Defence stocks might just consolidate: P Phani Sekhar

In an interview with ET Now, P Phani Sekhar, Karvy Stock Broking, shares his views on pharma and defence stocks. Excerpts:

ET Now: What in pharma do you look at?

P Phani Sekhar: Generally better known midcap pharma names and all of them incidentally are looking quite good. Over the next two years, actually the entire gamut of large cap pharma as well as midcap pharma looks interesting and just like large cap IT, even if you look at large cap Indian pharma, since the large part of the business is driven globally. They are global midcaps and to that extent, there is still huge amount of growth that is possible there and over the next one-and-a-half, the large number of exclusivities are coming up so the outlook for both the better known midcaps as well as the large cap Indian pharma names still looks exciting so I have not really gone so much down the barrel.

ET Now: Is defence on the priority list or because the delivery is to happen two-three years down the line, you probably wait and bide your time before buying into these companies?

P Phani Sekhar: You are seeing the first flush of excitement which is that defence sector gets opened up to private players but if you were to really be keen on when that earnings get delivered I think it will be at least five years because by the time defence order actually comes to you, it is at least two years because there are multiple levels of checks and balances there. It has to be approved by several layers of armed forces.

So, the first flush of excitement is what we are seeing now but beyond that the stocks might actually go into some kind of a sideways unless you see constant news flow in the form of order book additions something that at this point in time we cannot really comment because we do not know how quickly the government actually progresses on this.