Private banks Vs consumer stocks: This market veteran with 30 years of fund management experience weighs in

While traditional consumer staples may be overvalued, pockets of discretionary spending still offer potential upside.

The market seems to have given a verdict that consumer stocks may be the biggest beneficiaries from but the budget, Anand Radhakrishnan, Managing Director of Sundaram Mutual Fund, sees a different opportunity emerging.

The recent budget could very well end up motivating households to save more rather than spend more which will make a strong case for investing in banks, Radhakrishnan feels. He believes investors should look beyond the prevailing narrative to sectors that remain undervalued, and private banks are in this basket, he said in an exclusive interview with Moneycontrol.

“If we take a proposition that people will save a little more and deposit growth may increase, private banks look like an attractive bet,” Radhakrishnan says. Unlike the broader market, private banks have underperformed in recent times, keeping their valuations reasonable. With deposit growth on the rise, lending could pick up, strengthening their earnings potential.

The ripple effects of tax savings of households will extend to banking and beyond. A boost in disposable income means households may leverage more to buy better homes, expanding opportunities in real estate, cement, and construction-related sectors. “If you put Rs 80,000 additionally in the hands of a household, it translates to an extra Rs 6 or 7 lakh in borrowing capacity. That brings a new segment of buyers into the housing market,” Radhakrishnan told Moneycontrol.

This broader income effect, he argues, is often underestimated. Instead of focusing narrowly on immediate consumption, investors should consider how incremental financial flexibility changes long-term spending patterns. This, in turn, fuels growth in essential building materials, making cement and housing-related plays attractive.

"I have been quite bullish structurally on the QSR (quick-service restaurant) space. As people earn more, they may travel more, eat out more," he notes. While traditional consumer staples may be overvalued, pockets of discretionary spending still offer potential upside.