3 telecom stocks that can give good returns | Economic Times

Bharti Airtel, Indus Towers and Sterlite Technologies are three telecom stocks on which Jigar Shah, CEO, Maybank Kim Eng Securities India, is bullish on. Edited excerpts from an interaction:What are your thoughts on the telecom sector?The tariff change largely depends on when Reliance Jio wants it to change. We are the lowest in terms of tariff globally and the data consumption keeps going up. As the 5G auction nears, telcos, including Jio, will require a lot of funding because they will have to make investments which will give them return only after a few years.Bharti and Jio seem to be okay in terms of subscriber additions. Vodafone Idea continues to lose. This whole situation can only change if Vodafone gets a new lease of life in terms of some new equity. If there is some improvement in tariff, that would also be positive. Eventually, it is about a larger issue in terms of whether we want to have three telcos or not. There is going to be a requirement for a lot of investment. A three-player market will be more beneficial but then there is uncertainty.We still remain quite constructive on Bharti Airtel. It is definitely doing much better. Its balance sheet has become better, cash flows are better and the subscription has also improved. On all aspects, Bharti is doing better and that is probably the only specialist telco that one can invest in.Indus Towers will get affected if Vodafone goes down, but to a great extent that negative is priced in. It may go down a little bit more, but eventually it is a very strong and profitable business. As they get into adjacencies, it will further improve their business. The risk will get diversified. At this valuation, we think that the upside may be more in Indus Towers than the downside.Sterlite Tech is another player which will benefit from the infrastructure investment that will take place in optical fibre and also in 5G. These are the three stocks which we think one can consider in the telecom sector.Which other sectors are you bullish on?We continue to like the software sector because IT spending has advanced by a few years. Post the pandemic, AI and cloud segments are booming. So even though the large IT companies are trading at a premium compared to their valuation in the past, we remain very positive on TCS, Infosys, HCL Tech and Wipro - all the top four companies.We also like tractors. The rest of the auto space is struggling because of lack of volumes. There is a lot of uncertainty. Comparatively, tractors are better off with monsoon going in the right direction. The farm sector is likely to post another good year. The overall infrastructure work is also in a growth phase. We like both Mahindra and Escorts in this space. Those are our other top picks.In cement, we continue to like UltraTech and Dalmia Bharat. Despite the fact that there is a cost pressure, they are doing very well. Those are some of the segments that we like in the market at this stage, even though the overall market looks pretty heavy and due for correction at any point of time.