Bullish on cement; see potential in fintech, midcap IT, diagnostics space: Emkay Global

According to Krishna Kumar Karwa, managing director at Emkay Global, the recent correction in the broader market is a healthy sign. The focus should be on ‘bottom-up’ approach while buying midcaps, he said.

“If you look at from the last six-seven months perspective, smallcap indices have been outperforming the largecap indices. In the last one month, we have seen that there has been a decent amount of profit taking as far as the smallcap and midcap stocks are concerned,” he said.

“Almost 15-25 percent correction has taken place in many of the smallcap and midcap stocks. That puts the exuberance in check but we are in the midst of a correction in a bigger bull market. So, investors should do well if they invest in the smallcap and midcap stocks over a medium-term perspective. There has been some froth which has got created and that is why some correction has been seen. But smallcap and midcap stocks are basically to be invested in a bottom-up basis,” he added.

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The broader market has performed in line with frontline indices in past few years, he noted.

He sees huge potential in fintech companies, midcap IT stocks and diagnostics plays.

“The fintech opportunity where we have seen one of the non-banking financial companies (NBFCs) which has got a massive technology edge, that seems to be emerging as a leader in that space. My judgement is that one of these companies could become a massive outperformer, going forward,” he said.

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He believes there are opportunities to invest in the new-age companies and these companies will continue to drive investor focus.

Karwa is positive on the cement sector. “Going forward, we believe that infrastructure spending from the government and private sector capex augurs well for the overall cement sector. From a medium-term perspective, we are very positive on many of the cement companies. I believe some of the mid-sized companies – the valuation is very attractive and they should give you much better returns than maybe the largercaps,” he shared.

On midcap IT and digital stocks, he said, “My judgement is that the only challenge that many of these IT companies face is about the accretion level which has gone very high. But if the business tailwinds are very strong then they should be having a good pricing power also. I still believe that the mid-market IT companies could outperform as far as the stock market performance is concerned.”

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According to him, there is opportunity in some of the mid-sized hospital chains and diagnostic companies as well.

“In terms of the returns that the shareholders can make in many of these highly valued or more expensive hospital chains would be very difficult to envisage. Having said that, the acquisition of Thyrocare by a private equity funded enterprise is something which is very interesting. So my judgement is that the diagnostic space could possibly see more action,” he said.