“I think we started this year believing that banking and financial services as a space looks reasonably positive especially given the overall context of the market,” says Taher Badshah, CIO, Invesco MF.

As we have stepped into the brand new year, it seems like you have got some of those largecaps that are in the spotlight but the expectation was that the FIIs would be back with a bang this year, might not have seen evidence of that too much in the month of Jan, how do you expect the rest of the year to pan out and more importantly how contingent with the markets you think be on it?
Well, it is always a little difficult to call flows but I would like to believe that we probably are likely to see interest rate differentials at least stabilise. We saw that in 2023 as well that significant recovery in flows compared to 2022 which was a negative year and I would like to think if India probably from a fundamental standpoint continues to remain a reasonably attractive market versus other destinations, flow should be on the positive side both in the equity as well as in the fixed income space. HDFC Group this morning has asked RBI permission to raise stakes in six banks in one go, in fact it did create a bit of a confusion early morning as well whether the bank wants to acquire IndusInd, of course clarifications followed. But I want to understand your take on the clutch of private sector banks, some of them have not been performing for a long while, are you looking for some safety in such names or would you stick to the one which have performed but then at the same time the stocks of those names have also run up?
I think we started this year believing that banking and financial services as a space looks reasonably positive especially given the overall context of the market. I think this is a space where you still find a reasonable value especially in the private sector banks versus some of the public PSU banks, the differential between them in terms of growth profile for FY25 seems to be relatively narrower compared to what it used to be in the past and valuation differential between private and PSU banks too have narrowed in the last 12 odd months, so I think tactically from a cyclical standpoint private banks and in general the banking sector does look reasonably attractive to us but within which I would like to probably believe that privates might probably nudge a little ahead.

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We have started on a relatively positive note as far as the opportunity in the banking and financial services space is concerned for 2024. We believe that it is a sector which has underperformed and we would like to think that the differential in terms of growth as well as valuation on private sector banks versus the PSUs is narrowed making a relatively stronger case for private sector banks versus PSUs for this year.

By and large we would like to believe that much of the banking space looks attractive, should do well, but within which there is a fair possibility that privates may nudge ahead of publics in the current fiscal year.

Wanted to out of curiosity just get in your take on some of the new-age tech companies as well, Paytm aside there have been some pretty encouraging sets of numbers that the companies have delivered for instance Delhivery or a PB Fintech, how are you looking at the turnaround and the treatment that they have been meted with since their listings and now?
We have seen a reasonable journey with many of these companies approximately two odd years since their listing and since the listing our view has always been that there will be a few of these, if not all, which will become dominant, which will become very-very relevant and stay relevant over the years, given their competitive advantages.

And if they can maintain those competitive advantages, then they would merit a look. Alongside which we were also reasonably seized on the fact that we do not really want to see profitability being very-very distant in time.
We, of course, appreciate the fact that these businesses do take a little bit of time to mature, but I think we were also not of the view that we would want to pay for something which is too distant. And I think to that extent now with some of these companies having asserted their competitive advantages reasonably well over the last two years, having maintained their competitive position or even having widened it and simultaneously having brought their profitability targets relatively more closer, these clearly merit a look and to that extent I think we have represented whatever we like in this space in our portfolios as well.

Which end of the auto OEM actually you find most comfort in right now, is it two wheelers? Now that, of course, you will have another passenger vehicle stock very shortly, by Diwali you will have Hyundai also being listed on the exchanges, but where do you find most comfort right now?
I think there is a somewhat higher preference for two wheelers versus four wheelers, as I can gauge even within our own investment team and even within our own managers and I think there is a case for that simply because we have seen the low-mid income end of the market struggle, the rural end of the market probably struggled a little bit in the last some years and more particularly the two-wheeler market as well, so to that extent there is a value opportunity which is clearly there.

Numbers are yet lower than what it was pre-pandemic, but they are clearly getting better and there are some of these companies which are doing well in this space and have earnings momentum on their side valuations are not now as cheap as what they were some time back, but still relatively more palatable compared to let us say the rest of the market.

So, I would like to think that that is one of the more preferred spaces. We do like some pockets of the four-wheeler area as well, probably we are avoiding some of the more cyclical parts of the four-wheeler market at this stage. But some of the more secular stories and if they have a specific attractiveness for in terms of either product line or market share within the four-wheeler space, then they are also in the preferred category.

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