It is very difficult to take a call on the vaccine but on an ongoing basis, businesses in general are improving both in domestic and export terms, says Kunj Bansal, CIO, Karvy Capital.
What is your take on midcap IT? Give me a name that you like in the midcap basket.
Not keeping the recent share price rise and valuations in mind, but purely in terms of business model, the capability of the management and reasonably decent consistency in financials, Persistent Systems is one stock that I like. It’s not that the others are not good but since you asked me one name, that is the name.
There is always a valuation gap between the large cap IT and midcap IT. In the recent past, large cap IT has participated very well and that resulted in the valuation gap between large cap and midcap IT becoming wider. Obviously the advantage will flow in at some point of time to the midcap IT wherein the valuation gap will come back down to the average levels and that is where we could continue to see buying interest coming in.
Where within pharma are you sensing opportunities?
I am not banking on the vaccine opportunity because it is very difficult to calculate the numbers, be able to analyse or estimate the pricing that will happen and what kind of discount the government might expect for social benefits. So, it is very difficult to take a call on the vaccine but on an ongoing basis, businesses in general are improving both in domestic and export terms. So Divi’s Lab is one stock I like. There is the upfront rider that I have held a small quantity of the stock for a long time.
In terms of midcap counterparts, Laurus Labs is another stock which on a valuation basis is reasonably good. Let us keep in mind that it has moved up roughly 4X-5X in the last one year or so. But the company has shown good business growth there. These are some of the names. As I said, for any good stock valuation, price movement will always be a challenge. There could be one or two quarters’ blips depending on various circumstances that the pharma sector goes through. Sometimes it is US FDA issues, sometimes exports, sometimes recall of medicine and things like that. But these companies deliver longer-term consistency and the sector flavour that has come back in terms of buying interest.
