Veda Investments bullish on infra, healthcare, education

Vikas Pershad of Veda Investments is confident that India would perform well in the long-term.

Commenting on the market trend, he said he sees divergent trends. “We would lay greater emphasis on stock selection.”

He is bullish on infrastructure, healthcare, and education sectors. In infrastructure, he prefers IRB Infra and IVRCL . “We are also fond of Educomp  in the education space,” he added. Pershad is positive on  Godrej Consumer , Lakshmi Energy , and Redington .

Also Read: Book profits around 4700 Nifty: Ashwani Gujral

Here is a verbatim transcript of an exclusive interview with Vikas Pershad on CNBC-TV18. Also watch the accompanying video.

Q: What is the general drift you are getting for global equity markets because last couple of days there has been bit of pause and volatility for fears of interest rates and inflation heading higher—do you think it will manage to stall the equity rally or markets will bounce back?

A: If there is a bull markets in any market around the world today, it is in India. However, that doesn’t mean that we are in a straight line upwards. I think if we look at where we are relative to 200-day moving averages (DMA), Russia and India are by far the highest above those averages. In India in particular, I would say is more justified.

I think there are three current debates. One, are we in an inflationary environment or deflationary? Second, are we in a bull market or bear market? Third, are we recoupling or decoupling?

I think the answer to the first is more deflationary first, and inflation will come but it is still 12-24 months away.

Second, with regards to are we in a bull market or bear market?—If we are in a bull market anywhere, we are one here in India today. Then, with regard to recoupling or decoupling—that is still up for debate. However, I think you will see that the markets here have recovered stronger and faster than most other regions around the world.

Thus, I feel much more confident about India over the longer-term than most other markets.

Q: The Defty has already given you more than 60% rally year to date—would you expect to see much more by way of gains in  this calendar year  from the Indian markets or do you think best by way of price book performance is behind us?

A: I think there is still upside, we are up 60%. One interesting thing to look at is that if one looks at the period from September 15, which was the Monday after the Lehman collapse till March 9, there were only four stocks that were up in the BSE 500. From March 9, till yesterday, in the same BSE 500, you had only three stocks that were actually down. Interestingly, Akruti City was in both groups. I think the theme for the balance of the year would be divergence.

For the next six months, I can guarantee on most that you will not see the same one way moves, I think you are going to see greater emphasis on stronger balance sheets, cash generation, management teams, less chasing of fads and greater divergence in performance and more emphasis on stock selection.

Q: So, if you were to map the Nifty from here—from around 4,600—what kind of broad range would you indicate for the next six months, the highs and the lows as you see it?
A: If the past 12-24 months have proven anything it is that most people are not adapt at longer-term projections. However, I will say, if there is any downside risk, it’s probably more short-term. If you were to use calendar spreads, selling more near-term calls at around 4,900-5,000 to subsidised calls for six months and above, I think that is a pretty safe strategy.

Q: What exactly do you like right now within the Indian market? You mentioned Akruti City—is real estate and infrastructure a space you are looking at? How have you broken up your portfolio by way of preferences?
A: Less excited about real estate, more excited about infrastructure, health care and education. If I were to think about what needs to happen? Where will the Budget be allocated? Who will be helped? Where am I excited about?—I think in the education space I still like Educomp. I would be very excited if the prices were to move back to the low Rs 2,000 around Rs 2,500. But the viewer should ask themselves, should the largest education company in India have a market cap of only a billion dollars. If you look at the marketcap relative to the opportunity, I think 12-24 months from now, a company like Educomp should be trading at multiples from where it is today. If you look at the earnings valuations, the valuation multiples, mid-20s, high- 20s, current year earnings multiple high teens next year, earnings growing 60-75% per year, Educomp is one particular company where it does make a difference. The scalability in their business model is quite strong.

On the infrastructure side, I do like IRB Infra, the road builders. I think in the upcoming Budget, one particular area to watch will be the highways and the roads. I think Kamal Nath is going to do quite well in that area.

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