FMCG, IT and pharma facing slowdown; new growth may come from privatisation: Manish Chokhani – News Air Insight

Indian equity markets may face a slow “derating” in sectors like FMCG, IT, and pharma unless companies change their models and innovate, according to Manish Chokhani, Director, Enam Holdings.

Speaking to ET Now, Chokhani said IT companies risk losing relevance if they remain stuck in the outsourcing model. “They need to shift from just being processors to owning intellectual property and technology. Otherwise, growth will remain in single digits and current valuations won’t hold,” he said.

FMCG and pharma struggles

FMCG firms, despite excitement around GST cuts, are still low-growth businesses, Chokhani pointed out. “You can’t justify 40-45 PE multiples for companies delivering low single-digit growth,” he said.

Pharma too faces challenges, with Indian firms still dependent on generics. “Global pharma leaders like Bristol Myers, Merck, or Roche trade at single-digit or mid-teen multiples despite innovation, while Indian generic firms are at 25 PE. Without innovation, they can’t sustain such valuations,” Chokhani warned.

High-growth new-age sectors ‘priced for perfection’Chokhani also cautioned against sectors like QSRs, food delivery, and electronics manufacturing, which have delivered strong growth but now trade at steep valuations. “The QSR sector in India trades at 100 times earnings, food delivery companies together have $50 billion in market cap with little profit. These are priced for infinite growth, which is risky,” he said.Electronics manufacturing services (EMS), boosted by Apple and government policy, may continue to grow but require high capital investment. “It’s a capital guzzler like airlines—great for the economy but risky for investors at current valuations,” he added.

Where opportunities may emerge

Chokhani sees opportunity in potential privatisation of public sector companies. “If the government moves on non-strategic disinvestment like IDBI Bank or metals companies such as NALCO, SAIL, or NMDC, these neglected sectors could turn interesting,” he said.

PSU banks, he noted, have already bounced back, and a similar trend could play out in other state-owned firms if policy reforms take shape.

Markets need new growth engines

Chokhani underlined that with India’s earnings growth at around 9% and markets trading at 20-21 times earnings, fresh drivers are needed. “The country clearly needs new growth engines. Without them, we may see a long phase of consolidation before the next compounding cycle begins,” he said.