Mayuresh Joshi of Angel Broking told CNBC-TV18, "2013 was an exceptional year for IT and pharmaceutical where we saw a lot of polarization happening within the top tier companies, within these spaces itself. Going forward in 2014 as well we believe that the earnings growth will largely be dependent on export oriented sectors and we have a certain liking for stocks within the IT, pharma and FMCG space. We also like the metals pack as a whole."
He further added, "We like HCL Technologies and Tata Consultancy Services (TCS) from the IT pack where we believe that the earnings growth both in dollar and rupee terms will be exceptional for both these companies going forward. With the US economy picking up and European markets stabilising, I think the discretionary spends on the IT side whether it be BFSI or the other sectors should grow going forward. It should support the EBITDA margins of both these companies within the top tier IT names."
"From the pharma space on declines we like Sun Pharma, Dr Reddys Laboratories from the top tier companies. From the midcap pharma space, we like Ipca Laboratories, Cadila Healthcare where we see huge potential going forward specifically in case of Ipca Labs where utilization is Rs 80-100 crore in terms of bottom-line performance. It has got 36 ANDAs in the pipeline, 62 percent of its revenue contribution comes in from the export markets. Similarly for Cadila Healthcare, which has got good pipeline of products, can have a revenue impact and can be revenue accretive going forward as well," Joshi said.
He further said, "From the FMCG pack, we like ITC from the top tier names, Britannia, Dabur which we feel have tremendous growth going forward especially in the rural markets. Specifically in case of Dabur we are looking at health supplements, their juices business is doing exceptionally well. They have been able to maintain their margins at 15-16 percent and volume growth has been pretty good between the 10-12 percent range. Valuation wise it is a little bit expensive at 34-35 times, but if you are looking at growth coming from rural areas and the urban areas as well, I think Dabur is one stock along with Britannia which can do well."
"From the metals pack we like Tata Steel where we believe that the import substitution theory can play out very well for Tata Steel. We have been able to maintain that margins and growth and revenues in a tough economic environment from their European operations. Once the domestic macro economic conditions improve, Tata Steel's domestic operations can aid and benefit from this move and again aid earnings growth going forward. So Tata Steel can do well from the metals pack," Joshi said.
He further added, "We like United Phosphorus from a agro-chemical play which we believe with around 7 million kind of patent can hugely aid UPL which is a back-ended degraded operations. It is not trading too expensively at seven times FY15 earnings. The stock looks reasonable, the buyback at Rs 220 will be a good support for the stock from a medium to long-term perspective."
"In the midcap IT space, KPIT, we believe there is huge potential going forward. The management has indicated that they will outperform the Nasscom estimates by a huge margin. They have been consistently delivering results over the past few quarters and our expectations are that the revenue growth both in dollar and rupee terms for KPIT can be much better than the industry," he said.
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