Financial Services will remain an attractive sector

Rise with India theme versus how India was being positioned in 2006-2007: The euphoria and excitement in India is no different from the excitement in 2006-2007. But we fell short of delivering that hope and delivering that potential. Now is the time to realise that potential. We were in a rising interest cycle in 2007, we are in a rate easing cycle currently. If you look at corporate earnings, that had a strong momentum back then; we are in a low cyclical earnings phase today.Even though valuations in multiples seem high, they are on the back of low earnings. Back then, in 2007. The flow of money was predominantly foreign flows whereas today we have very sticky domestic flow that is keeping the markets where they are.

The most important aspect today is political stability. Today you have a very decisive government with clear policies that are executing towards those policies and this time around, the PSU sector is working as hard or harder than the private sector trying to put reforms and policies in place that will help the economy grow. Candidly speaking, I am more bullish today than in 2007. In 2007 I would have said we don't need an “incredible India story“but a “credible“India story ...10 years later and I think it is happening now.

We believe that some of the policies that the government has put in place will lead to more job creation. So that is for the next five to 10 years, but a word of caution here is if I look at the country for the next 10-20 years and on one side we get super excited by the artificial intelligence, robotics, automation that is happening which is disrupting the technology world and will eventually take away jobs from countries. So that is something that is on my mind that continues to concern me about our longer term prospects.

On the future of financials sector as a growth investor: Financial services will continue to be a sector where investors will be very interested because it is a leveraged way to play the economy. Lots of NBFCs chasing growth have been growing the lending books very-very fast and you sometimes wonder whether they have compromised on risks and whether that risk is really going to play out. You have to be very careful when you look within the financial services sector and look specifically at lending. Again you have to look at the micro, you need to look at the company and you need to look at the managers who are managing these companies.