It seems the markets are ignoring what is happening in the commodity universe so far. Do you think if crude goes above $90, the equity markets will begin to feel the heat?
Anand Tandon: Well, yes, there is no doubt that if the oil prices were to continue to sustain higher, there will be some pressure on the economy. For now, at least, the quarter that has just ended will actually show commodity prices being relatively lower and therefore, most of the manufacturing companies will show increased operating margin.

But going forward, oil is something that one needs to watch out for. I have been saying that we should be expecting an increase in energy costs because of the fact that despite subdued production, despite the fact that there are global issues which are preventing free flow of oil, despite all of that, the prices were remaining well under control and we had significant cutback in terms of production, I think that will now begin to show up in higher prices as we are already seeing.

Let us talk about some of these individual sectors that one should watch out for. What is your view on the real estate sector? Obviously, the whole turn is coming around that. But, is it interesting to have a play coming in for the proxy plays whether you look at in terms of cables, switchgears or the pipe companies? Is that going to be more of a play that one should watch out for or would you play with pure play real estate names like DLF or a Prestige?
Anand Tandon: The real estate companies have had a massive run. You will soon start to hit some kind of a pushback because you are already seeing that most of the higher or more expensive properties are the ones that have done very well. The mid-range has more or less been flattish and I do not think that there is much that is going to happen there because that is the kind of income distribution we are also seeing in the market.

How much can you sell in terms of the premium? Maybe in certain areas you can. But if you want a generic way of playing the sector, I think a better way of doing it is not even the inputs that you mentioned, including pipes, electric fittings and so on, but perhaps simply housing finance. That has been a somewhat ignored sector for a while and you have had the banks moving in fairly strongly, so it has been somewhat of a contested sector, the margins have been slightly under pressure.

But that remains the cleanest way of playing a housing cycle uptake. And the interesting part is that the companies are not particularly challenging in terms of valuation, etc. So, overall, I would argue that if you are looking to play the housing, a smoother and less bumpy ride could be had through housing finance.What is your view on some of these new-age tech names and Zomato in particular? Is Zomato something that you would still look at after it hit a 52-week high or maybe now just wait and watch?
Anand Tandon: It is not as if these are cheap stocks by any stretch. So, if you are looking for growth, the interesting thing about Zomato is that they have managed to pivot and get into a slightly higher growth path and sustain there, which is something that very few companies among the new tech companies have managed to do. Many of them have floundered and been unable to reduce the kind of spend that they had without increasing profitability, unlike Zomato. Zomato, therefore, deserves some amount of premium. But whether you want to buy it at this level is a matter of personal choice, in my view. There is not that much margin of safety and you are assuming a kind of sustained growth which to my mind will be difficult to justify going forward because there is a pushback that will continue to happen going forward as well from many of the supplier companies and I think you will see that happening sooner rather than later.

I think from a growth perspective, they have done exceedingly well. The market has rewarded them handsomely. If you are holding on to it, no reason why not to. Fresh money, I would be a little more circumspect.

What have you made of the Q4 updates which have come in from some of the smaller banks like RBL, which had very strong growth in the fourth quarter, improved their CASA ratio by a good 140 basis points on a sequential basis. For Suryoday Small Finance Bank as well, the disbursement figure has been very strong. For Ujjivan as well, a very healthy uptick and same is the case with AU Small Finance Bank.
Anand Tandon: I mean, you can slice and dice the banking sector in many ways. Frankly, one of the key things you have to remember about banks is that they should be robust enough to take shocks and we have seen repeatedly that the smaller banks have a disadvantage there, besides of course, the fact that their liability profiles will always be at a higher cost which will mean that the disbursements and loans will also have to be given to higher interest rate bearing clients, which automatically means that they are riskier.

If you look at it just structurally, we have had regional banks for a long time and finally, you have to get rid of them. Cooperative banks have been a major source of problems. Companies which have been offering money to microfinance have had a major shock every three years. My take is, unless you are just chasing some kind of momentum, it is perhaps better to go with banks which have the robustness and established ability to lend money and get it back, rather than just lend money and show high growth in certain periods of time. So, I would still prefer more stable, larger banks in general.

In terms of where the smaller banks are, because they are lending to a more aggressive segment, so long as that segment does well their numbers will be quite good.