Why Vikas Khemani of Carnelian Capital prefers midcap IT, pharma

In a conversation with CNBC-TV18, Vikas Khemani, Founder of Carnelian Capital Advisors said he expects growth in midcap IT space to continue to remain robust and he is particularly positive about the Engineering Research and development (ER&D) space within the sector.

“We are in some funds a little bit underweight, some funds sort of equal weight, but we have been for more focusing at a company level. We have been very bullish on mid-cap IT and that is where the growth continues to remain very robust.”

He added that it is crucial to consider the significant deal wins achieved by large-cap  IT companies, as they serve as a key indicator of the prevailing demand in the sector.

He added, “Growth from FY25 and FY26 perspectives, I think 10 to 15% kind of growth is doable with that kind of last base."

“...companies that have a large exposure from ER&D space such as Cyient has been one of the pick in that which kind of fits both in the ER&D space as well as aviation growth. We have been looking at some of the product-focused company, which has been kind of doing well.”

Shares of Cyient were down around 2% at Rs 1742.95 today. The stock has gained 113% so far this year.

Khemani also shared insights on the Public Sector Undertaking (PSU) banks. He pointed to the significant investment of large PSU banks in technology and how it has helped them deliver services seamlessly while building a larger footprint.

"So I see can move PSU banks reporting 20% kind of ROE in the next one or two years.”

Khemani believes pharma is better placed than consumer stocks in terms of risk-reward.

“Pharma is another space, which we think one should start looking at from the next five to seven-year perspective, there's a very big change happening in the international market, which was a big pain point for the last five-seven years because of that pharma stocks did not deliver. I think that's the space which is getting into a good trajectory.”

He added, “I would say pharma stocks are better placed than consumers from a risk-reward perspective, as they are reasonably valued and have better growth profiles.”