Kotak Securities continues to bet on IT and pharmaceutical space but prefers domestic economy facing companies, Pratik Gupta, CEO & co-head, institutional equities, told CNBC-TV18.
“Pharmaceutical is one sector where structurally the long-term prospect is good. We have had a phenomenal rally in the stocks last year, and this year as well to some extent, but now you have to get a bit more selective. We still prefer some of the largecap pharma names where the product pipeline is good and some of them have a decent India business as well,” Gupta said.
“Therefore, given the valuations are for the pharma sector and for the broader market in general, it’s better to be in sectors and companies which may benefit from strong domestic economic recovery. So, we like the pharma sector, we like the IT sector, but there may be more upside from an earnings surprise perspective from the domestically-oriented sectors provided we do not get hit by the third COVID wave. We could see a dramatic recovery in India,” he said.
On Indian equity markets, he said, “India has outperformed most of the emerging markets (EMs) and the only exception being Brazil perhaps. India is now trading at 20 times FY23 earnings and there could be some earnings upgrades next year, even then the valuations are no longer leaving too much on the table for investors.”
“The only one major where we could say there could be potential for a further rerating is perhaps the banking sector as you get more clarity on the economic outlook. But from a broader perspective, most segments of the market are now fairly valued to somewhat expensively valued – that is not to say that the market cannot continue to rally further – that can still happen,” he said.
For the entire interview, watch the video.