Prashant Khemka bullish on banking, consumption, IT but bearish on real estate

"The value of any company is the present value of future cash flows," said Prashant Khemka, founder and managing director of WhiteOak Capital Management.

White Oak Capital Management founder Prashant Khemka swears by a bottom-up driven approach to investing in a range of sectors, as the market flirts with new highs. The market veteran is bullish on banking, consumption, IT services, healthcare and chemicals but has reservations about the real estate sector.

In an interview to Moneycontrol on June 23, Khemka said, "The banking sector has a large number of well-managed private banks, financial institutions and non-lending banking finance companies, offering a multitude of opportunities."

The Nifty Bank index, which has the highest weight in the Nifty, has delivered a return of over 10 percent over the past three months. Bank stocks have been some of the best performers in the past year. This is also a space where analysts see value.

In the technology sphere, despite IT services getting hammered over the last 12 to 18 months, Khemka see the sector as a good addition to an investor’s portfolio. The sector has generated massive wealth over the past 20 years and the companies spread across several market capitalisations are a good pick, he said.

The Nifty IT Index has delivered a 109 percent return over the past five years. Over the past year, the index has been trading flat on fears of an impending recession in the US, which remains one of the biggest markets for Indian IT servcies firms.

Khemka also has a favourable view of the consumption and healthcare sectors. He is bullish on both consumer staples and consumer discretionary, including auto and retail.

In the smaller sectors, he sees growth potential in the chemicals sgement which has achieved good success over the past few years.

He is, however, cautious on the real estate sector due to weak governance. “In the real estate sector, our team is unlikely to find many opportunities. This is because the opportunities set is much smaller than what the number of names in real estate would suggest,” he said.

The Nifty realty index has delivered 130 percent return over the past three years.

Khemka believes in analysing stocks in terms of the strength of the business and valuation. "Well-governed sectors are where my team structurally tends to find more opportunities because governance does not change overnight,” he said.

“We have a strong focus on governance, so some sectors have larger numbers of companies with better governance while in others its challenging.”