Daily Voice | Not increasing positions in IT as headwinds in US, Europe fairly strong, says this investment professional

I think the balance sheets of the financial sector are definitely in a healthy place right now. This enhances the capital adequacy of the lenders and in turn, strengthens their ability to lend aggressively. However, to a large extent, the improved balance sheets are already priced into the market.

Future value creation would be a function of credit growth and continued improvement in the credit environment.

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What are the five major themes that you are betting on, which can deliver healthy returns over the next couple of years?

We normally do not look at themes or sectors and are bottoms-up in our approach. To this question, I always answer that in a growing, diversified, and young economy like India, investment opportunities are available across sectors.

Nonetheless, manufacturing looks promising, given the government's 'Make in India’ push, and the world’s China-plus-one, and now Europe-plus-one, strategy. Driven by the government's focus on indigenisation, the defence sector also looks good, besides, banking and financials, and speciality chemicals.

As the market is close to a record high, what are your thoughts?

Given the global recessionary scenario, Indian markets have been extremely resilient. Our markets are close to all-time highs when the whole world is in a slowdown — that shows a lot of confidence in the growth prospects of the Indian economy.

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We do not look at Nifty or Sensex levels. We are positive on Indian equities over the medium to long term.

Are you betting on any theme in the financial services space?

As I mentioned earlier, we do not bet on any themes and invest across sectors wherever we see value and opportunities.

Can one start taking big positions in the IT space, since it has been consolidating for almost a year now?

The IT sector has been a laggard for some time and I do believe that we will start seeing value sooner than later. However, we have not yet increased our positions as headwinds in their key markets of US and Europe are fairly strong.

What are the general parameters you consider before taking a position in any stock, or avoiding any stock?

We look at businesses which have long-term growth opportunities. Products with strong moats, distribution, brand, technology, etc., which are capital efficient and have strong cash generation.

We are very particular about the management and corporate governance of the companies we invest in, and look at managements who are continuously focusing on developing new capabilities to drive future growth opportunities.

We generally avoid global cyclicals, highly capital-intensive businesses, and sectors with a lot of regulatory intervention.

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