You admitted that the biggest challenge for you was figuring out the terminal value in stocks. Now when there has not been those mini 10% corrections where are you seeing all of this? You had said that the best way to play the capex cycle is through banks. Is it still that?
Yes, some of the themes which we believe in are powerful themes from the next 3-5-year perspective. The first one is the revival of industrial capex and manufacturing.
We believe that there are early indications that both government and private sector capex is likely to pick up in the coming quarters and months. During the last decade, we saw that the sector has not done anything and they are not very expensive also on the valuation side and we believe that the way we’re bullish on chemicals three, four years back I think the same positivity is there on industrials and manufacturing as a theme.
The impact of the China plus one and the PLI themes has started flowing into the economy. Every company is talking about incremental orders coming from global suppliers which were dependent on China. So that is one space where we believe that incrementally it is a medium to long term trend.
The second is financials. Private sector financials may have underperformed the market of late but if you look at a slightly longer term basis over a decade or two, private sector financials have still a headroom for growth. They are gaining market share. All the other metrics are looking very good. Credit cost seems to be coming down now. Can they compound their earnings by 20-25% going forward, the answer is yes. So that is one space which is again reasonable on valuation.
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The third theme is that we are believing that strong will become stronger, big will become bigger and across the board we are backing the leaders of the sectors, the top three, top four guys and we are seeing that the formalisation of economy which started post demonetisation has actually gathered pace post Covid and the leaders are gaining market share at the expense of the smaller guys or the tail end of the sector and I think that is the third theme where we are positive on.
The fourth theme which we believe is the real estate revival theme. We are not great admirers of the real estate developers because they do not generate the return on equity over longer periods of time but in order to ride this revival in the residential real estate we are quite positive on the home improvement space very well acknowledging the fact that the next couple of quarters we may see pressure on margins but from a three to five year perspective we believe that the demand momentum revival would be very strong.
So these are the main four themes and along with that exports which will include IT and pharma. So I think these are some themes which are part of our portfolio and we believe could be powerful themes over the next three, five years.
