Dinshaw Irani: These are distractions. We’ve been calling out a flattish market since the beginning of the year. Our call was based on fundamentals. If you look at the December quarter, our view was that things were not looking too good, and that weakness would carry into the March quarter—which it did. The March numbers weren’t very exciting either, and now we’re in the current quarter.
If you listen to the management commentary accompanying the March results, it was fairly downbeat. April and May also reflect a similar tone. In fact, yesterday Voltas held an analyst meet where they reported a 20% to 30% dip in air conditioner sales, which is quite concerning.
So, fundamentally, things haven’t improved. Then came geopolitical tensions—whether with our own neighbors or the Iran-Israel situation. But as I said, these are distractions. I don’t think the market was poised for a rally anyway. The only thing supporting it was liquidity flows.
Our view remains that we’re in for a time correction going forward. It’s a flattish market for now. On the domestic front, not much is happening. However, the silver lining is the way the RBI has handled the situation. It started with the government offering generous tax sops, followed by the RBI’s “bazooka” measures—a 50 basis point interest rate cut and a 1% CRR cut. These moves will have a positive impact, albeit with a time lag. So perhaps the festive season in the December quarter will be when the real upturn begins.
It’s been a period of ups and downs, but as you just mentioned, there are some positives. In this setup, which stocks or sectors do you see value in?
Dinshaw Irani: The first beneficiaries of the RBI’s action would be NBFCs. That’s where the real momentum starts because both their lending and borrowing books are on short cycles. This enables them to adjust their net interest margins (NIMs) quickly.
As for private sector banks, the real impact might take a quarter or two. The CRR cut will be helpful but will take time to show up in the numbers. PSU banks, on the other hand, are likely to be negatively impacted. Their lending book operates on a long cycle while their borrowing is on a short cycle, so their NIMs will be squeezed. Plus, their mark-to-market (MTM) book will take an immediate hit.
That said, overall, the BFSI space looks healthy. It’s one area we are very bullish on. Beyond that, we also like the healthcare sector—especially hospitals, which we believe will perform very well.
Tourism should pick up too, albeit with a lag, as per capita incomes rise. And of course, we’re focusing heavily on new-age companies. We are increasing our exposure to NBFCs and new-age firms because that’s where India’s real growth potential lies.
Absolutely. Just picking up on the financials—what started off as selective buying in private banks now seems to be broadening. NBFCs like Bajaj Finance have done well, and smaller ones are also gaining post-policy. With regulatory support coming in, even the insurance segment seems to be turning a corner.
Dinshaw Irani: Yes, you’re absolutely right. If you look at our upcoming June portfolio, you’ll find several small- and mid-cap NBFCs making the cut. Even gold lenders are benefitting. The final policy that the RBI released was more diluted than the original consultation paper, which was a positive for gold lending firms.
The insurance space has been good for us too—particularly life insurance. We’re not as bullish on general insurance, but life insurance remains a strong focus.
And there’s another area people often overlook: money managers. Asset management companies (AMCs) and wealth managers are poised to do well in this environment. With liquidity flowing in and deposit rates coming down, mutual funds and equities become more attractive, and that’s where we see continued growth.
