Should one build on auto theme? Will softness persist in IT?
Gautam Duggad, Head of Research — Institutional Equities, Motilal Oswal, says “there is a possibility that we might see continued strong performance of midcap IT. But the stock prices may lag a little bit now to allow the earnings to sort of, to allow the valuations to sort of catch up, whereas large cap, we find risk-reward more attractive. So while we have an overall underweight stance on IT, within that all our allocation is currently drifted towards large cap, so HCL Tech being our top idea.”
You have seen big upgrades and if I look at your note as well in autos, that is a meaningful sector, it is a very large contributor. How should one look into this sudden uptick in demand in autos? Do you think it will sustain? Should one build up on this auto theme, whether it is exported to domestic or EV now?
Gautam Duggad: Let me give you one context on auto. Between FY18 to FY23, the auto earnings were absolutely flat in Nifty at about 30,000 crores. FY18 was the earlier peak, when auto earnings in Nifty were 30,000 crores. In FY23 also, it was about 28,000 crores. FY24 is the first year of a big auto earnings growth. We have seen auto earnings doubling in FY24, which is why a year and a half back, we had gone overweight on auto from underweight.
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Having said that, now we
