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19 Nov 2024
Pawan Parakh, Fund Manager at Geojit Financial Services, highlights three sectors—pharma, renewables, and telecom—that are set to see significant earnings growth. He notes that defence is a long-term theme, but current valuations are a concern for Geojit.
When discussing sectors with potential for high earnings growth, Parakh emphasizes pharma due to several companies having blockbuster molecules in their pipelines, promising substantial revenue growth over the next couple of years. In the industrials sector, he points out that renewables and automation will benefit from both revenue growth and improved margins due to operating leverage.
Telecom is another sector poised for sharp earnings growth, driven by expected tariff hikes. Parakh references Sunil Mittal of Airtel, who has indicated that the industry needs a significant increase in ARPU (average revenue per user) from the current Rs 210 to at least Rs 300. This potential rise could lead to notable gains for telecom companies. Parakh suggests that a focused investment in Indian telecom is sensible due to the anticipated migration of 2G users to 4G and 5G, which will naturally boost ARPU.
Regarding the defence sector, Parakh mentions that while Geojit is not currently heavily invested due to high valuations, they recognize it as a long-term growth story. He praises India's push for self-reliance in defence, noting government efforts in indigenization and technology transfer, as well as a commitment to exports. Geojit remains cautious about entering this sector until valuations become more attractive.
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