Amidst the slowdown in the IT sector, the next uptick in the market may come from sectors like manufacturing, BFSI, healthcare, consumption and energy…
highlights
- There has been a sharp slowdown in the IT sector for a long time.
- Nifty IT has declined by about 17 percent in 1 month.
- The next uptick in the market may come from sectors like manufacturing, BFSI, healthcare, consumption and energy.
IT sector was once considered the growth engine of the market, but today the picture has changed. If we look at the recent data, pressure is clearly visible in the Nifty IT index. Nifty IT has fallen by 17 percent in the last one month. Returns in the sector are weak, valuations have softened and investor confidence is not what it used to be. In such a situation, the question arises that if IT does not lead then who will take the market forward?
If not IT then who will handle the market?
According to Vijay Mantri of Financial Services, data of the last 25 years shows that IT supported Nifty in many periods, especially in 2000 and 2020. During Covid, the share of IT in the total profit pool of listed companies had reached about 23%. But now this share has reduced considerably. Growth has been reduced to single digits or low-teens and its weight in the index has also reduced. Therefore, it is no longer correct to assume that the market will run only on the strength of IT.
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Capex and credit growth are giving new signals
Interestingly, private capex of 700 listed companies has increased by 13%, which is a six-year high. This investment has mainly gone into auto, manufacturing, metal and mining. On the other hand, bank credit growth has reached double digits after many years. This means that activity on the ground in the economy is increasing.
Vijay Mantri believes that manufacturing, energy, BFSI, healthcare and consumption sectors can perform better in the coming times. Some sectors of the old economy may remain under pressure, but the market momentum will continue, only the leader may change.
India’s structural story is the biggest strength for long-term investors. India’s contribution to global GDP may increase rapidly in the coming five years. The country’s working-age population is strong and per capita income is rising.
Changes in lifestyle are also becoming big themes. Rising obesity rates, a surge in packaged food consumption and an increase in discretionary spending—all make healthcare, pharma and consumption strong themes.
Emergence of formal economy and capital market
India’s economy is becoming increasingly formal. Earlier, the share of bank deposits in total financial savings was 57% and equity and mutual funds were only 2%, now deposits have decreased to 37% and equity/MF have increased to 13%. BFSI and capital market intermediaries can directly benefit from this.
Vijay Minister said that manufacturing expansion is not just the story of ‘China Plus One’ but is part of the ‘Anything but China’ strategy. Companies want to reduce geopolitical risk and India can benefit from this. Also, if AI is the future then the demand for electricity will also increase. It would be wise to keep an eye on the power and energy sector.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. ET NOW Swadesh recommends its readers and viewers to consult their financial advisors before taking any money-related decisions.
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