector? So, there appears higher probability of a pause now. Also, the banking stress is already leading to tightening of conditions and that will too further act similar to the impact of rate hikes. Recent issues in the banking sector in the US are worrying for market participants. The US monetary policy has stayed in the tightening cycle for more than a year now but inflation still stays higher around 5 percent, as reported in March, and the underlying economy stays in expansion mode with April service sector PMI at 53.6, triggering another 25 bps hike by the Fed on May 3. What is your view of the Federal Reserve's latest rate decision and do you expect it to hold interest rates for the rest of the year? Hence there appears higher probability of a pause now," says Kumar, who has over two decades of experience in fund management.Īt home, he expects MNCs in the capital goods space to show healthy growth over the next three or four years as capex improves and various steps are taken to make the most of China plus one strategy. ![]() "Banking stress is already leading to tightening (of) conditions and that will too further act similar to the impact of rate hikes. Narnolia Securities co-founder and chief investment officer (CIO) Shailendra Kumar thinks there is a higher probability of a pause by the US Federal Reserve after it raised interest rates by a quarter of a percentage point on May 3 as regional banks continue to see trouble. ![]()
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