Do you believe that the IT story will go on for some more time?
The IT story really got a tailwind in terms of the rupee depreciation. But is there a secular story building up in terms of volume growth or pricing power? All those things still remain in an apprehension zone at the moment and added to that, there are quite a few uncertainties connected to what is happening in US at the moment.
IT has had a good run without any doubt and even today it still qualifies as something which can provide a defence to your portfolio. If you are looking for making some very proactive gains or something over a slightly longer period of time, I do not IT is going to outperform the indices in any meaningful way.
I would say one has to be cautious as far as IT is concerned. In uncertain times, it certainly should be taken as one of the bets to provide some defence to your portfolio, I would still wait and watch as far as IT is concerned and till some clarity has emerged on that.
How are you looking at the disruption within the telecom space? There are reports coming in on Vodafone-Idea saying that there is going to be a lot more pain down the line. What is your assessment of telecom?
Some of the issues which you mentioned about telecom has been haunting all the investors for quite some time. Disruption being the foremost in what is causing all the pain. Added to that, ARPUs are not coming back and capital intensiveness of the business is really going up. One needs to make very huge investments to ensure that one is not left out in terms of the technology and competition.
It is something which is not really great for any sector to be in. This sector still has been going through a lot of pains which possibly will continue. As far as Jio is concerned, it has very successfully disrupted the entire industry and will continue to do so but one has to see how much investment Jio is going to make and how quickly they are going to recover some of the money or whether there is going to be a meaningful ROI on the investments that they make or how long one has to wait.
Some of these questions everybody will still try to understand and interpret. In my opinion, at the moment, it is better to avoid this sector.
What is the long-term visibility for metal companies according to you?
We have seen a good improvement in the performance of metal companies in the last one year and possibly even the last quarter has been pretty decent. But my own take is that this has been largely supported by the anti-dumping duty.
A lot of governments especially in the emerging countries have imposed a lot of tariff barriers on chemicals, metals etc. This is really helping them show a very good performance. My worry of course is that whether this thing can be considered as secular and on a long basis, I am not too sure whether the imposition of tariff that is helping all the companies should be taken as a long- term change.
Second, economic recovery is always a cause for worry and the commodity prices or the steel prices have come off a bit but by and large, we can still expect the performance of companies to be very good over next three to four quarters. It is difficult to take a very long-term view on any of these commodities. So next three to four quarters will certainly be very good.