Amnish Aggarwal from Prabhudas Lilladher, noted the volatility in trade relations with the US. “The situation of your trade parameters with the US remains very volatile. Now, we have got some interim arrangement, but as we have seen over the last one year, nothing can be said with certainty because this is not only the India problem, this is a bit of a geopolitical problem as far as your tariffs are concerned. At this point, I would be very cautious on how the deal with the US will pan out. Something like, if we do not lose from the situation we are in, that should be satisfactory for the country. I would be more gung-ho on some of the other deals we have done, which includes the EU, where we are getting much better terms of trade. Based on the tariff policies of the US and other geopolitical factors, I believe that overall market volatility will continue in the near term.”
On the impact of artificial intelligence on IT services, Aggarwal highlighted the uncertainty surrounding business models and profitability. “It is very uncertain because it is not the beginning of AI or the transformation, it is not the end of it, but it has just started getting noticed and having some impact. We are not in a stage where growth rates of companies have started plummeting or there is margin pressure. So, this is a big reset. I do not think it is going to get settled in a quarter or two. One needs to wait and watch how deep and big the impact could be. The market actually hates uncertainty. I do not see any big green shoots for IT in the near term, and that is why we have been underweight on IT services for at least a couple of years.”
Turning to financial services, Aggarwal discussed the value unlock potential in digital lending platforms. “One needs to look at it from three angles. It aims at utilizing the cash flows the company is throwing, and because you are into telecom, we have got the digital platform and tech stack already there. They are extending it to make it bigger than today. The bigger issue is how your screening process is and how you control lending, collections, and delinquencies. Given the money they are allocating and the reach through their mobile network, they have a fair chance to scale it up. As far as value unlocking is concerned, it is too premature to presume. But for a company throwing in so much cash, it is a good extension and usage of cash. This is not going to be the first initiative, as other segments like data centers will also play a major role over time. The impact on financials and value unlocking will take a long period.”
On IDFC First Bank, which recently saw a 16% hit to its stock, Aggarwal emphasized perspective over panic. “We do not have a formal rating on the stock, but the hit of 590 crores is not that big relative to the balance sheet. However, it raises questions on the process and systems prevalent in the organization, which they need to address. Usually, there is initial panic, but if they manage the situation well and the deposit franchise is intact, things should recover over time.”
In the auto sector, Aggarwal observed a mixed but generally positive momentum. “The auto sector changed gears immediately post-GST. The past three to four months have been fairly robust. Two-wheelers were already doing okay, but for PVs, the major push came later. Logically, the momentum should continue, but last month Maruti showed flattish volumes for small cars, while M&M did well in SUVs. Entry-level cars might show some fatigue, but two-wheelers and commercial vehicles continue to do well. The farm sector has been strong, though El Nino may impact the upcoming monsoon and tractor demand. Overall, selectivity is key in the auto space.”
Aggarwal also shared his view on metals. “In the ferrous space, demand is good, and profitability is likely to improve in Q4. From current levels, incremental returns are possible. For non-ferrous, like aluminium, we have already seen the best, with companies like Hindustan Zinc moving up on price action. Ferrous remains the space where we are still positive.”
