Dalal Street Voice: Lot of foreign money waiting to invest in new age technology stocks in India: Amit Gupta of ICICI Securities

There is a lot of venture capital and foreign money waiting to invest in new-age technology stocks in India. This is the trend seen in US 25 years before when Netscape and Yahoo featured in the markets, Amit Gupta, Fund Manager – PMS, ICICI Securities – said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts: 

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Q) Indian markets cooled off from highs amid weak global cues. What is your view on markets? Is it because D-Street seems to be factoring sooner than expected rate hike?

A) We believe markets will continue the upward trajectory amid intermediate profit bookings as the valuations are stretched in select sectors.

Thus, the profit booking trend can be more dominant in stock specifics where the margins are under pressure and stocks have moved up sharply. However, the balancing act can be seen from underperforming spaces so far.

Q) Nykaa made history while Patym failed to meet expectations of institutions. What are your views on the long-term potential and why such stark difference in the subscription status?

A) There is a lot of venture capital and foreign money waiting to invest in new-age technology stocks in India. This is the trend seen in US 25 years before when Netscape and Yahoo featured in the markets.

However, Yahoo couldn’t survive and other companies like Amazon, Google captured the market later. This is where this is a new beginning for Indian markets and investors need to be careful in their investments. Many new opportunities are going to come in the coming 5-10 years.  

Q) What are your views on the IPO market for the rest of FY21? The new age businesses are difficult to interpret and many of these themes will make their debut in the next 3-4 months. What are the key parameters to look at?

A) IPO market will have a good time going forward. However, companies leaving something on the plate will benefit. For example, the market was expecting a lot of liquidity to be sucked by Paytm.

However, the market response to the issue was relatively dull. This means a lot of intelligent money is available which is going into smaller IPOs also like we saw recently in Latent View Analytics which is in the booming sector and is related to many new digital technologies like Artificial intelligence, etc.      

Q) What cues are you getting from September quarter results? Do you think that earnings could take a hit in the coming quarters?

A) Volume growth is coming better however the margins are under pressure. The companies will have to adopt cost optimisation methods in order to counter the rising input inflation.

Companies that are increasing market share due to formalisation of the economy are going to be benefitted. Metals, Banking, Telecom, Construction, IT, and select Consumer Discretionary stocks have posted good volume growth.

The major mainstay of the market - Banking has posted higher YoY profits due to better recovery and lower slippages. The major worry of restructuring seen in HDFC Bank results may be temporary as announced by the management of the bank.

Corporate linked banks are looking in better shape and are attractively valued. Almost 85 per cent of the corporate loan book is provisioned and extra provisioning done for Covid may revert into the earnings.

Q) Which themes are making a comeback – the reopening trade?

A) The hotels, airlines, multiplexes, manufacturers of luggage, Shoe and apparels, retail stores are witnessing a good recovery which should continue going forward in absence of any third wave of Covid in India.

Q) What is your call on the auto space?

A) This is a space that is facing disruption of EVs, higher input cost, and shortage of semiconductors. We believe it’s better to look into the CV and rural-specific segments in this space.

M&M has witnessed a good recovery in volume growth in the Tractor segment, LCVs, and select SUVs. It is also on the forefront of EV along with Tata Motors. These companies are going to be benefitted going forward.

Q) Stock exchanges to start T+1 settlement from Feb 25, 2022. What are your views – is it a step in the right direction? FIIs had some reservations with respect to that. What are the possible impact on D-Street?

A) Yes, it is surely a step in the right direction and will see higher volumes in the equity segment. Shorter trade settlement is the way forward for bourses. Technology progress and improvement in market infrastructure has made it possible.

Quick settlement reduces counter-party risk. However as major global exchanges still offer T+2 settlement, the FIIs doing arbitrage between India and global markets may get affected.        

Q) Inflows in equity MFs were the lowest – but SIPs continue to rise and shine. What does the trend suggest?

A) This is the right trend that shows confidence from domestic investors towards our country’s long-term growth and staggered investments is the tight way in current higher valuations.        

Q) You have decades of experience under your bets, what is your winning strategy to picking stocks?

A) We believe in the higher capital expenditure cycle, it is better to have a combination of old and new economy stocks in the portfolio.

Manufacturing is going to revive in India owing to PLI schemes and push for Atmanirbhar Bharat. Exports are going to blossom. So far India has a higher weight of Services and Consumption in the economy. Now Manufacturing will also increase its stake.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)