How would you react to yesterday’s selloff?
Chakri Lokapriya: The regulator getting into valuation is rarely done in other markets and actually if you look at the nature of the market itself, today the broader market is nearly 50% of the entire market versus about 10 years ago, when 90% of the market capitalisation was only in the largecap. So, versus the fund flows going into 50 stocks versus going into let us say 600 stocks.

The way equity is a risk category and investors need to be cognisant of that and all mutual funds have proper regulations in place in terms of sector exposure, stock exposure. So, some of these announcements lead to these knee-jerk reactions. That has created some kind of, what do you call, opportunities because the broader market still is looking very good.

What has been your strategy in 2024? Where are you taking chips off the table? Where are you bulking up more stocks?
Chakri Lokapriya: In 2024, initially, we thought we should raise IT, but then we decided against that because IT spending will continue to remain tepid until the US interest rates trajectory becomes clearer, which is still many months away. We are still positive on manufacturing. We have taken off some on railways, but that space is still looking okay. In terms of banking, we still maintain PSUs. Within the PSUs, Union Bank, Bank of India, even SBI, because as the ROAs and ROEs of private banks and PSU banks are converging, then why should PSU banks trade at a far greater discount than a private bank?

But HDFC Bank now is sub-two times, which makes it at par with SBI. So, is there a real disparity now?
Chakri Lokapriya: I think in their recent, in one of their analyst interactions, HDFC Bank indicated that they are more after profit share rather than a market share. In a volume business like banking, financial services, volume share, market share, maintenance is very key and that is one of the main reasons why you gave it a premium multiple. Now, the focus of the bank is shifting and, of course, they will have some amount of merger related costs which will settle down in a few quarters but it looks like some amount of market share loss can lead to a lower multiple for the stock.

In this market fall, apart from banks, any other PSU stocks you are planning to buy?
Chakri Lokapriya: In PSU banks, Bank of India has corrected, Union Bank has corrected, as have some of the NBFCs. Shriram Finance is still looking very good. But both the CV cycle as well as all the consumer financing bit will still remain strong. The valuation is still on its side. So, it is a combination of both Shriram Finance. Power Finance, REC have corrected fairly significantly. The valuations are more attractive compared to IREDA. IREDA is the more expensive stock, but I think PFC and REC are looking good.Tata Motors, stock of the year for 2023. CLSA now says that it is looking expensive.
Chakri Lokapriya: Tata Motors is still looking good simply because the discounts on Land Rover have gone down. Pricing is improving. Volumes have held up in all its key markets like the UK, EU, and the other bits are all doing well. The whole story of the debt coming down for the company has played out. The company will be cash positive next year. So, with so many things going for the company, yes, while the stock has run up, fundamentally the stock is still good and I would still continue to hold on to it.Another stock which has managed to hit out of the park is Jio Financials. It may have corrected on Monday, Tuesday or Tuesday, Wednesday, but in general from 240 it has gone to about 340, 350.
Chakri Lokapriya: Jio Financials is probably one of the very few companies which has such a well-capitalised balance sheet with Rs 1.1 lakh crore. Those numbers clearly demonstrate the company’s willingness and goals in terms of reaching market share and growing. In that space, they can grow at the expense of the market. The market itself, of course, is expanding. But Jio Financials is definitely worth looking for at current levels because you are sitting on a balance sheet size of about Rs 1.1 lakh crore, if I remember the numbers right.