Could IT be the big contra bet now? Hemang Jani answers

“IT as a space has gone down by almost about 12 to 15% and this is absolutely not warranted, given that most of these companies are in a scenario where the deal wins and the overall tech spend is on the rise globally,” says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.

What is your big contra idea for the year? Would you go towards pharma or IT? Both these sectors are getting slammed.
While I was looking at the post quarterly numbers and the subsequent upgrades, what is coming out is that IT as a space has gone down by almost about 12 to 15% and this is absolutely not warranted, given that most of these companies are in a scenario where the deal wins and the overall tech spend is on the rise because globally, we had seen some cuts across the IPO names, the startup names. As a result of that, outflows of our IT names also are down about 10 to 15%. Within IT, there was excitement in midcap stocks as they were getting much higher valuation compared to the largecaps. I think HCL Tech, Infosys and to some extent TCS provide better entry points and comfort in terms of new allocation.

If Apollo Hospital is able to unlock valuation of 24/7 which is its online pharmacy business, could that fetch $3 billion of valuation?
Apollo Hospital has created two different verticals; one is this digital medical support and the other one being the medicines through that 24/7 initiative. Both these businesses have shaped up pretty well and it is quite heartening to see that the company is able to get this kind of value for this business and of course for the other business also. They have tied up with Amazon and a couple of online portals.

This company, apart from focussing upon the key business of healthcare, has been able to build these kinds of online and physical initiatives and we would definitely be very positive about it. Along with that, the stock has corrected from the top by almost about 10 to 15% because of some technical reasons and the selling by the FIIs so definitely we are extremely positive on this name for the next one year or so.

In the Budget, there was a lot of focus on the infrastructure sector. How do you see that story panning out within the cement space? Any preferences within this sector?
Overall this quarter has not been great for the cement sector because price hikes were not that strong and the dispatches on the volume growth were muted. But somewhere, these things are now stabilising and in the eastern region, we are seeing some price hikes coming through.

If we see more pick up in the activity in the next couple of quarters, particularly on the back of the kind of capex allocation which is there in the Budget, then people would want to participate in the cement sector. The only concern is the way the input costs have really gone up, particularly of coking coal and couple of other raw materials.

In terms of preference, we would be extremely positive on UltraTech that a largecap cement play and maybe some of the names like Dalmia Bharat and Birla Corp which are essentially east-based companies because that is where maximum price hikes have been taken. We would definitely be comfortable buying into these names.

What is your view on the fundamental side on Indian Hotels? We have seen improvements in their financials as well as their very ambitious capex plans going forward. Is Indian Hotels a good bet?
Yes absolutely. The way the company has managed the entire Covid period and emerged far stronger, given the kind of positioning that they have of having their own hotels and the management tie-ups and the way things are going to open up in India and globally, we think this is one name which will emerge stronger over the next two or three years and operationally also, the recent quarter was quite strong and is one of our midcap preferred picks.