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Aditya Birla Sun Life AMC bets on domestic pharma, consumption themes

Midcaps’ recent correction, pick up in earnings growth is likely to catch up and it would be a good idea to selectively add them to your portfolio

June 21, 2018 / 02:40 PM IST

Mid- and smallcaps have seen a significant correction in 2018 after a sharp surge of around 50 percent in 2017. Stocks have been beaten down on the back of skyrocketing valuations.

But Mahesh Patil of Aditya Birla Sun Life AMC feels it is also the first time that value is emerging in this space. He suggests looking at the correction as an opportunity to pick some stocks with a long term view and start building a portfolio.

“There are some decent companies here, which if seen with a long term view, may report better growth,” the Co-Chief Investment Officer at Aditya Birla Sun Life AMC told CNBC-TV18 in an interview. He added that such stocks had previously seen a big expansion in price-to-earnings multiples. “After the recent correction and with a pick-up in earnings growth, it would be a good idea to selectively add them to your portfolio.”

Patil spoke on multiple sectors and how investors could play it. Here are some of the key points he highlighted:

Corporate banks

The sector has seen large amount of non-performing assets (NPAs) getting recognised in the recent past and that has impacted its accounts. While the pain could continue, he feels the magnitude of stress is in sight for investors. “Looking at the valuation difference between retail and corporate banks, there is a case for a re-rating in two to three years. With a slightly long term view, there is scope for a decent upside in earnings growth.”


Patil highlighted how the sector was one of the laggards in the market, but recently has seen upmoves after reduced negativity in the market. He believes the sector will recover this year based on product approvals and easing of pricing pressure in the US. “One could also look at domestic pharma industry, which is in a much better shape.”

ConsumptionGoing forward, he sees a pick up in rural consumption. “A normal monsoon will aid sentiment.” Though valuations are expensive, he feels one could look at sectors such as consumer discretionary, which is currently offering a good entry point.
Moneycontrol News
first published: Jun 21, 2018 02:40 pm

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