Invesco MF’s Taher Badshah has a bottom-up approach towards this sector; here's why

Taher Badshah, CIO-Equities at Invesco Mutual Fund is of the view that next 12-18 months could be moderately better from an overall economic standpoint. “It should be a combination of global as well as domestic factors leading to that and if that were to happen then it is not going to be surprising that we will see the broadening of the market because valuations are relatively reasonable in the broader market,” he added.

With regards to rally seen in the mid and smallcaps, he said, “I think that’s already started to play out over the last 3 months and maybe now over 6 months we are seeing the mid and smallcap indices are doing better than the Nifty. Things are changing very fast at the ground level and there is better participation. I would like to think that this probably will have lot more legs even from hereon. "

"We still have a fair bit of underperformance on the mid and small versus the large caps over 2-3 year or even a 5 year timescale. So there is a fair bit of catchup, which is still in the offing,” added Badshah.

Sector specific, pharma is a bottom-up story, he said. “We don’t have a choice but to look at it segment by segment and try to look at opportunities even though some of our funds would reflect overweight position in pharma vis-à-vis the benchmark.”

The traditional pharma space is not entirely out of the woods, he said, adding that the business models there are changing so we have to have a different kind of a lens to evaluate them. While some of the more domestic oriented names or perhaps names which border on things like healthcare or hospitality – that’s something which needs to be looked at differently. "We don’t have a choice but to keep making those distinctions internally, and that is how we are arriving at our overall pharma allocation. It is going to be a sector where we can look at one or two companies, which can be 7-8 percent of our portfolio but I don’t think we are still there yet,” Badshah added.

On capital goods, Badshah said, “We are reasonably positioned in industrials. We are overweight in some of our growth and value strategies. It’s a space we like."

“We are spread across a fair bit of industrials - be it light industrials, road related companies, some of the conglomerate as well and diversified industrials too. So that’s the space which looks interesting incrementally, he added.