Daily Voice: Despite short-term worries, this fund manager explains why private banks are a terrific place to be in the long run

Daily Voice: Despite short-term worries, this fund manager explains why private banks are a terrific place to be in the long run

Daily Voice: Despite short-term worries, this fund manager explains why private banks are a terrific place to be in the long run

Motilal Oswal Santosh Kumar Singh of AMC said that no significant news is anticipated since the interim budget is typically voted on. He would like to have objectives stated in the budget, however.

Fund manager Santosh Kumar Singh works at Motilal Oswal Asset Management Company.

About private banks: "If one is willing to look past the very short term, India has a number of excellent banks that will continue to grow their market share due to their technological advantage, making it an excellent place to be in the long run." According to Santosh Singh, fund manager of Motilal Oswal Asset Management Company, in a Moneycontrol interview.

The chartered accountant, who has over 20 years of expertise in equities analysis and strategy, thinks that any news on this front might cause market turbulence even if there isn't any political turmoil at the moment.

"I don't see many domestic positive triggers, but if the US surprises with a rate cut, the market might see some more downside."

Do you believe that at this moment, private banks are not providing a high risk reward?

Private banks have considerably outperformed both their PSU peers and the Nifty over the last year, with major banks particularly underperforming. This underperformance has been caused by three factors: a) sluggish deposit growth; b) increased expectations from the banking industry; and c) pressure on NIM (net interest margin), since they are coming off of an exceptionally high NIM owing to a significant rise in repo rates. were. The years 2020–2022 were remarkable.

NIM may continue to face pressure given the likelihood of a repo rate decrease and the liquidity shortage; hence, the near term might be challenging for equities. But if one is prepared to look beyond the near term, certain excellent Indian banks will continue to grow their market share due to their technical edge, and as a result, they are well-positioned in the long run.

Do you believe that the worst is behind the IT industry and that investors should begin buying these stocks?

The forecast for the US economy has been a major factor in the success of IT sector companies for a while now. The IT industry continued to underperform while interest rates were rising and the market anticipated the US to do badly. Nonetheless, I think this is a very long-lasting industry as these businesses will play a major role in advancing global digitalization, which will make it appealing in the long run.

It's widely believed that US interest rates have peaked and that a gentle landing is imminent. In America, rate reductions are also anticipated. Additionally, growth in the IT industry is expected to be at a multi-year low.

In light of this, I don't think there's much reason for the industry to do poorly. But, given the sector's recent significant outperformance, caution is warranted. These stocks should only be purchased with a long-term outlook in mind.

Do you think the current year's market will stay range-bound? Which factors, both favorable and unfavorable, have the power to alter the direction of the market this year?

The market will rise because profits growth, which is anticipated to be in the mid-teens, will boost market performance given that the market is now trading at several points between the mean and one standard deviation on long-term data. could coincide with EPS increase.

Though any news on this front might cause market turmoil, there isn't any political unrest at the present. Furthermore, the market anticipates that the government's current pro-capital spending policies would continue. Should the budget persist in addressing this, there may not be any adverse consequences.

Although I don't anticipate any domestically driven positive catalysts, the market may see further loss if the US shocks everyone with a rate decrease.

Do you think capital expenditures in India will boost the Indian industrial sector?

The industrial sector has done very well overall during the last year, especially in light of the government's emphasis on capital spending. We anticipate that capital spending will continue to be encouraged by government policy, which might lead to strong industrial performance. But because the equities have been trading at high values for a long time, one must be aware of valuations.

Do you anticipate continued government capital expenditures and a slow increase in private investment in the next quarters?

Since the government's capital expenditures are having a noticeable effect on the economy, we anticipate that they will continue. Private capital expenditure usually comes before public capital expenditure, so if the government keeps its focus, we can witness a revival and acceleration of private capital expenditure in the next quarters.

Is there anything significant that the administration has announced in the interim budget, particularly in relation to the upcoming general elections?

Major announcements are rare with interim budgets since they usually go to the vote on accounts. But I would want to see the Budget's aims.

Despite the fact that the Fed Chairman hinted at three rate reduction this year at the most recent meeting, do you believe the Fed funds rate decrease is being postponed?

The Federal Reserve has consistently said that decisions would be based on evidence throughout this cycle. I continue to think that a rate reduction may occur this year. Its timing and scope, however, will rely on the data, and the reduction may be postponed if solid data already exist.