As risk appetite opens up, midcaps and smallcaps will outperform, says Carnelian Capital’s Vikas Khemani

He said investors should look at the companies where the large capacities are already in place. "They took a beating either because of the working capital cycle or lower utilisation due to demand issues. As the utilisation comes back, you will see the operating leverage and demand growth accelerating."

“We will see a very widespread improvement in the economic environment in my opinion. I have been saying that as the credit growth picks up, you will see fairly wide improvement in the earnings across the sectors,” he further mentioned.

Khemani said two-wheelers are better placed in the auto sectors but Carnelian Capital is not bullish from a structural perspective. "We like names like Bajaj Auto, Eicher Motors but we as a house are still not convinced in investing from a structural point of view in automobile given there are a lot of headwinds.”

In terms of pharmaceutical space, he noted, “Domestic pharma is recovering very well, international businesses have bottomed out. There is some improvement seen and stocks have been in a reasonable valuation range and most of them are under-owned. We like pharma as a sector, we are beginning to evaluate a lot of companies there but next 12-18 months or maybe long run, pharma as a sector should generate decent returns.”

 

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