quarterly results of companies Have started arriving. Early results from several information technology (IT) and banking sectors painted a mixed picture. Many concerns ahead of the results have been justified. IT companies reported sluggish revenue growth due to implementation delays (largely on the client side), but margins improved. At the same time, most banking companies (although results of some big banks are yet to come) have reported a decline in CASA ratio as depositors have shifted funds to fixed deposits to take advantage of the current high FD rates. In such a situation, market experts say that there may be pressure on IT and banking stocks.
Pressure may be seen on banking stocks
Deepak Jasani, Head of Retail Research, HDFC Securities Ltd., said it seems that banking stocks are overbought at the moment and hence may underperform in the near term. At the same time, deposits in banks have grown at a slow pace, indicating a struggle for funds without raising rates too aggressively. The cost of funds has increased faster than the returns on advances resulting in a decline in the net interest margin (NIM). The asset quality of banks remains stable, but the fear of NPAs from personal loans and agriculture/MSME sectors has been highlighted by some banks and even the Reserve Bank of India (RBI). The festive season may see higher disbursements by banks, as consumers are opening their wallets to spend on durable goods, travel and other purposes.
The impact of AI and machine learning is also visible
IT companies have finally taken the risk and undertaken aggressive cost rationalization steps, with several mega-deals closed, although the prospects for recovery in discretionary spending are still unclear. Investors will wait for global technology spending to resume normality before getting excited about the sector. The spread of artificial intelligence (AI) and machine learning (ML) has brought some uncertainty into customer decision making and over time IT companies may focus more on digitalization and AI implementation and leave fewer jobs for unorganized players. .
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