“The companies were not so positive about this year, so that is what is reflecting the kind of selling we have seen there. Something has to come from the companies to get some confidence back into people because the guidance was not so great,” he said.
Valuations Turn Attractive After Sharp CorrectionDewan believes the steep correction has made valuations in several IT stocks more reasonable, with companies like Infosys and Wipro nearing levels where downside may be limited. However, he advises long-term investors not to rush into buying until there is greater clarity on business growth.
“After falling so much, selling should stop now. Looking at the valuation Infosys is trading at and the kind of massacre we have seen in some stocks like Wipro, they should reach a base where even if you have 5% to 6% growth, these valuations should sustain.” He added, “One should not be in a hurry to buy. One should get some more clarity and some positive momentum coming back into stocks,” he said.
Trading Bounce Could Be Around the CornerWhile long-term investors may still prefer to stay cautious, Dewan believes traders could benefit from a technical rebound after the recent decline. He noted that software product companies continue to perform better than traditional IT services firms, making stock selection increasingly important.
“For a trader, maybe some trading bounce back may be around the corner because we have seen earlier also that after falling, there is always a trading bounce back in IT stocks. One can be a little stock-specific there, but overall there can still be some more consolidation,” he said.Lower Crude Prices Strengthen Banking OutlookDewan remains optimistic on the banking sector, pointing to the sharp decline in crude oil prices as a significant positive for India’s economy. Lower energy prices are expected to keep inflation under control, reducing the immediate risk of interest rate hikes while supporting overall economic growth. “The kind of fall we have seen in crude prices is very positive for us. The fear of interest rates going up may come down a bit, and inflation should also stay under control after this kind of a crash in energy prices,” he said.
Financials Continue to LeadRecent business updates from banks reinforce Dewan’s positive outlook on the financial sector. He believes both public and private sector lenders are well positioned to continue delivering healthy growth, with many of the earlier concerns already reflected in valuations.
“The numbers which have come from some of these banks’ updates are also very good. There has been a consensus that financials should do well, and that consensus should hold,” he said.
He cautioned that the only major macro risk remains the progress of the monsoon, although other economic indicators, including auto sales, continue to remain encouraging.
Commercial Vehicles Preferred Over Passenger CarsWithin the automobile space, Dewan favours commercial vehicles over passenger vehicles. He expects demand to remain strong, supported by healthy infrastructure spending, improving energy availability and robust order books across sectors. Auto ancillary companies linked to commercial vehicles are also likely to benefit from this trend. “The commercial vehicle space can do better than the normal passenger vehicle space in the short to medium term,” he said.
FMCG Offers StabilityDewan also maintains a positive outlook on FMCG stocks. Although he does not expect sharp upside, he believes easing inflation and previous price hikes should support profitability. He also notes that valuations remain reasonable compared with their long-term averages.
“If inflation is coming under control, some price hikes have already happened, so that may have a positive impact on their margins. I feel that one should be positive as far as FMCG is concerned,” he said.
Retail Stocks Need Valuation DisciplineCommenting on the strong quarterly updates from value retailers such as V2 Retail and VMart, Dewan acknowledged the healthy operational performance but advised investors to remain mindful of valuations. While the businesses continue to grow, premium valuations could limit future returns, making stock selection critical.
“The numbers have been pretty good. This will again be stock-specific. We have to check which stock, at what valuation, we would like to buy because these stocks normally trade at a premium. Valuation again will be important to check as far as these stocks are concerned,” he said.
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