What are you going to keep top of mind as we head into 2021?
It has to be a Barbell strategy. The momentum trade is not going away very soon given how low interest rates are and the digitalisation that is happening. So IT and pharma stay but the recovery trade is also gaining traction. Overall, in the last three months, especially in the US market, the Vanguard value ETF has done a 2x of the S&P 500 and has done six times of the Vanguard momentum or growth ETF.
There is reversal or a rotation into sectors happening. We have seen banks as the first beneficiaries of it, it will then go into consumption. We will see those themes in industrial and capital goods and those are looking quite interesting and could be outperformers for next year. So our basket is diversified as always but the top picks would be banks, industrials, capital goods, cement and housing material suppliers. All these will be the outperformers for next year.
How are you looking at the entire pharma space?
I would say the most preferred part of pharma would be the large cap pharma, you have seen the top three players getting quite a few approvals and new approvals coming in. I think that will help. Midcap is transitioning. We are seeing quite a few things happening on the midcap pharma as well. As one of the big themes for next year, the momentum continues in pharma and it is very well positioned for India. Second, a lot of multinationals have offered China nearly a 50% discount in terms of getting their drugs approved in the Chinese market. Things like that can create more opportunities for our players as manufacturers of choice and suppliers of choice. The third big thing that is happening is that there is an expectation that 60% to 80% of the global population will get vaccinated this year and that is giving a huge cache of P&L for this pharma companies and our companies as suppliers will get some portion of that. There will be a rerating down the line even in terms of the multinational pharma operating in India. They will bring in those vaccines at cheaper costs and manufacture them in India and offer it in India. All that is going to drive pharma. We see quite a bit of runway for pharma even for next year and beyond.
