IT sector may see recovery from Q4FY24; can invest in banking, infra, auto, says Aditya Gaggar of Progressive Shares

livemint.com:

Aditya Gaggar, Director of Progressive Shares believes that the earliest signs of recovery in the IT sector would only be visible from Q4FY24 or Q1FY25 onwards. In an interview with Mint, he said one can look at banking, infrastructure, auto, pharma, and chemicals sectors to invest. However, he emphasised that it is more of a stock-specific rather than a sector-driven market.

There has been an uptick in the order inflow seen over the past two to three months across the IT companies but a slowdown in the project-based business is hampering the overall industry growth. With the macroeconomic scenario being uncertain, which weighs on discretionary spending, Q2 results are expected to be muted (seen through the leading names already). There has been anticipation of a recovery in the coming quarters for the sector (deal wins show positivity on expected revenue growth for FY25E), but it definitely remains a wait-and-watch, as macro conditions maintain the volatility.

We feel that the earliest signs of recovery would only be visible from Q4FY24 or Q1FY25 onwards. The mid and small-cap indices have outperformed the larger peer in 2023 (witnessing a rally of 30-35 per cent) despite the volatility and global uncertainties at its peak. Will this rally continue or not is more of an unpredictable thing (as each time a correction was expected there has been an upward move led by higher inflows) but definitely this space has always been about buying good businesses.

For the ones who have invested with us and made a good return in the recent rally, we have been advising of booking profits making it a free-of-cost investment. Fresh investments are recommended in the intermittent falls being witnessed. The markets have been rangebound