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Business News/ Money / Personal Finance/  IT growth in near term to be modest, says Sneha Poddar of Motilal Oswal
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IT growth in near term to be modest, says Sneha Poddar of Motilal Oswal

Sneha Poddar believes that our economy is undergoing a mini-Goldilocks moment as a result of strong macroeconomic conditions, healthy corporate earnings, peaking of interest rates and current policy momentum.

She says that conservative investors should invest in large cap fund, while moderate risk takers can look at flexi funds. Premium
She says that conservative investors should invest in large cap fund, while moderate risk takers can look at flexi funds.

Investors can expect significant growth in the capex, manufacturing, and infrastructure development in this financial year, says Sneha Poddar, AVP, Motilal Oswal in an email interview with MintGenie.

She also talks about her outlook on the Indian IT sector, likely impact of interest rate cuts by RBI in the near future. She also suggests the mutual fund categories which young investors should invest into based on their risk appetite. 

Edited Excerpts: 

What is your outlook for the market index for this financial year?

India is currently experiencing a mini-Goldilocks moment due to solid macroeconomic conditions, healthy corporate earnings, peaking of interest rates, and ongoing policy momentum. India now boasts a unique combination of ‘size and growth’. It is set to exit FY24 with a GDP growth of over 7.6 percent. 

Expectations of political continuity after the forthcoming Lok Sabha Elections should bolster the overall economic momentum further. 

ALSO READ: Lok Sabha polls 2024: Equities or other asset classes? What should you pick ahead of election results

High-frequency data (GST collections, auto monthly numbers, Power demand, PMI data, etc) indicates that earnings momentum will continue to remain intact going forward as well. Thus, the overall trend in the market remains positive.

What is your view on the IT sector's performance while most IT majors have failed to meet their revenue growth guidance?

Uncertain macroeconomic outlook continues to dampen the demand environment for the IT services industry. Despite some initial signs of pent-up demand, there is a continued pause expected in discretionary deals in the near term. 

ALSO READ: Nifty IT index falls 5% in April; how to play the IT sector after Q4 results?

Though we expect demand improvement in FY25 on the back of a positive outlook from US Fed and large order backlog; however, the certainty of this translating into tangible growth remains uncertain. While the companies expect FY25 revenue growth to be better than the low FY24 base, near-term growth commentary is still modest.

As RBI is likely to cut rates later this year, do you think this will have an immediate ripple effect on the rate-sensitive sectors such as banking and housing?

Both the RBI MPC meetings and the FOMC meetings indicate that the interest rate cuts are not on the horizon in the near term. However, whenever it happens, it will have a positive impact on interest rate sensitive sectors like NBFC, Real Estate, Auto, Consumer Durables. 

Especially, fixed-rate lenders such as Vehicle Financiers, Micro Financiers and even Micro-LAP lenders will benefit from any interest rate cuts whenever they occur.

Which are the sectors that are set to give good returns this FY and the ones that would, in likelihood, face the headwinds?

Expectation of political continuity augurs well for sustained economic reforms and continued policy momentum, with a focus on capex, manufacturing, and infrastructure development. 

With inflation moderating and predictions of a normal monsoon, coupled with election spending, we expect consumption trends to bottom out and contribute to growth in 2HFY25. 

ALSO READ: India eyes to unlock MSME potential, pivots to digital public infra to catalyze growth

In addition, we believe selected domestic cyclical themes, such as financialization of savings, private capex revival, rising discretionary consumption, strengthening real estate cycle, and the massive development of digital and physical infrastructure is likely to drive medium term India story.

What is the category of mutual funds that you would recommend young investors to explore investing into?

Depending upon one’s risk appetite, one can choose which category of MF he or she wants to invest. For conservative investors, investment in large cap funds is recommended while moderate risk takers can look at flexi funds. 

Mid and small cap funds are more suitable for aggressive investors. Young investors with limited capital should ideally look at large or flexi-cap funds.

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Published: 06 May 2024, 11:08 AM IST
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