Sandip Agarwal: EPS +13% on rupee, banks, capital goods
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- IT sector valuations have cooled, with PEG ratios dropping from 5‑6× to 1.5‑1.6×, according to Sandip Agarwal.
- IT EPS is expected to rise about 13% from the 13% rupee depreciation, contributing to a 15‑20% earnings growth outlook over the next two years.
- March quarter historically delivers muted IT growth, so investors will focus on management commentary and forward guidance.
- RBI is likely to prioritize growth over inflation, and a rate‑hike scenario would make large banks a safer bet, with PSU and large private banks offering good value after sharp corrections.
- Middle East post‑war capital‑goods demand is seen as a structural theme that could boost large capital‑goods firms and ancillaries.
- Defence sector offers long‑term growth but current stock valuations are described as “insane” and difficult to justify.
Why it matters: IT firms stand to gain roughly 13% EPS lift from the rupee’s 13% fall, while investors can capture value in sharply‑corrected banks and capital‑goods players poised for post‑war demand; defence stocks, despite growth prospects, remain overpriced, limiting upside for buyers.
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