Milind Karmarkar of Dalal & Broacha Stock Broking opines that hospital stocks are not a great Covid play but meant for those willing to stay back for the long haul. Edited excerpts from his interview with ET Now:
What are your thoughts on the resilience that the market is showing against the spike in Covid cases?
The collective intelligence in the market believes that we will soon see the end of the second wave. If you go back to the Spanish flu, there were three waves and the second one was the deadliest. Unfortunately, that’s happening again. So one should always have a tab on history.
We know that the market is not going to react to the same event twice in the same fashion. Do you think that any upside could be capped from here and 2021 could be a year of consolidation?
2021 could be a year of consolidation. But at the same time, our GDP growth projections could come down to 9 per cent, which is not bad at all. April GST collections have been extremely good. So I continue to hold my view that even 2021 may be better.
On FMCG stocks
There will be some kind of cost push on FMCG companies but they did well in the first two quarters of last year. If you go back to the 60s and 70s, the top five companies in the US were FMCG. But in next 15-20 years, all of them were retailing companies. FMCG companies will do well, but not to the extent they did last year. Their growth may be slightly lower, but retailing companies should do well.
The opportunity for FMCG continues to be massive. Certain sections are maturing but food has extremely low penetration. I do not see FMCG as a completely mature business but the long stint of 18-20% year-on-year growth is going to slow down. However, it will still develop higher than the GDP growth rate.
Do you think that pharmaceuticals, hospitals and the overall healthcare space is a long term opportunity or is it just a Covid play?
In the short term, I don’t think hospitals are a great Covid play because they have to give their beds at a substantial discount. The second reason is that hospitals are a long haul business and until one has a view of at least 10 years, I do not think one should be invested. At the same time, hospitals are like retail. In the initial stages, capital expenditure is significantly higher because they keep investing in new properties, because of which there is a strain on the balance sheet. You also have to look at how the insurance sector is panning out, because ultimately it will be insurance which will drive these hospitals over a longer period of time. But I am all for investing in hospitals and if one finds good hospitals which are delivering service at a reasonable price I think one should be invested in them.
What about your approach in terms of diversification of portfolio? Where does asset classes like gold, real estate or debt stand as a component?
A lot of younger guys ignore NPS and PPF. There has to be a balance in investing. Timing the market is extremely difficult. Fixed income should be a part of your overall portfolio. When you are building a portfolio, think about long term. At least 80% of your portfolio should be in equities.
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