Now is not the time to read too much into Accenture commentary and buy into IT companies, Santosh Singh, BFSI & Head of Research, Haitong Securities, tells ET Now.
Edited excerpts:
Where are you finding opportunity in the market?
We are finding opportunity in areas where the stocks have had a greater fall. There are some midcaps, some financial names where we think there is an opportunity to make money. Specifically, corporate banks are a space where there is an opportunity to make money. There is opportunity in some of the auto names and rural theme.
Looking at the markets, I get a sense of 2013 when people used to talk about only two sectors — IT and retail banks and that is what we are looking at today. We think these are the two areas where less amount of money would be made than some areas like capital goods, some of the corporate banks or some of the smaller finance companies.
How should one read into the guidance of Accenture? There is a very big similarity between Accentures business model and IT companies business models. How should one read into the encouraging commentary from Accenture?
Accenture has been outperforming most of the Indian IT companies for some time. When the Indian IT stocks were giving negative commentary, Accenture was outperforming the analysts expectations. At that point in time, most of the IT analysts used to say that Accenture is very different from what Indian IT companies are and today I am surprised when I hear people say Accenture giving positive guidance means Indian IT companies should also benefit from it.
Without denying the fact that there has been some positive development on the IT space, I am not going to read a lot into what Accenture says. Accenture has been taking market share and has always been ahead of most of the Indian IT companies. So, I would not read too much into Accenture commentary.
Definitely, there are some positive fundamentals building into IT companies, but so have the valuations. TCS, from 14 times, has moved to 20 times earnings. In Infosys, the earning has been rerated by 25-30%. It already prices in the fundamentals. It is all about rupee now which is at 69. If it goes to 72, is there an upside? Yes, there is. But now is not the time to read too much into Accenture commentary and buy into IT companies.
Are there opportunities to buy more of the decline in metals?
Definitely. If there is a turnaround in metals or if there is an increase in commodity prices, then metals is the sector which tracks commodity prices. If there is an increase in commodity prices, then a case can be made that commodity companies as such could be bought. There has been significant decline in commodity companies stocks. I would say that cyclicality in the market also plays a significant role. I do not think there would be a lot of demand as of today. People are getting more defensive.
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