I wanted to start asking you by having your take on Reliance. I do understand that you cannot talk stocks, but sector outlook is what you can share. So, let us breakdown Reliance into different segments. One is the oil, the other one is retail, and then there is telecom. If you can give us some sense that what is your outlook on all these three sectors, how are they expected to perform going ahead so that we can get some clue about what is your view on Reliance, but overall how do you see these sectors performing in the markets.
Vinay Paharia: So, we are fairly positive on the overall oil and gas, especially the speciality chemicals space. So, while oil and gas is a pure commodity business, but speciality chemicals is more differentiated, has much more stable and structural long-term growth potential and has a defensible return on equity characteristics, so we like that segment of the market.In fact, in most of the portfolios, we are positive on speciality chemicals. As far as telecom is concerned, once again that is another sector where we are extremely positive on. It is like a sector which has consumption characteristics, FMCG like characteristics, but the sector has much higher volume growth, rising growth, and incrementally we can clearly see that the return on capital in the sector is also going through the roof.
So, telecom is another sector where we are extremely positive on. And retail or consumer discretionary that is while the sector is a long term positive, it is going through near-term challenges. The consumption trend in India has weakened after almost three to four years of fairly strong consumption boost. So, we are positive long term, but slightly cautious in the near term, especially on the consumer, on the organised retail side.
Take a look at how you are placed in terms of your large and midcap fund. I see your largest sector allocation is coming in banks and IT and software. Help us understand how you are positioned when it comes to banks. Are you liking PSUs? Are you liking the larger names or is it the midcap names where you are seeing value when it comes to the banking space? And also IT, you have an 8.5% allocation to IT in your portfolio. Since it is an outward facing sector and a lot of action is happening globally especially on the back of the Trump tariffs, tell us what is your view when it comes to both of these names banks as well as IT.
Vinay Paharia: So, we are very positive on banks. At this point of time private sector banks appear like a no-brainer. The sector is expected to grow at a faster pace given that the liquidity conditions are starting to ease off, this was one of the biggest challenges faced by the sector.
Second, as far as valuation is concerned, this is actually one of the biggest sectors which is pulling down the valuation for the entire largecap segment, so this is one of the cheapest segments in the market and I am talking purely about the private sector banks. These banks, in fact, the larger banks have displayed exceptional track record as far as their underwriting discipline is concerned. They have navigated most of the challenges in their marketplace. For example, microfinance or personal lending, etc, etc, and have come out extremely strong. They generate very reasonably good returns on equity and hence at this point of time given the current market environment, these appear to be the best places to be in. We are very positive on private sector banks. As far as IT sector is concerned, this is another sector which is coming out of a reasonably soft environment. It has gone through a cyclical weakened times for the last one to two years and incrementally we think going forward there is tailwinds for the sector and this is not a great sector from a very long term perspective.
It is a stable sector and it is likely to just deliver volume growth and value growth in line with our nominal GDP growth, but nevertheless it is a great defensive sector at this point of time and we think that it is also coming out of a cyclical downturn, so it has good returns on equity characteristic and it is also going to see some cyclical tailwind for sales growth and hence we are positive on this sector as well.
Given the recent reset of the valuations for the Indian markets and some of these sectors across, give us some sense that which sector offers the most lucrative opportunity to you right now, other than financials?
Vinay Paharia: So, I would digress a bit and not just talk about sector. The big value lies sin the set of high growth and high quality companies which are present across the largecap, smallcap, midcap and also across various sectors so there is clear opportunity in most of these companies, they have severely underperformed in the last two years; however, these are the set of companies which have over the last two decades deliver superior returns compared to the overall market and they have a very strong potential based on their current valuations on a relative basis.
So, we think a lot of opportunities in the high growth, high ROE segment of the market. As far as sectors are concerned, as we talked about private banks that is one of the best ones.
Apart from that, we also like healthcare sector, we like IT sector, we like telecom sector, and we like consumption oriented sectors from a long-term perspective. So, broadly these are our sector overweights at this point of time.
