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Pvt banks, NBFCs place to be; like Eicher: Birla Sun Life

The IAIP India Investment Conference 2015, which is underway in Mumbai, is seeing a lot more interest this year when compared to the last year, is the word coming in from Jayesh Gandhi of Birla Sun Life AMC joins from the sidelines of the conference. The theme is how does the Narendra Modi government reboot the growth engine.

According to him, the Modi government’s performance so far has been good and his biggest achievement has been managing to bring the growth agenda back on the table. It is not any one big ticket policy announcement but a series of important policy initiatives taken by the government that is notice-worthy, he says. He further expects the economy to hit 7-8 percent GDP growth in 2-3 years.

Gandhi is hugely biased towards Indian banks, especially the private sector banks and NBFCs on the back of structural positives and tailwinds from improving economy. He believes that BFSI, consumer discretionary and autos will lead equities hereon. He feels it makes more sense to stay invested in companies with a good track record from a long-term perspective even if they are expensive at the moment. According to him, Eicher, MRF, and Bharat Forge will capitalise on growth.

He is also looking for greenshoots in infrastructure and capital goods sector. His portfolio for 2015 will largely consist of India-focussed companies with a select IT and pharma names. 

However, he cautions that the Indian equity market can see volatility in the short term. But he expects it to give healthy returns with a 2-3 year perspective.

Below is the verbatim transcript of Jayesh Gandhi’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: What kind of an audience you get and what kind of speakers just to get an idea of who are interested in India? Did you see more interest this time than you saw in the Annual 2014 Conference?

A: Our registrations have crossed an all-time high number of 450 and we probably have equal number watching the proceedings online as well. The response to the conference has been overwhelming and we thank everybody for the same. The theme of the conference is you can get it from the name tag which is how does the Modi government reboot India’s growth engines and get India back to the growth path?

This is a critical question that is facing the entire investment community and all investment professionals today. It is critical that we get our domestic economic situation in order and get it right because we do not have the tailwind of the global economy to help us this time around so it is our own domestic economy and policies.

Latha: Your star speakers include Arvind Panagariya and Jagdish Bhagwati as well?

A: No, Mr. Panagariya only and we also have interesting speakers from the global arena. We have Vikram Mansharamani who will talk to us on the forth coming consumption boom in this country and across the world because of the drop in commodity prices. Then we have Russell Napier who will talk to us about deflation that the world is likely to experience and how investors should protect their wealth in this deflationary environment.

It is going to be a mix of domestic economy, focus towards reigniting growth in India and the way Indian investors should protect their self from the global volatility and what is the way forward in terms of investors in India both equities as well as fixed income.

Sonia: How have you and the people you interact with assess the Modi government’s work so far?

A: Prime Minister Modi has been credited for a number of successes in the last few months. My belief is that his principle success comes from the fact that he has been able to bring the growth agenda back on the table. He has been able to bring that confidence in people of this country that they can do it and India can come back to a strong growth environment. No big ticket announcement but a series of important policy initiatives that we have seen in the last few months which is driving towards a much stronger economic environment over the next few years. My belief is that we should hit 7-8 percent gross domestic product (GDP) growth in two-three years time.

Latha: I was looking at some of your top holdings; you are heavily biased in favour of banks especially private banks and maybe non-banking financial companies (NBFCs). You do not think public sector undertakings (PSUs) deserve a place?

A: It is not that PSUs do not deserve a place but at this juncture and at this structure of the market we thought best would be to play with private sector banks and NBFCs which have structural positives and the tailwind of the improving economy and the likely expected better credit growth in the next few months to benefit.

Latha: For 2015 will the bias be towards finance and within finance towards private?

A: Absolutely. Our sense is that banking and finance should be the sector to remain overweight on. We think banks, financial services & insurance (BFSI) along with consumer discretionary and auto should be the sector to look at. As I look at the earnings estimates and look at the growth for the next 12-18 months, the biggest opportunity which comes there and our bias would be on private sector names because we think they will be the ones who will benefit the most in the initial first two years of the economic expansion in India.

Disclosure: My family & I do not have positions in the stocks discussed

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