For IT, 2024 might be a tougher year than 2023: Sandip Sabharwal

Around 212 stocks of companies with a minimum market capitalisation of Rs 500 crore have eroded investors wealth considerably in the first half of 2023, as per data analysed by ETMarkets. Most of the laggards were midcaps and smallcaps, though the broader markets have outperformed the largecaps in recent months. Adani Group companies dominated the list, with Adani Total Gas falling more than 82% YTD. Infosys was the worst performing stock in the frontline IT pack, and Hindalco Industries was among the severely affected largecap metal companies due to a demand slowdown.

According to Sandip Sabharwal, large group stocks like Tatas, Mahindra Group, Adanis, and Reliance have performed well. He believes if the economy sustains 7-8% growth, many companies and groups will continue to thrive. However, he is cautious about HDFC Bank and warns investors tobe wary of the overvaluation in smallcaps.

After inline numbers from TCS and disappointment by infy, it might appear that Q4 earning season for the IT sector has taken a back seat. That might not be the case, as Q4 results will throw a light on how individual companies are managing the situation in a changed environment. Stock Reports Plus, powered by Refinitiv, is a comprehensive research report that evaluates five key components of 4,000+ listed stocks - earnings, fundamentals, relative valuation, risk and price momentum to generate standardized scores.

The whole logistics sector has seen a major shake-up in the last few years, right from tech aggregators who came into the scene with a promise to disrupt, challenges that Covid brought on the table to a phase where oil prices become a pain point for margins. After all the challenges, the sector has emerged stronger as some companies restructured their operations to stay profitable. There are many facts about the logistics industry which might surprise many. Just to mention a few, a metal major has such a large fleet of owned trucks that the unit itself can be listed as a separate company and probably would figure in the top 5 logistic companies. Last year at one point of time, the market cap of one single company was higher than the market cap of all the private sector companies put together and interestingly that company was in the red.

The stock market is very challenging at the moment, but if someone is willing to look at a one year time horizon, they can find good opportunities in the construction infrastructure space. Larsen & Toubro is a good example of a company that is going to benefit from this market trend. Other companies that are worth watching include Mahindra and Mahindra, JLR, and Mahindra Electric Vehicles.

Cement has been a sector where most of the analysts have been caught off guards. The stocks have done well and a large number of analysts have been sticking to their stands that pricing and capacity utilization is an issue. What they probably ignored was the fact that any industry which has been facing headwinds for a long time tends to sort the issues and few players are able to make a comeback as consolidation takes place. Pretty much what we have seen in power.

As an investor, one needs to look at every sector, companies and their operating and valuation matrix separately. The reason, when there is a change in the operating matrix, the valuation matrix gets impacted more. When valuations are not cheap look for only those stocks at this point of time where there has been a fundamental improvement in terms of macros factors which are governing that sector or industry has turned better. The reason to be cautious is that when a correction takes place, and it does, stocks which have seen an improvement due to fundamental reasons tend to perform relatively well as compared to others. So look at stocks where analysts' outlook has improved over the last one month. These selected stocks depict a strong upward trajectory in their overall average score which is based on five key pillars i.e. earnings, fundamentals, relative valuation, risk and price momentum. This implies that there has been a significant improvement in their market outlook in the given time frame.

The relentless selloff in India may be influenced by the situation in China, where there are rumors of further attempts to support their domestic stock markets. Some foreign investors may be tempted to switch their investments from India to the oversold and cheap Chinese equities. Despite short-term pressure on the financial sector, it offers fantastic opportunities for medium- to long-term investors. IT and healthcare sectors, viewed as more defensive, have been strong performers. India still presents a good longer-term investment story, although there may be some money flowing into China if it outperforms.

Amazon, Google, Microsoft and Meta are making strategic trims even as they rebound from the tech downturn.

Shareholders have had a remarkably good year. Forecasters have had a terrible one