Krishna Kumar Karwa bullish on auto ancillaries

Krishna Kumar Karwa, MD at Emkay Global Financial Services told CNBC-TV18, "From a one - two year perspective it seems that the midcaps have run up sharply and have outperformed the largecap indices. However, if you look at the midcap indices from a five year perspective still there is a lot of catching up that the midcap as a whole versus the largecap index. So primarily from a short-term perspective you may feel that they have run up sharply but I believe that still in a growing economy it is the midcap stock which will tend to give you out size returns versus the largecap stock."

"Having said that you can not brush all midcap with the same brush, you will have to be bottom up in terms of identifying and investing in them. Rather than trying to do sectorial attempts in terms of which are the sectors and then I would like to look at which midcap to invest, it is primarily based on bottom-up kind of approach where valuations and individual growth opportunity should be the key theme," he added.

"About auto ancillaries, there is recovery in the commercial vehicle (CV) cycle. Then many of the auto ancillaries which have been struggling for want of growth and also many of them have been developing good export opportunity. So, they should do well and they also are reflected in the valuations that many of the tops have gone through. We are bullish on auto ancillaries, we have seen the kind of growth which an Amara Raja has had and we still believe that despite it having run up so much it will still give you good returns."

"Other stock that we like in agro-chemicals, we like Tata chemicals that is again a large midcap where we believe that the balance sheet tries correction in terms of debt reduction which is happening should add to the enterprise value and to the market cap of the company. We are bullish on UPL where we believe that versus peers the valuations are much lower. It is a global company available at very reasonable valuation," he said.