Even as the markets are super nervous about IT stocks on fears of US recession, Prashant Khemka, founder of White Oak Capital counted mid-cap IT stocks as one of his top sectoral bets. He said, his other top sectoral bets were large-cap financials, healthcare, and consumer discretionary stocks.
Besides, Khemka feels that the moderation in earnings of IT companies will make only a very small difference to the overall benchmark earnings and returns for the year.
Mid-cap IT firms, with consistent execution and strong operating performance, remain core holdings despite global macro uncertainty. "If global growth slows down, the demand environment would be weaker and it would hit all: large, mid, and small," Khemka acknowledged. "But the best-executing companies would gain market share and still continue to deliver."
Khemka pointed out that mid-cap IT players have delivered strong double-digit growth in revenues, profits, and cash flows through multiple demand cycles since Covid. "Yes, they have been volatile—no doubt. But through these ups and downs, they have performed extraordinarily well in both operating metrics as well as in the market," he said.
Khemka said that India IT companies, which constitute 9-10% of the index currently, “could see miniscule moderation” if there were to be a US recession. “If you look at even the global financial crisis, Indian IT companies actually grew earnings, despite all the projections—disastrous projections,” he said. “So could the Indian IT sector’s growth be, instead of 6–7% in dollar terms, 4–5%? Yes. That is a 3% moderation on a 10% base (weightage). Even if earnings are moderating by 5%, that is half a percent change (to overall returns).”
"Our largest allocations are in large-cap lending institutions—both banks and non-banks—but also capital market intermediaries, which tend to be small or small-to-mid caps. Those are fairly well allocated in the portfolio," Khemka said in an interview on Moneycontrol.
Healthcare is another key overweight, spanning across pharmaceuticals (mostly domestic-facing), hospitals, and diagnostics—areas where White Oak continues to find opportunities across large, mid, and small caps.
Consumer discretionary, too, features prominently in the portfolio, especially across the mid-cap universe. While Khemka sees opportunities in industrials as well, he cautioned against sectors like infrastructure, industrials, and deep cyclicals, where excesses have built up.
"In consumption, there was no excess built. In tech, there was not any excess built either. Financials, IT, healthcare, consumer discretionary—these are pockets where we continue to see value," he said.
Telecom and other sectors, such as small-cap cyclicals, were notably absent from his top picks, reflecting a cautious stance amid a potentially slowing global growth backdrop.
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