3 sectors Deven Choksey is bullish on in near term

“The business outlook for ITC in different vertical remains absolutely promising, and I believe that these verticals have inherent strengths to get separately listed eventually,” says Deven Choksey, MD, KRChoksey Holdings Pvt. Ltd.

What is your view on ITC, the stock hitting a 52-week high yesterday and reports are indicating now that the centre has revived its plan to sell part of its indirectly held stake in the company and that transaction could be completed within the current financial year, what would this mean for ITC?
Yes. The business outlook for in different vertical remains absolutely promising, and I believe that these verticals have inherent strengths to get separately listed eventually. In times to come I guess the agri vertical, the IT vertical, the FMCG vertical and hospitality vertical each of these verticals could possibly unlock higher amount of values for investors and could possibly sustain their growth going forward.

So I would remain relatively more optimistic and this particular company remains relatively more promising than ever before given the kind of strength that they have created in each of their verticals in the business. Separate listing would mean good amount of value unlocking for the investors.

Wanted to understand whether in the last month of volatility and weakness that has played out in the market and more so for the mid and smallcaps if you have added any positions within mid and smallcaps in your portfolio.
We have been liking some of the auto ancillary companies largely because of the fact that the auto OEMs are now going to report steady numbers going forward particularly commercial vehicles and passenger vehicles.

Of late, the last month data also suggested that two wheelers have started showing reasonably better performance. So the conviction remains higher with some of the auto ancillary companies which are there in the midcap baskets into the market and they could possibly once again start performing better going forward in the current year because behind them is the surge in the metal commodity prices which affected their margin for a while in the last year as well.

I mean continuing in this current year also and at the same time the demand scenario remaining absolutely convincing I would think that the auto ancillary companies which we have started picking up in our portfolio remain relatively a stronger proposition. Similar is a situation with the 5G rollout in the companies covering the 5G related rollout space, a couple of them in the market listed place which we like have started presenting themselves good opportunity. In the defence space some of the mid segment companies are looking promising and maybe they are recently listed so one will have to wait and see how exactly they sustain their quarterly performance to get the full judgment on the full year performance here after.

How should one approach IT now because names like etc have already gone up 25% this year would you rather bet on the niche plays the likes of , etc or go with the large caps?
I think the large caps definitely show the visibility of revenue for next five to seven years because of the contracts that they have been winning in the last few quarters that we have seen. Both and remain absolutely strong proposition on that front as they keep on adding the billion dollar customers on every single quarter which gives them the visibility for five to seven years of revenue. They remain convincing and at the same time, the need for the IT services has always been there and is likely to grow even further from what it used to be. In fact I am getting a similar kind of understanding that what it used to be in 1990s the need for IT and services. I think in these particular times you are having a situation where most of the companies are reaching out to the customer directly adopting to SaaS platform, going to cloud computing and re-entering into AR, VR platform.

So in my view point the business condition remains absolutely conducive for them even except in some pockets of the world there might be some amount of slowdown in releasing the orders.

In Indian space some of the mid-tier IT companies look really interesting. They have reasonably good amount of niche and at the same time the growth rate would be higher compared to the frontline IT companies and I am talking about the likes of LTTES or LTI Mindshare or for that matter even

Technology.

Tata Elxsi remains reasonably strong proposition from the point of view of growing at 25% and above at least in the foreseeable visible few quarters from here onwards.

What is the anticipation from the policy tomorrow and whether that could turn out to be a more meaningful event in terms from a market perspective?
The RBI has always indicated that they are not going to be in hurry to raise the rate of interest as long as they see the working of higher effects of interest rate on inflation. As of now it appears that given the kind of fall in the commodity prices both food as well as industrial commodity prices and given the fact that the crude oil prices have remained under the range, I would rather like to believe that inflationary pressure for the time being has probably peaked out and if it has peaked out indeed in that situation, RBI is unlikely to be in hurry to raise the rate of interest.
However, as far as the market is concerned, the market may be prepared for 25 basis points hike in the interest rate.
So that should not come to the market as a surprise or a shock even if RBI increases the rate of interest which I believe that they will wait, they will not be in hurry to raise it.