In an interview with CNBC-TV18, Mahesh Nandurkar, the Head of Research and Managing Director of Jefferies India, shared insights on various sectors and stocks. He discussed the future performance of information technology (IT) companies, his perspective on the banking sector, the potential of quick-service restaurant (QSR) businesses, and the re-rating potential of engineering and capital goods stocks.

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Nandurkar expressed his belief that IT companies might disappoint in terms of earnings in the upcoming period. Despite acknowledging the sector's recent growth and significance, he maintained an underweight stance on IT.

In contrast, Nandurkar expressed a favourable outlook for the banking sector, stating a preference for banks and financials over IT stocks. He even emphasised a bigger overweight on non-banking financial companies (NBFCs) compared to traditional banks.

"In the financial space we like the banking story. Our clear view is that we have a preference for banks over IT sector. So if you get that one call right, it will be a big driver for the India portfolio performance. However within banks, NBFCs tend to perform much better than the banks in a period of stable to declining interest rate environment. So we have a bigger overweight on NBFCs compared to banks," Nandurkar said.

Regarding the manufacturing sector, Nandurkar identified engineering and capital goods stocks as the best way to benefit from the expected increase in capital expenditure (capex). He anticipates a re-rating of these stocks, suggesting a significant potential increase in their valuations.

Looking at long-term prospects, Nandurkar expressed optimism about the QSR space and considered it attractive from an investment perspective. However, he advised waiting for one or two quarters for investor expectations to align with actual delivery before jumping into the QSR space.

"QSR as a space looks pretty attractive from a long term perspective. However the space as a whole needs to go through a period of one or two quarters where the investor expectations versus the actual delivery get mitigated. So I would wait for a couple of quarters before jumping into the QSR space," Nandurkar said.

Nandurkar also said he believes that real estate is currently in the third year of an upcycle and expects this upcycle to last for another 3-4 years.

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First Published:May 23, 2023 5:57 PM IST