Recommend a pick and choose approach in IT pack currently: Avinnash Gorakssakar

In a chat with ET Now, Avinnash Gorakssakar, Head of Research, Miintdirect.com, shares his views on some sectors and stocks. Excerpts:

ET Now: Would want you to react to the draft note by the oil ministry which advocates sector-friendly reforms? How would this augur for ONGC or Oil India?

Avinnash Gorakssakar: It definitely is good news. However, since we are heading into elections, these are longer-term decisions which would take time to actually get implemented. But, going forward, as the Kirit Parikh Committee report has said, deregulating crude prices and giving the benefit to these companies would definitely give better earnings visibility and would lead to a re-rating of these companies’ valuations. Again, I don’t think at this juncture, the markets would take these announcements very seriously. Maybe for the next couple of quarters, once the elections are out of the way and a new government takes over, one would like to re-evaluate and see whether the new government also looks forward to these decisions being proposed now.

ET Now: What is your view on the midcap IT?

Avinnash Gorakssakar: In the midcap IT space, there are specific stocks that would definitely do well. In the large cap IT, we have already seen companies coming out with robust numbers and giving a fair amount of strong earnings visibility. With NASSCOM saying that this is going to be a very good year for IT, coupled with the fact that the rupee has also depreciated, this would augur well for these companies.

Within the small cap IT basket, KPIT Cummins and Hexaware are the two stocks which probably have a good client list and more earnings visibility. Therefore, one should adopt a pick and choose approach, since the optimisim is not across the board.

However, companies with more business from the US and Europe would obviously get a better re-rating and clearly, Hexaware has been a candidate there. KPIT did disappoint investors in the third quarter, but with the kind of order book that they have, they should obviously do better in the coming two quarters.