George Thomas, Fund Manager – Equity at Quantum AMC, is making a clear play for private banks and IT services while steering clear of hospital stocks. The fund manager sees margin expansion in banking and improving earnings in IT as key drivers for the coming quarters. This isn't a blind bet; it's a calculated move based on current valuations and fundamental shifts in the market.
The IT sector, once seen as sluggish, is surprising analysts. Thomas noted that recent earnings have been stronger than anticipated, with companies successfully passing on higher input costs through pricing actions. "So even if we look at some of the recent earnings season, IT is holding up at portfolio level, and even the growth is better than what most investors thought," he said. He expects demand to firm up further as pricing pressure from automation and artificial intelligence eases.
On the banking front, Thomas sees a value opportunity. He pointed out that some private banks are trading at decadal low valuations, creating room for mean reversion. As higher interest rates transmit through the system, bank margins should improve, supporting earnings growth. He believes asset quality will remain stable, providing a solid base for this valuation normalization.
Hospital stocks, however, are a different story. Despite the recent correction in share prices, Thomas remains cautious. He cites regulatory uncertainty, ongoing capacity additions, and valuations that are still too high from a value-investing perspective. "We would be cautious on the sector," he added, stating that these stocks are not at levels where Quantum AMC would want to enter. The risk-reward balance simply isn't there right now.
Thomas emphasized that the long-term outlook for Indian equities remains optimistic, but near-term moves will be driven by global interest rates and geopolitical developments. He noted that higher bond yields in developed markets are making investors cautious about emerging market exposure. His strategy is to stay focused on sectors with clear fundamental improvements while avoiding those with lingering structural risks.