TCS says FY25 will be better than FY24. They have been improving their utilisation and that order book number is what the Street will be pleased with. Your call.
Sandip Sabharwal: Concerns remain. I believe that the most significant part of the TCS commentary is that AI is changing so fast that even the companies who want to outsource let us say out of TCS are seeing their projects and what they need to do, how the entire regenerative thing will work out change so fast that they are getting orders, but those orders are not getting executed because the projects themselves might become irrelevant or change a lot. That creates near-term uncertainty on growth. They have done very well on margins and I think that restricts the downside. But I do not see the results or the commentary says anything which could create any significant upside for the stock price in the near term.

I may argue back and say that the downside also could get limited because if you are getting orders, they will eventually be executed. For me, what matters is that margins have gone higher in a comparative market and because of the AI fear. So, it may not spark a rally, but it may just restrict the downside and this sector now could qualify as a sector you would really want to buy when you have a dry patch.
Sandip Sabharwal: Yes, I will agree that the downside is limited, but then valuations are also not cheap and that is why the upside also is restricted. So, it is a no-go sector in my view. We do not invest in the equity markets so as not to lose money. We invest in the equity markets to try to make money and to that extent I do not see any reason to buy the sector overall.

Where else do you think money can be made?
Sandip Sabharwal: Near term, given what is happening geopolitically, as well as the kind of results we saw out of large US banks on Friday, I think the result season is going to be volatile. So, you keep some cash on the sidelines, watch the result season, see how opportunities come up. The directional trend still seems to be on the capex-oriented stocks in India with possibility of some consumer durable participation in the near term.

I think that is where we have talked of those stocks, like what we have picked up. Voltas or V-Guard or VIP Industries as a turnaround candidate or some beaten down consumer stocks. That is where I look for opportunities if some bad results come and the stocks fall further.

Within the capex theme, where do you find opportunity at the current valuation?
Sandip Sabharwal: The valuations are a bit stretched. Many of the stocks are still near 52-week highs, but among the stocks which we hold, we hold NCC, we hold Thermax in few of the portfolios, we hold Ahluwalia Contracts, VA Tech Wabag is something which we hold and I think that is a very good longer-term story and here the valuation are still not stretched despite the stock doing very well. So, these are the ones which come to mind and then on the larger cap, large size companies. I believe companies like ABB, Siemens continue to do very well and there is the railway capex thing. So, there are a lot of companies which we can talk of, but a few of them could be these.

Within that construction theme, Ahluwalia is right up there. Great margins, great track record. You want to buy these stocks when there is acute pain on the street. But now that real estate is in a bull run, commercial real estate has started picking up, there is more demand and less supply. There could be a huge advantage for some of these so called constructors. Apart from Ahluwalia, what else is there on your radar?
Sandip Sabharwal: I tend to buy very few stocks and have a bigger allocation, so we have largely stuck to NCC and Ahluwalia. There are other companies which are there. The main thing which investors need to see is that there should not be too much debt and these companies should not be taking BOT projects which stretch their balance sheets. Those are the key criteria. So, there would be other companies, but I would not be actively tracking them so much. Have to get in your views on the BJP manifesto. Quite a few points were made about the economy, about manufacturing as a segment, agriculture, housing, and of course, a lot of focus on defence and railways. Any drawing points from there? Any new ideas?
Sandip Sabharwal: No, I think it is the same as what they are doing right now. So, there is no real change per se. I think the themes will remain the same. What additional they can do on these fronts is something we need to see. We need to recognise that there is transformation in many of these sectors. In railways, defence, a complete transformation is happening, as also on the power side. The economy is getting transformed. Many of these sectors are giving multi-year or multi-decadal potential opportunities and to that extent these will play out for whoever has the patience to remain invested.If one has to look at that construct, can we get a theme from the manifesto? Whether it is energy transition or agriculture or perhaps part of manufacturing because that is the way things are implemented, then a new wave of multiplier effect will be there.
Sandip Sabharwal: In agriculture, there is very little that can be done which is playable via the stock markets, except for being more mechanised, which could benefit a few companies. But nothing significant. I think what we have seen in the last few years of the current government is the execution where companies used to get killed earlier was that projects or themes used to get announced with great fanfare, but there was no execution or they would start getting executed, then get stalled in between. That is not happening now.

Companies get into something, they are able to execute it and realise their money also and I think that is the big change that is leading to what is happening now. I think it will continue. New themes are very tough to pick out. The same themes continue which have been there over the last two-three years at least will continue.