Market Expert Nischal Maheshwari Recommends Buying IT Stocks on Dips, Says Avoid NBFCs for Now

Nischal Maheshwari, a market expert, advises that investors should buy IT stocks during market dips. He points out that the BFSI (Banking, Financial Services, and Insurance) sector generates over 50% of revenue for many IT companies. If BFSI starts to recover, it could greatly benefit the IT sector. With interest rates beginning to fall in the US, discretionary spending is expected to rise, making IT stocks a good investment.

On the flip side, Maheshwari warns against investing in Non-Banking Financial Companies (NBFCs) at this time. The Reserve Bank of India (RBI) has suggested that NBFCs should slow their growth, so it’s best to stay away from these stocks for now.

Here are some key insights from Maheshwari:

1. Market Volatility: Maheshwari noted that the Indian market is seeing some profit-taking, which is somewhat disconnected from the strong performances in the US and Southeast Asian markets. Many consumption companies are reporting lower-than-expected earnings, contributing to market pressure. For instance, Bajaj Auto’s disappointing results have added to the downturn.
2. NBFCs and Gold Financing: Regarding Manappuram Finance and other gold financing companies, Maheshwari recommends staying away for now due to RBI’s caution towards growth in the sector. The RBI’s guidance indicates a slowdown in lending growth, suggesting it’s not the right time to invest in these stocks.
3. Axis Bank Performance: Maheshwari observed that Axis Bank’s growth was subdued, but its asset quality has improved. The market is reacting positively to this, but overall growth remains cautious as banks take cues from the RBI to temper their lending.
4. City Gas Distribution (CGD) Sector: Although Maheshwari previously covered CGD companies, he acknowledges that recent regulatory actions have negatively affected the market. While some cuts were expected, the extent of the reductions was surprising, leading to negative reactions from investors.
5. Building Materials Sector: The real estate sector is performing well, but companies like KEI, Havells, and Polycab are experiencing profitability challenges due to rising raw material costs. Maheshwari believes this might be temporary, and advises investors to remain invested, especially with the upcoming festival season likely boosting demand.
6. Outlook on the IT Sector: Maheshwari is optimistic about the IT sector, suggesting that the worst is over. With signs of recovery in the BFSI sector and interest rate cuts in the US, he believes it’s a good time to hold onto IT stocks. He encourages investors to buy more IT stocks whenever there’s a dip.

In summary, Maheshwari’s strategy emphasizes buying IT stocks on dips while steering clear of NBFCs in the current market landscape.