My Best Pick 2013

Rigour driven

Persistent’s strength lies in its core outsourced product development business and high cash generation ability

Soumik Kar

Despite a 25% jump in the market, India’s macro backdrop remains unclear, and there is no evidence yet of the investment cycle turning any time soon. Therefore, while investors should look for exposure to any recovery in the investment cycle, when it does come, the best way to build in some caution is by maintaining strict quality discipline. The only way to strike a balance is to buy high-quality mid-cap names. In general terms, we’re now finding a better quality/value balance in mid-cap stocks, as many of the large cap ‘quality’ names look fully priced. (Institutional holdings decrease substantially with the decrease in a company’s market cap, especially in terms of foreign institutional holdings — and FII flows of $20 billion this year have been a major driver of the large cap names, hence the market. On an aggregate basis, FII holdings are 4 percentage points lower in mid-caps than large caps.)