Are IT stocks attractively valued? Pankaj Murarka on valuations and his sectoral exposure | Exclusive

Pankaj Murarka, Founder & CIO at Renaissance Investment Managers on Tuesday said he finds IT stock valuations attractive and sees internet stocks as reasonably-valued, citing strong growth potential. Murarka's management and advisory firm, which manages close to Rs 5,000 crore in assets under management, has about 10 per cent exposure to the information technology sector, while its exposure to internet stocks is at a similar level, taking the combined allocation to IT and internet stocks to the high teens.

Murarka said IT firms are of high quality, with probably no leverage on the balance sheet and a lot of cash on balance sheets. Calling them cash machines, which are generating cash year after year, he said IT valuations are very attractive at present. 

The analyst finds valuations pretty reasonable for internet stocks in the context of the growth that the companies are expected to deliver over the next 7-10 years. 

In an exclusive interview to BTTV, Murarka explained: "It just fits into a framework of companies delivering healthy growth, pretty high growth in case of internet. In the IT, while the sector has been in a midst of earning slowdown, we think growth will pick up going forward in the second half of this year and into the next year." 

Murarka's Renaissance, meanwhile, has the biggest exposure at around 30 per cent to financials, given the high weightage of the sector in the Nifty50, at about 37 per cent. Besides, he said he likes automobile as a sector because post the GST cut last year the demand momentum has been pretty healthy. He said there will be some headwinds because of the rising fuel prices but Murarka still believes the medium-term demand will sustain for auto makers.