‘We Estimate Earnings Growth to Touch 14-15% Next Fiscal’
Indian markets are just a few percentage points away from all-time high levels, but in the context of strong growth possibilities going ahead, the valuations are not expensive, said Vikas Khemani, President and CEO, Edelweiss Securities. In an interview to Anandi Chandrasekhar and Sanam Mirchandani, ahead of the launch of Edelweiss’ India Conference, Khemani said the shift from unorganised to organised sectors will be a key investment theme going ahead, within which mid-caps will do particularly well. Edited excerpts:
What is your sense on the budget announcements? There were no negatives, which was a good part. It was a growth-oriented budget and money was allocated where it was needed — spending in the rural economy and kickstarting the investment cycle. The budget has addressed all the needs of the economy at this point by loosening the fiscal, keeping credibility intact yet allocating money for the needy section of the society, and leaving money in tax payers’ hands in the form of lower taxes. factored in most of the companies’ valuations.
How will the ongoing elections in some states affect market direction? It is an uncertain event. I don’t think this can really change the game big time depending on the outcome. There might be a short-term impact if there is an adverse outcome. If there is a positive outcome in favour of the current central government, it will give big wings to the markets.
Within midcaps what are the themes you are looking to play? Investment cycle is one theme – power, railways, roads – a huge amount of investment is happening in these sectors. Another aspect is the shift from unorganised to organised, which cuts across various sectors like industrials, consumption, financial assets, healthcare, textile, retail, diagnostics, packaging material, dairy and food processing. In financials as well, the growth would be unprecedented in the next 3 to 5 years.
In NBFCs, the demonetisation impact has not been as bad as feared but valuations are still expensive. Will you be a buyer in this space? Yes, I will be, because demonetisation has not changed anything. If the valuation is higher than what one might want to pay, it is scarcity premium. Even if you pay a little more right now, growth will compensate for it.
With valuations of telecom companies at rock bottom, is it time to focus on this space? Consolidations are key and a lot of industry disruption is at work with a new player coming in. It makes it difficult to say how it will play out. I would say it is better to wait for some time, there is no point in taking a contrarian call until you know where you’re moving.