Tech Sector Faces Uncertainty; Cement and Real Estate Show Promise: BofA Securities
Kunal Tayal, Senior Analyst at BofA Securities, provides insights into the tech, cement, and real estate sectors, highlighting the ongoing uncertainty in tech and the potential for growth in cement and real estate.
Tech SectorCement StocksReal EstateMarket DynamicsBofa SecuritiesReal Estate NewsJun 07, 2025
In this interview, Tayal discusses the challenges and opportunities in the tech sector, the potential for cement stocks, and the ongoing upcycle in real estate.
Q: What is your outlook on the tech sector, especially given the current global uncertainty?
A: The tech sector has faced significant challenges over the past couple of years. While there was initial hope that the uncertainty would subside, recent findings suggest that the 90-day pause in trade negotiations may only prolong the period of uncertainty. This has led to a slow taper-off in IT spending, though not as severe as initially feared. Discretionary spending is under pressure, but other areas of technology expenditure remain robust.
Q: How do you view the largecap vs. midcap investment opportunity in the tech sector?
A: The largecap to midcap trade-off has been a consistent theme. Midcaps have shown faster growth, which is reflected in their valuations. However, our investment approach is more absolute, focusing on specific criteria across both largecaps and midcaps. We look for secular winners in data and analytics, companies with a well-defined right to win, and those with the potential to expand margins. This approach helps us navigate the current uncertain environment.
Q: Turning to the cement sector, how do you see the performance in FY26?
A: The cement sector faced a tough FY25, with weak volumes and pricing pressures. However, the stock performance remained relatively stable, driven by expectations of volume recovery. For FY26, the key factor will be pricing. Q4 has shown early signs of pricing recovery, which could be a significant driver for midcap companies. These companies have more leverage on their EBITDA per tonne outlook compared to largecaps.
Q: What is your take on the real estate sector?
A: We believe the real estate sector is in the fifth year of its upcycle. While CY24 presented challenges, such as slow approvals and rapid price increases, these issues are beginning to stabilize. We expect the sector to compound bookings at a rate of 10-15%, with EBITDA growth potentially outpacing this due to recent price increases. Overall, we remain positive on the real estate sector.
Q: How do you view the Delhi-NCR and Mumbai markets specifically?
A: The Delhi-NCR market is often viewed with caution due to concerns about investment demand overshadowing genuine user demand. In contrast, other markets, particularly Mumbai, are considered more resilient. Our investment picks are based on the availability of land banks and the ability of developers to launch new projects over the next few years. Developers with strong land banks and clear project pipelines are likely to perform well.
In summary, while the tech sector faces ongoing uncertainty, the cement and real estate sectors show promise, particularly with the potential for pricing recovery and stable growth.
Frequently Asked Questions
What factors are driving the tech sector's uncertainty?
Global trade and political uncertainty, particularly the 90-day pause in trade negotiations, are causing a slow taper-off in IT spending, though not as severe as initially feared.
What criteria do you use to select tech stocks?
We focus on secular winners in data and analytics, companies with a well-defined right to win, and those with the potential to expand margins.
Why is pricing important for cement stocks in FY26?
Pricing recovery is a key factor for cement stocks in FY26, as it could significantly boost the EBITDA per tonne outlook, especially for midcap companies.
Where is the real estate sector in its upcycle?
We believe the real estate sector is in the fifth year of its upcycle, with expectations of 10-15% booking growth and faster EBITDA growth due to recent price increases.
What is the outlook for the Delhi-NCR and Mumbai real estate markets?
The Delhi-NCR market is viewed with caution due to investment demand concerns, while Mumbai is considered more resilient. Developers with strong land banks and clear project pipelines are likely to perform well.
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