Energy a long-term buy, telecom a contra sector: Himanshu Srivastava, Morningstar Advisers India
In a chat with ET Now, Himanshu Srivastava, Morningstar Advisers India, says an investor who is directly investing in telecom stocks, should use their financial prudence and get advice from an advisor before they venture into investing more money in this sector.
Edited excerpts:
It is turning out to be a very tepid day for the markets, very lacklustre. You have the Bank Nifty under pressure. Perhaps our markets are doing better than they would have if it were not for Reliance Industries. You do not want to talk stock specific but if I could just get your reaction on the energy pack, getting a lot of support from Reliance Industries, do you think that is going to have a rub off effect on the sector? Is this a sector one should watch out for and perhaps even invest in?
Over the last few months, I have been seeing energy sector stocks on the portfolios of various mutual fund managers and energy is one of the space where they are actually bullish on. What is auguring well is the regulatory measures that the government is taking to regulate the sector. That is something that over the long term will pan out well.
While the short term blips cannot be ignored, over the long term, the sector has a lot of potential from an investor perspective and that is what a lot of mutual fund managers are also banking on as they are increasing weight towards this particular sector. It is for a long term rather than for a short term investment.
The other sector with lots of news is the telecom pack. It is clearly in consolidation mode. We have already seen what Bharti Airtel has done with Telenor. You have a Vodafone-Idea deal in the works. Reliance Industries is announcing its tariff plans come 1st of April. When you look at the telecom sector’s valuations what would your advise be?
The telecom sector has become a kind of a contra sector. Mobile usage in country is increasing the kind of rate with which people are using mobile services. The consolidation of telecom sector was on cards since the time Reliance Jio has come into picture. It has sort of become a contra play. There are the managers who are actually reducing the exposure to this particular sector whereas there are managers who are actually increasing exposure because they are a bit contra and bit hopeful about the sector going forward.
All these aspects will make telecom an uncertain sector. There is really no indication as to how this sector will pan out in the short term. Over the long term, when this consolidation process is more in practice and we have new entities in picture, then we will see how the tariff rates and the services pan out for the end consumer.
As of now, it is a bit of an uncertain situation for the telecom sector. At this point of time, an investor who is directly investing in telecom stocks, should use their financial prudence and get advice from an advisor before they venture into investing more money in this sector.
The interesting thing has been IT and considering the spate of buyback news around TCS and Infy, people seemed to have all of a sudden forgotten about what Trump could do and whether or not that could hamper earnings and longevity of IT as a fundamental sector of investment. What is your own view on whether or not IT can come back into the value zone after the recent bout of recovery as well?
IT has always been a favourite among investors, among various participants and it is not much about the US, it is more about the Euro because Europe tends to be the more prominent sector or more prominent region for this particular sector.
When Brexit happened, we saw a lot of investors trimming down their exposure to technology sector but that has stopped. I can see there is a bit of a stagnation in that particular space in terms of holding in various portfolios.
As of now technology is doing well. We have seen that they have recovered from the down that they have witnessed earlier but obviously what happens in the US and on the Brexit side will definitely have an impact on its future prospects.
Edited excerpts:
It is turning out to be a very tepid day for the markets, very lacklustre. You have the Bank Nifty under pressure. Perhaps our markets are doing better than they would have if it were not for Reliance Industries. You do not want to talk stock specific but if I could just get your reaction on the energy pack, getting a lot of support from Reliance Industries, do you think that is going to have a rub off effect on the sector? Is this a sector one should watch out for and perhaps even invest in?
Over the last few months, I have been seeing energy sector stocks on the portfolios of various mutual fund managers and energy is one of the space where they are actually bullish on. What is auguring well is the regulatory measures that the government is taking to regulate the sector. That is something that over the long term will pan out well.
While the short term blips cannot be ignored, over the long term, the sector has a lot of potential from an investor perspective and that is what a lot of mutual fund managers are also banking on as they are increasing weight towards this particular sector. It is for a long term rather than for a short term investment.
The other sector with lots of news is the telecom pack. It is clearly in consolidation mode. We have already seen what Bharti Airtel has done with Telenor. You have a Vodafone-Idea deal in the works. Reliance Industries is announcing its tariff plans come 1st of April. When you look at the telecom sector’s valuations what would your advise be?
The telecom sector has become a kind of a contra sector. Mobile usage in country is increasing the kind of rate with which people are using mobile services. The consolidation of telecom sector was on cards since the time Reliance Jio has come into picture. It has sort of become a contra play. There are the managers who are actually reducing the exposure to this particular sector whereas there are managers who are actually increasing exposure because they are a bit contra and bit hopeful about the sector going forward.
All these aspects will make telecom an uncertain sector. There is really no indication as to how this sector will pan out in the short term. Over the long term, when this consolidation process is more in practice and we have new entities in picture, then we will see how the tariff rates and the services pan out for the end consumer.
As of now, it is a bit of an uncertain situation for the telecom sector. At this point of time, an investor who is directly investing in telecom stocks, should use their financial prudence and get advice from an advisor before they venture into investing more money in this sector.
The interesting thing has been IT and considering the spate of buyback news around TCS and Infy, people seemed to have all of a sudden forgotten about what Trump could do and whether or not that could hamper earnings and longevity of IT as a fundamental sector of investment. What is your own view on whether or not IT can come back into the value zone after the recent bout of recovery as well?
IT has always been a favourite among investors, among various participants and it is not much about the US, it is more about the Euro because Europe tends to be the more prominent sector or more prominent region for this particular sector.
When Brexit happened, we saw a lot of investors trimming down their exposure to technology sector but that has stopped. I can see there is a bit of a stagnation in that particular space in terms of holding in various portfolios.
As of now technology is doing well. We have seen that they have recovered from the down that they have witnessed earlier but obviously what happens in the US and on the Brexit side will definitely have an impact on its future prospects.
