Large cap IT stocks to join midcaps in the party: Carnelian Capital's Kunal Shah
Kunal Shah of Carnelian Capital spoke with moneypoise and discussed his firm's outlook on fast-moving consumer goods (FMCG), new economy firms, and financial institutions.
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According to Kunal Shah, Senior Research Analyst at Carnelian Capital, significant IT companies should profit from the quantity of deal wins they have disclosed over the past couple of months as they prepare to release their second quarter results in FY24, beginning with TCS on October 11. Shah discusses fast-moving consumer goods (FMCG), new economy firms, and financial institutions in an interview with Moneypoise.
According to Shah, the contract wins are back, and TCS and other major firms have made similar announcements in recent months. Growth in Total Contract Value (TCV) and revenue in Constant Currency (CC) are two important indicators for such businesses, he said. He noted that many mid-cap IT firms are trading at 52-week highs on the back of strong growth reports. It's time, he argued, for large-cap IT firms to catch up to midcaps.
The lack of a recovery in rural sales has been a sore spot for FMCG companies, according to Shah. He also warned that the silence would last for some time and advised that we keep an eye on the recovery of the rural economy.
Because of their high valuations, Shah added, they have been keeping an eye on the newer companies. He continued, "So far, we have avoided them because of the valuations and the cash flow that these companies have been generating." This isn't to imply that these companies won't succeed in the medium to long term, though.
The high interest rates, Shah claimed, would cause most individuals to move their money out of their current and savings accounts (CASA) and into term deposits at banks. He continued by saying that in a few quarters, the pre-provisioning operating profit (PPoP) will equal the substantial loan growth experienced by most banks.
He continued, "Not to say that the operating expenses are not going to be growing because everybody is in an expansion mode, but still the PPoP growth, probably one quarter down the line should be in lines with the loan growth, and the pressure should kind of settle down in a quarter or so." Mid-sized banks' asset sides have been repriced, according to Shah, who added that the NIM will return to normal in the coming quarter.
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