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Outlook On Economy Remains Robust; Prefer It Over Fmcg: Envision Capital

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Nilesh Shah, MD & CEO of Envision Capital, on Tuesday, said that outlook on the economy remains robust.

Nilesh Shah, MD & CEO of Envision Capital, on Tuesday, said that outlook on the economy remains robust.

In an interview to CNBC-TV18, he said, “The outlook on the economy, the demand environment still continues to be robust. Of course, there is some kind of speed breakers coming in because of supply-related challenges and especially for those companies, which are part of a global supply chain, obviously are getting challenged, but overall, I still believe that the demand environment is very strong and as we come out or get used to COVID-19 and all of that, I still think that consumer sentiment will come back even stronger than what we have seen over the last three to four quarters.”

On investments, Shah said, “In the context of how the market dynamics are playing out currently, clearly, technology services as a sector could be the safe hiding spot and the concerns, which are there, globally, they are all around liquidity, inflation, rate hikes and all of that. In that context, IT services still continue to have a very stable demand environment, margins are intact, or probably they could soften a bit, but by and large, intact, strong cash flows, and valuation, which of course have kind of moved up and rerated but they are not as expensive as I would look at the other pocket of safety, which is the consumer names, the valuations do tend to be north of 50 times in that context, probably, technology services will continue to hover around this kind of valuations, and end up being a strong outperformer.”

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“Auto components, auto ancillaries, is a much better place to be in. There are some really capital-efficient companies there, which have a very strong anchoring with some of their original equipment manufacturer (OEMs). In addition to that, they have the replacement market, the exports market, and obviously, will be still relevant for the new set of new-generation electric vehicle (EV) players. So relative to OEMs, we still believe that auto accessories, auto components are essentially a significantly better way to participate,” he said.

Shah further said that for investors that are looking for inflation plus returns, commodities is not a place to be in.

For the entire interview, watch the video

(Edited by : Dipika Ghosh)

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