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Siddhartha Khemka, Head of Retail Research, Broking and Distribution at Motilal Oswal Financial Services on Monday discussed the fundamentals of the market.
He believes IT companies are best positioned to benefit from the work-from-home environment and the increasing shift towards digital spend globally.
“IT has shown strong growth and that sets up the sector for almost robust double-digit growth for FY22. Q4 will remain strong and both the tier-I and tier-II companies will show strong growth. The deal wins have been pretty strong,” he said.
He prefers Infosys and HCL Technologies among the large-cap companies.
“Within midcap space, there is an interesting company – L&T Technology Services (LTTS). We see it as a key beneficiary of a growing tech adoption across research and development (R&D) and new product development. This stock has an ability to deliver mid-high double-digit growth over the medium-term,” he added.
Globally, there has been a structural shift happening in the IT sector.
“Whether there is lockdown or no lockdown, we have seen a pretty strong structural shift towards digital and that is happening globally. That is what the pandemic or the lockdowns have done to organizations worldwide. That is leading to higher deal-wins for the entire IT space. We believe it will continue,” he explained.
On metals space, he stated, “Metal space has been pretty strong on the back of robust demand. The domestic prices are still at a discount to the global prices. So there is room for further improvement in domestic metal prices. We believe the demand could continue.”
“The preferred picks within metals on the steel side are JSW Steel and Jindal Steel and Power Ltd (JSPL) and Hindalco on the non-ferrous side,” he pointed out.
With the onset of the summer season, Khemka is expecting to see good demand for some of the consumer demand companies.
“Our preferred pick there was Voltas but now we see that Orient Electric is fast emerging as a strong competitor in the electronics consumer durable space. With the rising temperatures across the country, the demand for consumer durables especially fans will be pretty strong. They deserve a better valuation and we like Orient Electric in the consumer electrical space with a target price of Rs 350,” he stated.
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