Arpit Agrawal is a co-founder of Electrum
“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,” said Arpit Agrawal, Co-Founder and Director of Electrum, the portfolio management services (PMS) arm of Arihant Capital.
“Indian 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,’’ says Arpit who is positive on Indian equities over the medium to long term.
A Chartered Accountant with more than 19 years of experience in the financial services industry, Agrawal believes that we will start seeing value sooner than later in the IT space. “However, we have not been increasing positions in IT as headwinds in the key markets of US and Europe are fairly strong,” he added.
Do you think their solid balance sheets are the only reason to bet on the banking and NBFC space?
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.
Also read: Inflation print for October likely to be lower than 7%: RBI Governor Shaktikanta Das
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.
Also read: Market rally extends to fourth week; 30 small-cap stocks rise 10-23 percent
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.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
