In a recent discussion on CNBC-TV18, Abhiram Eleswarapu, Head of India Equity at BNP Paribas India, underscored the evolving landscape of the financial sector, focusing on the continued growth trajectory and the normalization of credit costs. Here’s a breakdown of the key points from the conversation:
Consumer Sector Dynamics: BNP Paribas’s Approach
Eleswarapu noted that while some consumer companies have reported positive surprises in their earnings, valuations remain a secondary consideration. The overarching narrative revolves around companies demonstrating robust growth, forming an exclusive club amid a somewhat disappointing season for the consumer sector.
Affluent India Theme:
The “Affluent India” theme, which originally encompassed consumer-oriented sectors like automobiles and jewelry, has expanded to include financial products such as insurance. This broadening of the theme reflects evolving consumer preferences and spending habits.
Tech Inclusions:
Eleswarapu highlighted the increasing presence of consumer-oriented tech companies within the “Affluent India” basket. This trend aligns with the proliferation of new IPOs across various sectors, ranging from financials to online-oriented businesses.
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Financial Sector Outlook: BNP Paribas’s Views
Regarding the financial sector, Eleswarapu acknowledged the diminishing concerns surrounding margin pressures, particularly at the Net Interest Margin (NIM) level. Instead, investors are closely monitoring the continued growth momentum and the potential normalization of credit costs.
Valuation and Investment Opportunities:
Despite the recent volatility, Eleswarapu sees favorable valuations across the financial sector, particularly among large-cap private banks. He believes that these banks offer significant value, with the disparity in fundamentals between performing and non-performing banks narrower than perceived.
BNP Paribas On Non-Bank Financials and Insurance:
Eleswarapu expressed continued optimism towards non-bank financials, citing strong demand for credit and minimal issues concerning credit quality. Additionally, he highlighted the insurance sector as a long-term investment theme, particularly in the context of the evolving “Affluent India” narrative.
Capex Theme and Power Sector:
While acknowledging the upward trajectory of stocks within the capex theme, Eleswarapu expressed caution regarding the sustainability of gains. He identified the power and transmission sectors as areas with potential for further growth, driven by government initiatives and private investments.
Conclusion:
In conclusion, Abhiram Eleswarapu of BNP Paribas insights underscore the importance of sustained growth and stability within the financial sector. Amid ongoing market fluctuations, investors are advised to focus on companies demonstrating resilience and favorable valuations, while also exploring emerging themes such as “Affluent India” and select segments within the capex space.
By prioritizing growth and stability, investors can navigate the evolving financial landscape with confidence, leveraging opportunities for long-term value creation.