What is your view on markets in the medium- to long-term?
There are two recent issues to be considered—one, change in the interest rate regime, and second, rise in commodity prices. To an extent, these are challenges. I believe FY23 earnings will be erratic because of these factors, but FY24 will be broadly intact. Near-term hiccups will be because of oil and interest rate. India being a growth market, our view on equities is constructive.
Which sectors might do well?
There are tailwinds on various businesses, but they will turn around as conditions specific to them change. For instance, auto will do well in the next three-five years because the base is so low. Car sales are less than what we sold four years back, commercial vehicle sales are half; so, the only trajectory is up. If you look at telecom, there is consolidation in the market. Now this is a two-player market. Take the case of housing. After years it is turning around. We would see mean revert in many of the businesses.
What advice would you give investors in this market scenario?
I would not advise lump sum investment because of volatility. I strongly recommend SIPs (systematic investment plans). Thankfully, Indian investors have shown a lot of maturity this time, unlike in the past. They should just continue with their SIPs. There is a long way for the India story to go and it would be much better than the past. Equity will rule the next decade.
The banking and financial services sector is important because this sector constitutes a major part of broader indices, BSE-Sensex and Nifty. What is your view on sector?
If you scan the market today and look at good quality businesses at a reasonable price, the sector that comes out first is the banking and financial sector. It has strong franchises, strong businesses, and the valuations are not high. We think that the economy had seen a bad patch over the last five years due to multiple reasons, and when it started to recover, there were three waves of Covid. (Now), again there is uncertainty over the global interest rate and commodity inflation. But these issues will get pushed behind, and a recovery will lead to credit growth.
The balance sheet (of banking and financial sector companies) is in a very good shape because corporate NPAs (nonperforming assets) are behind. Covid has not caused as much pain as it was feared. Consolidation is taking place in many businesses, including the financial space. Strong companies are getting stronger. With the advent of technology, the larger franchises, including four-five names, are likely to get stronger. There will be huge consolidation in the sector. Additionally, subsidiaries are more meaningful than they were 10 years ago.
