What is your take as far as the IT sector is concerned? The midcap IT companies have been outperforming massively versus the front line companies. Is that the direction that investors should take now?
The midcap IT companies have been reporting pretty decent performance. The performance per se of Infosys was a little weak. Their guidance led to the kind of pressure we saw across the largecap universe. I do not see any challenge in the midcap universe so far the TCVs are coming. All of these companies which have reported have reported strong TCVs, in fact, so much so that that Coforge yesterday in their commentary gave a very strong outlook as well. KPIT has given very strong guidance. They increased their guidance from 27 to 30%. So we are seeing all the midcap IT companies coming and giving a higher guidance versus fears settling in after Infy numbers. I do not see any challenge. It was more, I believe, Infy specific, probably a quarter’s problem. One has to keep an eye on TCVs and how things shape up on that front. Until that time, it all looks fine. The valuations are extremely in our favour. These companies are all trading upwards of 30-35-40 times earnings. They all have come down to around 20 and sub 20 times. It is very attractive. This is the time to accumulate IT is what the call would be.
What is your outlook in terms of the overall capex plan for the entire railway sector? What will be the beneficiaries?
I would not stick around with railways alone. Capex in terms of announcement of ordering etc across the infra spectrum is at a full swing. We are seeing very heavy ordering across the infra spectrum. In the next one year, we expect this ordering run rate to be even higher and this would play over across infra names.
I would be more positive on the construction names where we are very bullish on PNC. We will be very bullish on something like an HG Infra over here, Ahluwalia and all. These are the names which we like and I see more ordering happening on the construction side.
What is your take on pharma? Suddenly it is back in the headlines for both good and bad news? Ipca today, for instance, got three USFDA observations. Deals are happening. What are you looking at when it comes to the pharma space sticking with hospitals, diagnostics and what is the way to play that?
I do not see any incremental positive triggers coming in the pharma space from here. Valuations have gotten very attractive, stocks have come off. These are great cash flow throwing businesses. That is why they became attractive as some of the value focused funds came in and were buying the names. But I do not see any incremental triggers going forward so I would much rather stick to other sectors where there are many more triggers. I would be very positive on discretionary names from here, something like the auto space overall – be it the four-wheeler, two-wheeler space rather than being positive on pharma.