Nitin Raheja bets on auto, consumer durable sector; stays cautious on IT

Auto demand has remained resilient despite market volatility, consumer durables are poised for a stronger year, and defence continues to enjoy structural tailwinds, according to Nitin Raheja from Julius Baer Wealth Advisors. However, he remains cautious on the IT sector, saying uncertainty around the long-term impact of artificial intelligence makes the sector difficult to value.

Auto sector shows resilience
The latest automobile sales numbers have reinforced confidence in the sector, even as several auto stocks have underperformed the broader market this year. Raheja said concerns over higher crude oil prices and inflation have not materially affected demand so far, making the sector attractive from a long-term investment perspective. He believes companies benefiting from premiumisation, electric vehicles and commercial vehicles remain well positioned.


"The auto sector numbers have been pretty strong... the fears with regard to high oil prices and inflation impact have so far not been visible," he said.

He added, "We like companies in the SUV segment... companies that have an EV play... and right now, the commercial vehicle sector seems to be doing quite well."

Consumption story remains healthy
Raheja continues to remain positive on the broader consumption theme, although he noted that rising competition has made it more difficult for companies to maintain pricing power. He believes businesses with premium products or differentiated offerings are better placed to sustain growth, while seasonal demand has also worked in favour of beverage companies this year.

"We are positive on the consumption segment, but... the intensity of competition had gone up," he said.

He said, "Either you have a seasonal play... or you play it through someone who has a differentiated offering or a premium offering."

Consumer durables set for a stronger FY27
A strong summer has provided a significant boost to air-conditioner manufacturers and their component suppliers, while the upcoming festive season is expected to support demand during the second half of the year. Raheja believes the overall outlook for consumer durable companies has improved.

"The summer being what it has, they will have a very, very strong quarter, especially the air-conditioning companies."

He added, "I would think that this year as a whole should be better for the consumer durable manufacturers."

AI creates uncertainty for IT
While IT stocks have become cheaper following recent corrections, Raheja believes investors still lack clarity on how artificial intelligence will ultimately affect the industry's growth trajectory. He said the uncertainty around AI-driven revenue deflation makes it difficult to determine appropriate valuations, despite attractive cash flows and dividend yields.

"We are not clear in terms of the impact of AI... what is the extent of the impact... is yet not very, very clear."

He added, "The question is on growth... I would probably be underweight on the sector."

Real estate now requires stock selection
Raheja believes the broad-based rally in the real estate sector has largely played out. With fresh supply expected to increase, he does not expect meaningful price appreciation across the industry. Instead, he recommends focusing on developers with strong project pipelines and execution capabilities.

"Price increases are not going to happen." He said, "It is really going to be individual companies... you need to play it through that."

Defence remains a long-term structural opportunity
The defence sector continues to benefit from higher government spending, the Make in India initiative and increasing export opportunities. However, Raheja cautioned that many stocks already trade at demanding valuations and investors should remain selective. He prefers larger defence companies that are building broader manufacturing ecosystems and also sees a multi-year opportunity in shipbuilding.

"There is clearly a tailwind as far as defence as a sector is concerned." He added, "I would play it through some of the larger players." On shipbuilding, Raheja said, "The shipbuilding sector is in for a multiple-year cycle."