In an interview with Shweta Papriwal, Editor, indiainfoline.com, Veekesh Gandhi, said, “We strongly believe investors should invest in equity market from long term perspective and hence any disruption in markets is buying opportunity for the investor.”
We see a huge disparity among Banking and NBFC Companies. Only few selected ones are going strong. What is the distinguishing factor responsible for this?
Financials in India, post IL&FS crisis, have become very polarized. Strong Liability franchise has become the most important parameter. Secondly, governance and quality (of management) has become equally important. Finally, ability to garner market share is also an equally important element. Financials with all three above ingredients are the ones that are seeing strong momentum. Most private banks and select few non-bank finance companies are the ones who tick all the boxes.
Which are the sectors and stocks you are betting on for next 2-3 years?
We believe the selective infrastructure and capital goods, rural focus and consumer discretionary stocks and Private Banks, NBFC (selective ones which will emerge as winners from current crisis) and general insurance are the sectors which are likely to outperform in next 2 to 3 years. Our stock selection is focused on sustainable growth, management quality and governance and finally the economic moat. Apart from this, we feel lot of investing opportunities lie in spaces like urban infrastructure and railways due to recovery in the investment cycle and government-aided capital expansion. The industrial sector stocks have underperformed by +40-50% in the decade gone by, improvement and confidence in the investment cycle, however, should drive significant outperformance from this sector.
What are the key budget implications for the economy in the next 4-5 years?
The budget was intended to have more of the long term implication aimed at achieving a virtuous investment cycle to attract more capital, expand the scope of digitization in our economy and boost infrastructure development — steps that will serve as the backbone for growth over the next few decades. A big ticket agenda emerging from this budget is the push towards infrastructure development with a sharp focus on roads and railways. The massive Rs50 lakh crore investment target to expand and upgrade the railway network by 2030 is by itself a game-changer. The multiplier effect of large infrastructure investments and the building of roads will help increase employment and lead to higher capital flows. The Finance Minister’s intent on making India an environmentally sustainable and future-ready nation is clear from the thrust given to electric vehicles (EV) Import sops on EV parts, incentives to manufacturers and tax breaks on loans for EV buyers is a well-rounded strategy that will help propel the EV ecosystem. Not only will this lower the carbon footprint but also reduce the burden on the exchequer caused by oil imports. Bringing water to the parched hinterland, building homes in rural India and ensuring electrification are themes that are continuing to receive the necessary budget funding. With an ambitious target of 1.95 crore houses in the second phase, the ‘Housing for All by 2022’ mission looks to be on course. However, apart from this, the government has touch based upon all the departments and taxations – from collections to ease of doing business and facilitating. The Finance Minister has clearly implied upon Government focus of ‘long term growth’ - whether it is creating an ecosystem for startups, eliminating cash transactions, e-assessments or driving infrastructure growth, each measure clearly shows a long-term focus.
How should the investors look at the stock markets from a short, medium and long term view?
We strongly believe investors should invest in equity market from long term perspective, and hence any disruption in markets is buying opportunity for the investors. The timing of market is always a difficult task and we suggest SIP route for investors.
Our view for market is that it will bottom out in next 6 to 8 months and market will realise this sooner or later. In near term, there will be correction in market and this provides buying opportunity for us. In the medium term, we expect the market to stabilise and we are optimistic on long term based on stable government at the centre and strong leadership team in the major ministries.
There is disruption or/and consolidation happening in almost all the sectors. Which industries would be the most affected and which would be least affected in the next 5-10 years?
Urbanization, a huge rising middle class and a free-spending younger generation, not to mention business-friendly government reforms, have made it one of the world's fastest-growing emerging market economies. We believe the GDP growth at 7.3% with mammoth population adoption of technological change across the economy will make India one of the largest growth engine of the world. We believe in Financial Services (The Mobile Path Toward Credit, transactions leading to lower operational cost), Technology (Leveraging A Massive Online Population), and Healthcare (Caring For An Aging Population). Hence, we would be long term bullish on Financials (private banks, insurers).