Equity markets are extremely buoyant given the kind of inflows that we have seen into mutual funds in the month gone by. Would you say that the likes of Enam India, HDFC AMC etc. are more attractive from an investment perspective?
The feel-good factor is returning with a vengeance and we can see that there is an increased traction in terms of demand for most of the items in the economy, though in Q1 GDP data we saw that private consumption had fallen and that possibly could be one of the things to be concerned about but the pent up demand of the last 12-14 months could be huge and then we are entering the festive season and then the marriage season.
Some of those things which got missed out in the last 12 to 14 months, will have a tremendously compounding impact and could be a double positive. So, the economy and the feel good factor and also the optimism in the stock market will possibly continue for some more time to come. Coming to your question about the asset management companies, without any doubt, the AMCs are something to own for a long term and we know that it has nothing to do with short term aberrations here and there. But possibly in the long run, as the choices narrow as the number of investors go up, the AMCs will continue to be the pick of the lot because they will continue to provide a good stability to the portfolio and also experience a continuous long-term appreciation as the ROEs are going to be very high for most of these companies.
The interest rate sensitives will be in focus. Kotak Mahindra Bank has cut home loan rates to lowest levels. How are you approaching this?
I think the rate sensitive sectors continue to gain a lot of traction. As the momentum builds up post the pandemic, we are seeing a surge across in real estate and allied sectors. The way some of these real estate companies have started reporting their sales numbers, it is inspiring a lot of confidence. This activity alone can have a tremendous multiplier impact on the economy because the real estate sector is one of the largest employers in India today and their doing well can have a phenomenal upsurge in the overall economy.
Some of the stocks look pretty good. DLF, Kolte Patil have very good balance sheets without any baggage and debts. Indiabulls Real Estate is seeing a process of adjustment, but in the long-term, it appears to be pretty solid without any doubt. As far as the housing finance companies are concerned, there will be some compression of NIMs as the lowering of the interest rates will definitely pinch profitability. Otherwise, I am not sure if overall this may inspire a huge demand for housing loans.
Housing loans possibly are more a function of what is there in the real estate and also what is the ticket size for each particular flat. But the banks as a discretionary play also comes very much into the reckoning and possibly the private sector banks also have very strong verticals and some of those banks will get a lot of attention.
Are we finally seeing a revival in the entire hospitality and aviation space?
Very much. People are talking about revenge vacations internationally and even domestically, that is really playing out in a big way. I think the travel, tourism and leisure industry is something which is going to be in focus easily for the next maybe one, one and a half, two years. In all this, one can see a lot of momentum play because fundamentally speaking, we are expecting some decent returns on their capital or their assets. It is still a very far cry because they are all still very bad in the process but surely in the next one and one and a half years, this tourism industry will play out very well.
Within the hotel industry, there are very few companies where one can take a big bet. Indian Hotels qualifies as one of these.
is another one with a very good business model but it is going to be slightly more longer term for them.
Even the aviation industry also will see a good surge in the coming months and possibly for the next six to eight months. Possibly up to March-June 2022, we can safely expect all the three industries — travel & tourism, hospitality and aviation — to do exceedingly well. One must play the momentum in some of these stocks, rather than go for a long term bet.
