Correction In EMS Space Is A Buying Opportunity, Says Abhay Agarwal

At a time when multiple Electronics Manufacturing Services (EMS) sector has faced pressure in the stock market, market veteran Abhay Agarwal believes it is time to invest in the sector rather than exiting it.

Speaking to NDTV Profit, Agarwal, who is the Managing Director of Piper Serica, explained that big corrections are part and parcel of the small and midcap space and should not tempt investors to fully exit the sector.

"Small and midcap stocks do go through these sharp corrections in between. So investors will have to have the appetite," he said.

Agarwal was speaking in relation to recent drawdowns of major EMS stocks, including Kaynes Technologies, which has faced immense pressure in the market in the wake of a Kotak report that highlights corporate governance issues.

Unless there is a fundamental issue with regards to corporate governance across the whole EMS division, Abhay Agarwal believes the ongoing correction serves as an excellent buying opportunity for investors.

"We have full confidence that the whole EMS space in India is ripe for pretty significant growth over the next 5 years," he said.

"I think any sharp correction like this is—unless it is driven by very poor corporate governance—if it is just short-term pressure on the stocks, I think it's a buying opportunity rather than an opportunity to exit," he added.

While Agarwal did acknowledge that valuations in the EMS space are currently on the higher end of the spectrum, he believes the EMS space is staged for higher growth going forward.

"I would say that the valuations are on the higher side and we would like them to be lower. But then as investors in the market we have to take what is available to us," he said.

"I think the EMS companies will show very strong earnings growth. I think they will have very positive management commentary. Valuations have run ahead of themselves," he concluded.