However, he believes the downside risk is limited at current levels. “We don’t see a meaningful downside from here on in the IT space,” Vyas said, adding that cash flow yields have improved. His preference remains for companies showing strong growth, with selective interest in mid- and small-cap IT firms rather than large-cap names.
Coforge acquisition to hinge on executionCommenting on Coforge, Vyas acknowledged concerns around valuation following its recent acquisition. He said the possibility of a Qualified Institutional Placement (QIP) to reduce debt remains an overhang, though the stock-swap component helps align interests.
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He noted that the stock has corrected and has delivered consistent growth over the past several years. “Execution around that front, both on the growth as well as on margin expansions, will be key to watch,” he said, adding that his team is becoming incrementally more positive on IT exposure.
Food delivery stabilises, quick commerce remains competitive
Vyas expressed a constructive view on Zomato and Swiggy, highlighting different dynamics across food delivery and quick commerce.
He said food delivery has settled into a duopoly, leading to improving margins and earnings visibility. He expects Swiggy to see faster margin improvement in the near term, as it is currently behind Zomato in profitability.
Quick commerce, however, remains the main area of competition. Vyas described it as the “actual battlefield,” noting the entry of multiple players. Despite this, he believes Zomato’s Blinkit and Swiggy’s Instamart hold an advantage due to strong capital backing.Also Read | Allspring stays cautious on IT and pharma, backs India, Korea, and AI chip plays
He said profitability timelines are becoming clearer, with Swiggy’s contribution margin expected to turn positive over the next four quarters. For Zomato, he expects break-even in quick commerce “sometime in the next two to three quarters.”
Vyas added that while both stocks remain in his portfolio, he has trimmed Zomato at higher levels and reallocated capital into Swiggy. “Both of these names we remain fairly more constructive now,” he said, citing moderation in competitive intensity over the coming quarters.
Earnings recovery and BFSI in focus
Looking ahead to the third-quarter earnings season, Vyas expects a broader earnings recovery, with market-wide growth projected at 12–13%. “The earning traction seems to be improving incrementally as you move into the third quarter,” he said, pointing to consumption and Banking, Financial Services, and Insurance (BFSI) as key drivers.
Within BFSI, Vyas expects Net Interest Margins (NIMs) to bottom out in the fourth quarter following the Reserve Bank of India’s (RBI) recent 25 basis points (bps) repo rate cut. He also expects credit growth to strengthen over the next four to six quarters, supported by retail demand and higher-ticket consumption in automobiles and real estate.
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He added that asset quality concerns appear manageable, with the RBI showing greater comfort on credit growth. Capital inflows from foreign strategic investors into lenders further support the outlook.
As a result, Quest Investment Managers has begun favouring select smaller private banks and Public Sector Undertakings (PSUs) over large private lenders. “For them, a large part of their construct actually on the asset side comes from the retail or the MSME segment,” Vyas said, highlighting stronger demand trends in these areas.
For the full interview, watch the accompanying video
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