How to make money in IT & fintech : Kunj Bansal

There are a few sectors which have not been not impacted by Covid and these include IT services and the fintech companies. So, we will continue to see money coming into this space, says Kunj Bansal, CIO, Karvy Capital. Do you think the RBI action could change because of this huge spike in CPI inflation numbers and move from an accommodative stance? That would derail the market momentum!Before the RBI action is due, this week itself we have Fed action coming in on Wednesday after the market closes tomorrow. Even in the US, inflation has been trying to raise its head a little bit. We will see what indication the Fed gives and there is a likelihood that Fed is not going to rock the boat anytime in the near future. Central bankers world over understand that doing anything at this point could derail the whole growth process because of Covid impact and the after effects are not yet gone. Coming back to India, the same will apply to RBI as well and I do not think they will do anything for some other reasons. While CPI and WPI have gone up, one fact is the base effect. Keeping that aside, there is a genuine price hike. Fuel prices have gone up; vegetable prices have been going up, commodity prices, metal prices have all been going up leading to revisions in the price of automobiles and other consumer durables. So yes, inflation has been going up but was it unexpected? Probably not. Though the quantum could be a little bit higher. Also if we go by the RBI’s comments, Governor Shaktikanta Das has been saying repeatedly that RBI will do whatever needs to be done. What they might do is what they have done earlier also. They might also give some indication that it cannot continue indefinitely. At some point of time, things have to normalise. If at all, they might do some indirect action but in terms of direct rate hike, I don’t think they will hike it immediately in the coming policy meeting. What about the tech driven rally? How have you looked at the opportunity within this space and do you believe that there is a lot of money to be made here?Yes. Over the last two-two and a half years, there has been a lot of movement in the tech space in India. Earlier, it was simply divided into IT services largecap and IT services midcap. Now it depends on whether we want to add the whole new fintech listings which have happened in the last three years to that space or whether we want to keep that separate. If we include it as another sub segment, there are three sub segments of IT investment opportunity available to investors in the listed Indian market. My view has been fairly positive on the whole space for quite some time and continues to remain so. What has happened is that the valuation of smaller cap or midcap IT has crossed the largecap IT. Money continues to come into the Indian equity markets both from global and domestic investors in a space while the economy and some sectors have been heavily impacted by corona. There are a few sectors which have not been not impacted and these include IT services and the fintech companies. So, we will continue to see money coming into this space. When money pours in, valuations tend to take a back seat as long as the financials are supportive and the financials indeed have been supportive. In fact, in the case of fintech companies, the growth rates are in the range of 30-40-50% and as a result, their valuations are already high and can continue to remain that way. So my view continues to be positive. There may not be money for the short term traders with the short term view, but for any medium term view, the money is still to be made from current levels.

from Economic Times https://bit.ly/3xrVpei
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