What we know from you is that you love the Pharma Space overall, and in that case you have a long way to go in CDMO Space and you shared on our channel itself I firmly believe that I remember the line of India’s CDMO sector has grown similarly to the IT boom of the mid-90s. But given the so many announcements related to tariffs, that’s the biggest headline today, do you believe it can actually create a dent in a structural story, or the tariffs Impacts and this higher tariff are possible, and do you believe the structural narrative is not, and still remains?
Vikas Khemani: Again, short-term issues should not be confused with long-term structural trends. CDMO is a very long-term trend. The need is to diversify the foundations of innovator drugs manufactured elsewhere, away from China, and we know what their interest is. It’s like the same thing as when I was going through Post E2K and everyone wrote that it ended as a sector, but we know that the sector has grown 20x posts It’s there. The fundamental needs for this. So, like CDMO, it is a fundamental need and it will unfold, I have no doubt in my mind. There may be a short-term adjustment there, I can’t really comment on it, but I don’t think there is a structural threat to it.
We’ve seen that there’s a cycle in the market, but I’m just breaking it for the viewer, when value stocks work, when mega caps work, when dividends are handed over. It may work. The past four years have been about PSU, defense, railroads and infrastructure. Therefore, the cycle has changed the cycles of small and medium stocks. So, whether the company is good or good, can a bias or negative bias on small and medium-stake stocks really hinder future returns?
Vikas Khemani: It depends on what your time horizon is. From the perspective of the next three to six months, the answer is yes. It’s probably small, and the medium cap may not return at its original speed.
But at the same time, SmallCap is likely to give you a good return, so if you’re looking a bit longer. For me, it reminds me of the time of the Ukrainian War. 21 was a great year from a return perspective, and January, February, March and April were great years.
Every day there were negative news flows, global concerns, geopolitical concerns, inflation concerns, crude oil prices and commodities. However, during that period, whether they purchased Smallcaps or Largecaps, the vintage provided great benefits for 23 and 24.
So the same thing, I would say it’s about the company, business model and management, not actually about small or midcap. If you like the specific companies and management teams that offer over a long period of time, these are the best times to buy, whether it’s a small company or a Largecap company.
So of course there is a chance as the volatility risk of a Lagecup is lower than a midcap. So, I look at it that way. I really don’t believe in small things and Largecups. I believe you are investing in businesses, and you are investing in businesses and businesses. As long as you’re right, stand in favor of risk and reward and look at it.
That’s why we run a portfolio that we like to believe in companies that may have positive rates of change. We discussed focusing on whether good sells when it gets worse. If the bad things are getting better, buy them. In this market, where do you think the rate of change in terms of revenue, management and business will improve? If yes, let’s discuss some of their names, ideas and themes.
Vikas Khemani: This year, in my opinion, there are plenty of high-risk risk rewards that favor both banks with PSUs and Matrix decent private banks. Of course, for the past six months, liquidity has hurt them.
As deposits, or bonds and deposits, become more attractive, the entire tax rebate of Rs 12 will push more flow towards deposits.
So some of these policy pivots were really good for this sector. And in my opinion, if it’s six months, six months after, 12 months after, the sector is the best this year, including absolute returns.
So you can see some of the personal names, whether it’s part of the PSU name, but that’s one sector I’d say this year and should be pretty good in the future, and that should have come The sector and liquid sector have the least impact from global uncertainty. So I feel that’s where there are a lot of opportunities.
But we’ve already finished major events, what exactly will we look at regarding the key indicators of the market, maybe it’s the Donald Trump-PM Modi tournament, the budget is off, the RBI tournament is passing Masu. But what are the key factors that will make you take care of?
Vikas Khemani: In my opinion, all of this, for now, the market atmosphere is very negative. In a way, as Nikunji said, the momentum is broken. And it takes time for this to come back. I think we will probably be in a similar kind of stage for the next three months. However, the direction of the market can change crucially.
If there is a Fed rate reduction, or if there is an indication from the Fed side to lower interest rates, it could probably change the critical trends in the market. Otherwise, perhaps somewhere in the first quarter, you can really see it coming back again if momentum was built around profit growth.
In other words, emotions change very quickly. We all know how our emotions changed negatively two months later. Similarly, we change very quickly, positively, but all that goes into is a billion dollar inflows from the FII, some indications, and a few statements here and there. So let’s not overemphasize about it. Let us not be overly pessimistic. I would say that many corrections have happened, time corrections have happened, so beauty will also happen when time corrections occur, value corrections also happen.
The reviews are really well received. So, in my opinion, as the market considers FY26 revenue, the next three months will start to fall into the next three months situation.
But one thing I’m paying attention to is the Fed rate reduction, which can be very decisive in terms of change, whether it’s six months away or not. It’s only a matter of time now.
