Be selective, shift focus to midcaps: Devang Mehta

Devang Mehta, Anand Rathi Financial Services says it is time to be selective in the market and one can start focusing on midcap stocks now.He recommends entering into Gateway Distriparks with a one-year horizon. He thinks the company is a proxy to the logistic story going forward and is in position to take advantage of economies of scale.  However, for him the valuations in the IT space look a bit expensive. Moreover, with profit warnings from some companies one needs to be cautious there. He also does not see discretionary demand coming back for the entire sector. According to him one could reduce their exposure in IT and shift into capital goods space and NBFCs, which are likely to be beneficiaries of the improvement in capex spending.He also like Lupin and Sun Pharma and believes corrections witnessed in them could give them more strength. So, those who missed out on them earlier should participate in them now. From the midcap pharma space, he likes Suven Life and Granules India.Within the NBFC space he is very upbeat on housing finance companies like HDFC, LIC Housing and Can Fin Homes. REC and PFC could also be looked at as a proxy to infra, he adds. He likes Can Fin Homes becasue it serves the lower income group of the society and has hardly seen any defaults. Net interest margins of the company are good and there are not much NPAs.

Looking at financials other than NBFCs, one could start accumulating Bajaj Finance at these levels, says Mehta. Even M&M Financial has corrected big time due to some concerns in the last couple of quarters but going forward, the results and earnings are expected to improve. So, this also could be a big beneficiary if something good happens to rural India. M&M Financial could be a dark horse going forward.

Disclosure: We discussed a lot of the stocks so it is safe to assume that our company and our clients might be having positions in this. I don’t have personal positions in the stocks that we have discussed but it is safe to consult your investment advisor before investing in the stocks.