In an interview to CNBC-TV18, Shirish Pardeshi, Head - Equity Research at Anand Rathi Institutional Equities shares his views on a couple of sectors and his preferred bets going ahead.
Below is verbatim transcript of the interview:
Q: You do have a lot of companies coming in to attend your conference and so many pharma stocks, so many real estate stocks have gone up considerably in the last five or six odd months. How is the mood amongst the participants with respect to growth in the midcap sector and personally, how much gains do you think the midcap sector could eke out in the next 6-12 months?
A: Looking at investors response we have a lot of interest in consumer facing stroke. There are few chemical companies that are there into the home solution and have dawned a lot of interest.
However, the current economic scenario offers the traditional value pickers a good opportunity to buy and for people who believe the growth story, there are options for them as well. There is so much demand because the small and midcap index over the last one year has gone up by 100 percent.
So, what we are seeing from the investor perspective is not a sector allocation but a bottom up strategy. Few pharma stocks where we have seen a lot of interest, right now the investor mood looks like what is it the growth story and the expectations and the valuations which are ahead of fundamentals.
The investors are clearly having a clear interest in terms of speciality chemicals.
We have seen interest in some of the R&D players that has got better business model like Insecticide India which has close to about 150 formulations and the crop protection business is just taking off. The company has just put the capacity and with the value picking up with the new plant at Dahej we see a lot of traction. Fundamentally, the company is well poised across India, has about close to 6000 plus distribution touch point. I think we see a lot of demand there.
Q: Besides Insecticides India, would you like to add to that list of either sectors or companies that are exciting investors most at this point in time?
A: In speciality chemical, Aarti Industries has drawn lot of interest. There is pharma ingredient supplier Speciality chemical who Aarti Drugs, there is a Hikal; these players have seen lot of interest. People are trying to factor in that with the economic improvement and there is earning visibility which can be predicted. I think there is lot of demand and interest in the small and midcap space.
In the consumer space we have seen lot of home solutions players like HSIL, Somany Ceramics. To talk about these companies, these companies have traditionally been into one segment of the business but there is a demand from vitrified and glazed tiles which is traditionally HSIL is seeing the up movement.
Similarly, Somany is also able to bring in new business lines which are into the sanitary ware and household faucets and other business. I think what investors are trying to gauge is that whether the company is well poised in terms of business model to get into and exploit the new business out of diversification. These are the companies which really have done wonderfully well in the times to come. I think the management gives that kind of confidence.
Q: Another pocket that shows up in your list is the education space but some of these names like Career Point, have not really participated in the rally in the last three to six months. What is the story within the education sector and what are the stocks do you think could deliver good returns?
A: In the education space what we are seeing, the investors are still trying to understand what is the big opportunity. With the focus of government trying to provide the education space a much wider audience, there we will see the traction and people who are providing solution I think my sense is that would be ahead of the curve. Though it is not reflecting into the earnings, so probably there is a position people have taken wait and watch maybe another one quarter. However, I strongly believe that this will get factored in, in another one quarter.
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