Latest news with #Chokkalingam
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Business Standard
19-05-2025
- Business
- Business Standard
IT stocks fall as Moody's downgrades US sovereign credit rating to 'AA1'
Indian IT stocks declined and the Nifty IT fell by 1.3 per cent on Monday after Moody's downgraded the US sovereign credit rating last week to "AA1" from "AAA". All the constituents of the IT index traded with losses. Mphasis, which fell by 2.5 per cent, declined the most, followed by Infosys, which fell 1.9 per cent, and Coforge, which dropped 1.8 per cent. Moody's said its downgrade reflects the increase over more than a decade in US government debt and interest payment ratios to significantly higher levels than similarly rated sovereigns. "Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's said on Friday. The downgrade comes as the US economy is staring at a slowdown, and President Donald Trump is restructuring trade deals with the US's trading partners. IT stocks fell as Indian tech firms earn a major portion of their revenue from the US. Analysts, however, termed the decline in IT stocks as a knee-jerk reaction and said the downgrade will not have much impact on the prospects of IT firms. 'The US markets have gone up even after similar downgrades in the past. The impact on IT stocks will be temporary. But IT stocks have their problems. The IT firms are posting poor single-digit revenue growth in dollar terms, which will not change much because of the rating action,' said Chokkalingam G, founder of Equinomics. Chokkalingam added that big IT firms are sitting on cash and have few expansion opportunities. "Large IT firms have been returning the cash they generate to shareholders through either buybacks or dividends instead of diversifying. The only option left for them to grow is acquisitions. Going forward, we could see mid-sized IT firms getting acquired. Otherwise, revenue growth in dollar terms will further shrink," said Chokkalingam. In the future, the pain in IT stocks is likely to continue. "The outlook for the IT sector is slightly negative. Large corporations in the US will try to cut costs from the new contracts they are signing with IT firms. The slump in their earnings growth is not getting reflected in their valuations. Moreover, there is a lack of clarity on how the trade agreement will shape up and if there will be any impact on the IT sector. Investors should ideally be underweight till there is clarity on US trade policy and one sees the next leg of new contracts the IT firms bag," said UR Bhat, cofounder of Alphaniti Fintech. So far in 2025, the Nifty IT index declined 13.5 per cent.
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Business Standard
13-05-2025
- Business
- Business Standard
India Inc. promoter holdings continue to fall, but experts see no red flags
Promoter ownership in domestic companies has declined to the lowest level since the September quarter of 2017, but market experts say the trend is largely market-driven and does not point to any governance-related concerns. In the NSE 500 universe, private promoters' share of overall holdings has dropped to 39.6 per cent in the March quarter so far, the lowest level since the September quarter of 2017, according to data from In December 2024, private promoter holdings in the broader universe stood at 39.76 per cent, declining slightly to 39.6 per cent in the quarter under review. Among the non-PSU Nifty 50 companies, promoter holdings currently stand at 34.4 per cent, the lowest since June 2017, as per the latest data. There are no governance concerns here as the regulations are strong, said Chokkalingam G, founder of Equinomics Research. He explained that the recent decline in promoter holdings is largely driven by market dynamics, particularly elevated valuations following an unprecedented bull run in calendar year 2024. 'Some stocks became extraordinarily overvalued. For instance, metal stocks that typically traded at 8 to 11 times earnings were suddenly valued at 25 to 35 times. This created an opportunity for promoters to offload shares,' he said. According to Chokkalingam, promoter selling at such high valuations should not be viewed with suspicion but rather as a signal for investors to assess price levels more carefully. 'Promoters understand their businesses better than most investors. If they are selling at a certain level, that price should serve as a reference point in the next market cycle,' he added. The reduction in the holdings comes in a quarter that was marked by a correction in the market triggered by global funds outflows amid valuation and trade war-related concerns. During the March quarter, the benchmark Nifty50 and the 30-stock Sensex saw a decline of 0.5 per cent and 0.9 per cent, respectively. Meanwhile, the Nifty midcap and small-cap indices fell by 13 per cent in the quarter. A lower promoter holding does not necessarily indicate a negative outlook for a company, said Deven Choksey, Managing Director of DRChoksey FinServ Pvt. Ltd. The very purpose of a company getting listed on the exchanges is to dilute its stake in order to raise funds. As long as companies receive the right valuation for the stake they offload, it should not be a concern. Shift in tide: DIIs versus FIIs This shift comes when, for the first time that domestic institutional investors (DIIs) now own a larger share of India's top 500 listed companies than foreign institutional investors (FIIs), marking a structural realignment in India's capital markets. As of March 2025, DIIs held an 18.4 per cent stake in Nifty 500 companies, surpassing foreign institutional investors (FIIs), whose ownership declined to 18.16 per cent. The FII-DII ownership ratio, which once stood at approximately 1.5 times in September 2021, fell to 0.99 times in the March quarter, highlighting the rising influence of domestic capital in Indian equities.
