Pankaj Murarka, founder of Renaissance Investment Managers talking about market fundamentals said, “There is a dichotomy, which investors are finding difficult to reconcile with - where the economy is all-time low and markets are all-time high but what we are confusing is the growth rate of the economy with an absolute level of the index,” he said.
According to him, one thing which has done well and probably likely to do well is the whole data consumption story in India. Due to penetration of smart phones, data consumption in India has gone something like 5x in the last three years and that is going to double in the next three-four years.
"So we like all the companies in and around the data consumption. We like internet businesses, we have started liking telecom, we are seeing return of pricing power in telecom after a gap of almost 10 years and we think this pricing power is here to stay for a pretty long time,” he added.
The house is also upbeat on the healthcare space because the sector has been through a deep downturn over the last three-four years. "This year is a year where earnings in the sector are troughing out after sharp decline over the last three years and from next year onwards, we think some of the leading companies in the sector will get back to growth trajectory,” said Murarka.
With regards to autos, he said they would look at it from a medium-term perspective because given the sharp negative growth rate that the sector has experienced, probably auto sales will get back to more normalised growth from next year, post the BS-VI transition.
Speaking about Vodafone-India, he said, “Vodafone-Idea is in a somewhat precarious situation. The business needs equity and probably some help from the government. From an investor’s perspective, this has been a sector, which has seen massive capital erosion for the last ten years but we are near the end of that cycle and now the sector looks interesting from medium-term perspective.”
With regards to pharma space, he said “We like the pharmaceutical companies. For the last three years, there has been significant earning erosion that has happened due to pricing competition in US but the generic prices in US are stabilising."
"More importantly, some of the leading Indian companies have made significant investments into the business, where they are trying to transition their business or focus on speciality and complex generics. Some of those businesses will become pretty meaningful over the next three-four years," he said, adding that they like companies focusing on the complex and the branded generics.
On Yes Bank, he said, “The franchise has value and so they will be able to raise capital sooner or later." However, the point to note would be the pricing and the terms on which they would they get capital, he added.