Post Covid, pharma has suddenly become the ra-ra sector. Does a natural tailwind due to healthcare spend warrant a complete rerating in PE multiples and stocks? There are stocks which are up even more than 100% from March lows?
We manage a pharma and healthcare portfolio and it is up 58% for the year, one year holding returns. So you are right that pharma is quite in vogue at this time and the question arises why is that the case? It has to be seen in the context of the timeline, say, the last five or six years. Also what is happening in the recent past.

In 2014, when the pharma sector peaked out, we had peak earnings and peak multiples and we had frontline companies trading at 40-50 times price to earnings.

What is your take on auto? The outlook sounds bright even if numbers have been very badly hit?
Autos is not a homogeneous sector. There are various segments within the sector, geographical distribution and also the kind of products that they are selling. The general consensus is that once the Covid instigated lockdowns are over, we will have some sort of move towards personal mobility. People will be wary of going in public transport and hence they would be looking to buy two-wheelers, four-wheelers etc. To some extent, that has been visible in the first quarter. After April, we witnessed a trend in that direction. We will have to wait and see whether this is a continuing trend or just an inventory filling which is happening in the channels.

The other thing that is quite evident is that the rural sector is doing quite well at this time and whoever plays into the tractor segment is also benefitting. In that context and also keeping in mind that this sector as a whole has been on a downswing for the last three years, there is a low late earning cycle and low valuation to go with it.

The room for downside was limited. Upsides could be substantial if the cycle turns and we see an uptick over the next two to three years. That is the way I would look at this sector and it is to some extent, bearing out in the last say three to four months.

Names like Laurus, Divi, Strides and a lot of midcap names post earnings have continued to see a steady climb?
Again, in the pharma sector, there are various segments and the names that you have given fall under contract research and manufacturing space. It is quite evident that the world is moving to a China plus one strategy.

Given that this market is large to the extent of billions of dollars and some estimates go up to as much as $100 billion and higher, India is really playing peanuts in this whole scheme of things.

A small move away from China into India could mean huge tailwinds of the entire contract research manufacturing segment in the country. And these names are clear beneficiaries of that. The first signs of that are visible in the quarter gone by and it looks like the outlook that they are giving for the future is also quite buoyant.

There is a marked shift in the trend for this segment and it is not like a flash in the pan. This is something that will play out over multiple quarters and years and this is a start of a trend for quite some time to come.