Kenneth Andrade, founder and chief investment officer of Old Bridge Capital, believes that the macro environment globally is likely to stay inflationary for some time. “If the overall trend is inflationary, which I feel it will be, India is the best market to be in and our corporates have the best balance sheets to capture that,” he said in an interview with Moneycontrol.
He stated that the pessimism on the IT sector may be overdone, as the valuations have adjusted for lower growth, further adding that Indian pharma companies are in a much strong position compared to their rivals in the US.
Amid the current environment, Andrade told MC, that he is looking at segments where valuations are reasonable, catering to industries that are growing, the product is acceptable and you have a fair degree of pricing power.
“IT, for us, ticks all the boxes. The sector is going through a downcycle, but it is still better placed. You have companies that are cash flow positive, have cash on the balance sheet and are now available at attractive valuations,” he stated.
Of course, there are debates about AI and India losing IT jobs, but at its core, Indian IT is a pure play on wage inflation, added the expert, in the interview.
For pharma, he believes that over the next few years, we will see Indian companies increasing their dominance in the West.
“If you look at the financial metrics, Indian pharma companies are solvent, have cash, and are willing to invest in capacity and to invest in growing market share. On the other hand, pharma companies in the West have too much debt, and that debt is expensive, and these companies are now vacating some of their strongholds giving an opportunity to Indian companies,” he explained.
He also sees steel companies doing well.
If they can get their carbon footprint right, then Indian steel companies will dominate the global market for steel as well as downstream products emanating from that, noted the expert.
He also predicted that growth will be softer this year, but from the earnings commentary, it is clear there is no major risk to the industry.
"We won’t see the kind of growth rates seen during the pandemic, but even the normalised growth rates will still be in the low double digits, which was seen pre-pandemic," added Andrade.
