Pharma looks attractive due to valuations but isn’t a long-term play: Andrew Holland, CEO, Avendus Capital

Andrew Holland isn't banking heavily on defensive companies such as pharmaceuticals, fast-moving consumer goods, or information technology.

Expect some more consolidation to play out for Indian equity markets ahead of the general elections since financials, especially banks, which occupy maximum weightage in the index, are unlikely to move upwards but rather face more pressure on their net interest margins (NIMs), said Andrew Holland, Chief Executive Officer (CEO), Avendus Capital Public Market Alternate Strategies LLP to Moneycontrol.
However, Holland isn’t betting big on defensives like pharma, FMCG, or information technology (IT) stocks.
The pharmaceutical sector, which has been unloved for quite some time, looks more attractive due to valuation comfort, but this doesn’t necessarily make it a theme for the long term. Instead, he indicated that it may not be a sector he would prioritise for long-term investment strategies due to ongoing challenges such as factory issues and drug-related problems, which often get slammed by regulators.
The CEO also brushed aside another defensive bet — FMCG — stating that there’s no catalyst to move the needle for the sector.
He found it difficult to be enthused by stocks like Britannia, HUL, and ITC despite higher valuations without a clear catalyst for growth, adding that though these might serve as defensive plays, they wouldn’t be able to outperform the markets.
Additionally, concerns were raised about the potential impact of prolonged low interest rates on the recovery of IT companies. Andrew also expressed concerns about the commercial real estate market in the US, which could have significant consequences due to extended periods of high interest rates for the US, thereby weighing down on the financials of the export-oriented IT sector.