ET Now: Is anything looking attractive from a risk reward perspective? When you are staring at a market like this where there has been quite brutal selling pressure over the past many days, do you just sit it out and wait for the dust to settle?
Pankaj Murarka: No, not really. One can find lot of companies which have reached a price point which is very attractive for investors who are willing to have a medium term perspective. In the short term, markets seem to be volatile because of the overhang of rising rates and sell off from foreign investors but for a investors with a medium-term perspective, this is a great opportunity to buy into some of these companies.
For example, we have got positive on private sector financials, especially the larger names. They have underperformed over the last one year but we think from here on, they will start delivering on the growth. The valuations are very attractive after the selloff and so we like them.
Also we have been positive on engineering and capital goods as a sector because we see very strong and healthy signs of revival of India’s investment cycle which has been virtually missing for most of the last decade and as a result, we find attractive investment opportunities in that sector as well. The point I am going to make is for investors who are going to have a medium term perspective, it is time to nibble in and start buying into it and not be bothered too much about what will happen to the listed equities over the next week or 10 days. I think that markets will settle down somewhere over the next few weeks.
What is your take when it comes to the largecap financials from a risk reward perspective on private sector financials?
The market is always forward looking and I do not think that the last year or last 18 months returns are the right judge to make an assessment on the future outlook for businesses because obviously these businesses went through a cycle during Covid where there were apprehensions about they might have a significant bad loans on their balance sheet but actually the way things played out the bad loans on the balance sheet of these companies or incremental bad loans were far lower than what everyone was fearing.
Now that the economy is normalising, probably this is the first financial year where India will experience a normalised financial year. In the post Covid world, these companies are emerging out of crisis far stronger than where they were when they entered the crisis. They have very high capital adequacy ratios and I think we are at a point where we are seeing an uptick in the economy.
I think all the pieces are aligned for some of these larger financials to deliver a very healthy growth from here on from a medium term perspective and given the fact that they have not performed effectively means valuations now have become far more reasonable than where they were two years back. So, private sector financials, especially the larger ones like ICICI Bank or a State Bank or HDFC Bank make a compelling investment case.
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