Amid stock market rally, even as investors grapple to find value buys, Vikas Khemani of Edelweiss Securities says that financial and construction sectors provide good opportunities. In an interview to ET Now, Vikas Khemani, President & CEO, Edelweiss Securities said, “ Obviously, it becomes difficult to find value in this kind of market. You have to look for different kind of themes and different kind of opportunities. You have to be in structural opportunity space where growth is there and we have spoken multiples times — financials, construction, all those things are structural opportunity space. Within them, lots of ideas are possible.” But how should an investor identify value picks from these sectors? “Investors must look at companies which have operating and financial leverage. As the activity and volume picks up, as capex is done, and volume growth picks up, the operating leverage kicks in, that is one theme I like. When economic turnaround happens, lot of sectors which are heavy with capacity will do well,” he told the channel.
In the same interview, Vikas Khemani shared his outlook on the HDFC Life IPO which closes today. “We have HDFC Life issue closing today. We like that a lot and it is again a great name from a pedigree perspective, business model perspective, growth perspective. Insurance is one space which in my opinion, one should look at from a 8-10 years perspective, to create a huge amount of value. I like financials in general. The financial penetration in this country is still very low,” the expert noted. There have been four other insurance IPOs in the year so far, including SBI Life Insurance, GIC Re, ICICI Lombard and New India Assurance. Notably, out of the four large insurers garnering Rs 35,000 crore in total, SBI Life Insurance and GIC are trading below their issue prices, ICICI Lombard is trading 2% above the offer price, while New India Assurance, which will list soon, is expected to witness a weak debut.
Sharing his outlook on general and life insurance space, Vikas Khemani said, “General insurance has a lot more scope for penetration, a lot more scope for product innovation, a lot more opportunities. Penetration is more than even life. I do believe that both segments will do very well over the next 8-10 years because in both segments we are significantly under penetrated and new product innovation, new ideas will come in those segments. I remain bullish on both these segments.”