Hiren Ved, CEO, Director and CIO, Alchemy Capital Management, continues to remain constructive on the market.
He believes in the next couple of years, the earnings of corporate India will surprise people on the upside. He said, “We believe that it is not just a matter of liquidity but it is the strong earnings growth, which is propelling the market.”
At this point of time, Ved prefers to stick to the larger financial companies. “Our belief is that the financial services industry is likely to see a very large disruption from technology companies. Therefore, we would not just like to be invested in companies which were traditionally strong on the liability and asset side, but also have a very strong digital footprint and capabilities,” he explained.
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He continues to prefer the Bajaj twins and ICICI Bank in this space. He further said that he expects to see a positive swing of earnings in financial services companies and banks.
For real estate, autos, cement and metals, he expects these sectors could offer the big swing factor on the earnings front.
According to him, IT sector will continue to surprise on the earnings front.
“There is still space in the consumer discretionary space or sectors which got most impacted by COVID-19 and then there are new emerging sectors, which have not done well for a long period of time like metals, infrastructure, real estate and financials – these are likely to contribute significantly to the upside in earnings over the next couple of years,” he mentioned.
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Ved is bullish on platform-based companies. These businesses have superior return on capital (RoC) characteristics. “We believe there is an opportunity to make money there. Many of the stocks are benefitting from increased financialisaton that we are seeing. We continue to be bullish on these platform companies. We do own one of them in our portfolio and we think that this is just the beginning,” he said.
Online insurance brokers are an interesting space as well. “We are seeing a lot of customer acquisition happening there and this is a long-term structural trend. Whether it is companies like ICICI Securities or Angel Broking, we continue to be very positive. We believe that is an area which will do exceedingly well,” he noted.
He is also bullish on quick-service restaurant (QSR) space. “Valuations though may seem to be higher; growth will compensate for that over the next few years,” he said.
Ved also likes the speciality chemicals space. “This space is going to have a 10-year runway of growth. ROICs are very attractive in this business. We like this space. We think that it could be the next big export industry after IT services and generic pharma – I think this is the third large industry that India will create. We have exposure there,” he shared.
In terms of auto space, chip shortage issue is more of a short-term to medium-term challenge. “I believe that there is an opportunity over the next two-three years because autos will come back in a very big way,” he stated.
For the full interview, watch the accompanying video.