"To say nothing,
especially when speaking, is half the art of diplomacy."
—Will Durant (American, 1885-1981)
Word for the day
Mussitation (n)
Silent movement of the lips
in simulation of the movements made in audible speech.
Malice towards none
After working tirelessly for
3years, does PM Modi need a vacation?
First random thought this morning
Ahmed Patel has been elected to
Rajya Sabha again.
Do you find-
·
Congress any
stronger
·
BJP any
weaker
·
RaGa any
wiser
·
India any
better (or worse for that matter)
If not, what was all this
brouhaha about?
If yes, Should AP be made
opposition's candidate to take on Modi in 2019?
Indian IT & Pharma at crossroads
The market consensus at this point
in times seems overwhelmingly against pharma sectors; whereas on IT the street
seems divided.
Many readers have been asking my
outlook on these two sectors. I may
present my views on these two sectors as follows:
Technical perspective
The underperformance of pharma and
IT sectors in the current market cycle (August 2013 till date) shall be
evaluated in context of the stunning outperformance during the previous four
year market cycle (March 2009 to August 2013). In this period Pharma Index
gained 240% and IT index gained over 300%, as compared to Nifty gains of 105%.
So on normalized basis, In past
eight years (since March 2009), Nifty has gained ~290%, where as Pharma Index
is higher by ~365% and IT index is higher by 425%. Not much to complaint there.
To make the context even more clear, Bank Nifty has gained 640% since March
2009.
The worry, as of this morning, for
traders should therefore be the banking space (especially private banks) rather
than the Pharma and IT space. The underperformance going forward, purely on
technical basis, could be more pronounced in financial space, in my view.
Fundamentals
On fundamental basis, I see both
the sectors standing at crossroads.
In past two decades, the core of
the Indian IT and ITeS sector has been the wage arbitrage opportunity. The
focus on innovation and product development has not been to the extent it could
have been or it should have been. However, of late many companies have started
focus on areas like digital, cloud computing, artificial intelligence (AI) etc.
But the focus still mostly seems to be on facilitation of cost optimization of
customers' operations, rather than innovating new processes or products.
Under these circumstances, I
believe that large IT players, who have the wherewithal to adopt to the
changing requirements of the clients will survive. I believe margin pressures
will ease as the technical intensity of the engagement rises. Adoption to new
technologies will reduce operating cost for the service providers as well.
Besides, with development of new technologies, a whole new set of businesses
may become technology intensive (e.g., retailing, biotechnology and automotive
engg) thus widening the catchment area for Indian IT companies.
Insofar as the smaller businesses
are concerned, in my view, the pure wage arbitrage based small businesses will
be replaced by the small businesses with some niche technologies and designs.
It is the space where the big money will be made over next decade....to
continue
No comments:
Post a Comment