In a recent discussion with CNBC-TV18, Sridhar Sivaram, Investment Director at Enam Holdings, highlighted the promising outlook for India’s power sector. Sivaram’s insights reveal a sector poised for significant expansion, driven by increasing demand and substantial infrastructure investments. However, he also expressed reservations about the financial sector, citing potential challenges that could impact earnings growth.
Optimistic Outlook for the Power Sector
Sridhar Sivaram is bullish on the Indian power sector, attributing its positive trajectory to robust demand and upcoming capacity additions. According to Sivaram, India is set to add between 70 and 80 gigawatts of thermal energy over the next 4-5 years. This surge in power generation capacity is expected to benefit power equipment companies, which will see increased order books and expanded capacities.
Sivaram anticipates that these companies will experience a significant boost in their margins, with an expected expansion of 100-200 basis points. This improvement in margins is projected to drive earnings growth by 30–40 percent. The establishment of new power plants, particularly those set up by corporations for internal use, will further benefit companies involved in power equipment. Additionally, the growing demand for data centers, artificial intelligence (AI) technology, and electric vehicle (EV) charging infrastructure is expected to contribute to increased power requirements, supporting continued growth in the sector.
Caution Advised for the Financial Sector
Despite his optimism about the power sector, Sivaram expressed caution regarding the financial sector. He highlighted several concerns that could potentially hinder earnings growth. Rising credit costs are a primary issue, with Sivaram predicting an increase of at least 25-30 basis points in credit costs this year. This rise in credit costs, coupled with sluggish deposit growth and high loan growth, could constrain earnings growth in the financial sector by approximately 10 percent for the fiscal year 2024–25.
Sivaram’s cautious stance is rooted in the broader economic context and the challenges facing the financial sector. While the power sector is experiencing growth driven by infrastructure and technological advancements, the financial sector faces headwinds that could affect its performance.
Market Outlook: Navigating Global and Domestic Influences
Regarding the broader market outlook, Sivaram anticipates a period of correction as local markets adjust to negative global news. Factors such as higher interest rates in the United States and fluctuations in the yen are expected to influence market dynamics. Despite these global developments, Sivaram does not foresee significant risks within India, as the country’s macroeconomic conditions remain robust.
India has demonstrated resilience compared to its global peers, with only a 1-2 percent correction in the face of international uncertainties. Sivaram acknowledges that while domestic conditions are strong, it is essential to remain vigilant about global developments that could impact market performance.
Conclusion: A Balanced Perspective
Sridhar Sivaram’s analysis provides a balanced perspective on India’s economic landscape. While the power sector is positioned for significant growth, driven by infrastructure investments and rising demand for power-intensive technologies, the financial sector faces challenges that could impede its earnings growth. Sivaram’s insights underscore the importance of staying informed about both domestic and global factors that could influence market trends.
Investors and market observers should consider Sivaram’s observations when evaluating their strategies. While the power sector presents opportunities, the financial sector’s potential challenges warrant careful consideration. As always, it is advisable for investors to consult certified experts before making any investment decisions.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.
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