BFSI theme through saving, formalisation and consumption are the three themes to focus on in the long term.
That means if you are a provider of savings products, general insurance, life insurance, asset management and wealth management, you will have to do something really stupid not to make a lot of money in the next 10 years.
More than lending, the way to make money in BFSI in the next decade will be through the savings angle, through the liability angle.
One I would go for the savings theme because in the savings theme I do see at least a
couple of plays where there have built a moat, a brand, distribution system. They have built a faith amongst investors, amongst the investing public that I as a broker or an asset manager will take your money and keep it safe.
The second is formalisation, the government’s pressure to crack down on the black economy to pull everybody into the white money system and into taxpaying mode will intense and therefore we will formalise sector after sector after sector. So areas like apparel clothing which are heavily black money dominated will become white, retailers in that sector will benefit, ditto for say plywood, electricals, footwear, the list is endless. The formalisation will be a big theme.
The final theme will be the realisation that the India consumption story is limited to 200-300 million people who work in jobs like yours and mine beyond this sort of small set of upper middle class people and middle class people I do not think we have got any real ability to spread prosperity so what we are seeing in FMCG and two-wheelers will happen elsewhere where the growth runway will be limited to 200-300 million people but for that 200-300 million people but for that 200-300 million people you will be able to sell them a whole plethora of leisure and retail products through the white money ecosystem.
Whether it is cinema, whether it is amusement parks, savings products, clothes, electronic goods, for that middle class, upper middle class, the consumption patterns will become more white than black. But macro stories or FMCG, two-wheeler type stories which hinge on mass penetration will peter out.
About current market rally what he says….
What I am seeing in our forensic model is slightly more perturbing development. We have got a forensic model of the BSE-500 that we have been running for the last six years and typically the bottom 30% on accounting quality, the weakest 30% of the BSE-500 on accounting quality tends to barely give any returns and the top 30% compounds at around 20-25% per annum.
For the first time in six years, I am seeing the weakest 30% whose annual reports we struggle to believe, outperforming the top 30%. So that is a slightly more sinister take on the situation, i.e., companies with highly suspect financial statements are outperforming companies with the most credible financial statements and that does suggest a degree of irrational exuberance out there. People are willing to buy enthusiastically stocks and companies whose financial statements themselves have serious credibility issues.