HSBC MF has launched its Financial Services Fund at a time when private banks – the big index heavyweights – are trading at 1 std deviation below their historical valuations even as they boast healthy return ratios – making them one of the best bets in the market from a risk-reward perspective.
In addition to large private banks, Gautam is also optimistic on select PSU banks, strong consumer lending NBFCs as well as vehicle-lending specialist NBFCs.
Gautam will avoid the bottom of the pyramid in the lending space – SFBs and MFIs – where he sees some more pain ahead before they emerge out of their current set of challenges.
While lending businesses account for a huge 85% of market cap of the overall BFSI space, Gautam will perhaps invest only 50-60% of the new portfolio in this segment, as he intends deploying disproportionately large allocations to fast growing non-lending businesses in the capital markets space.
He is bullish on asset and wealth managers where he sees continued strong flows, especially now that middle class India will have an incremental Rs. 1 lakh crore of savings from tax reliefs announced in the Budget – some of which will be spent while some will be invested.
With 40% to be invested in high growth non-lending businesses and 60% in attractively valued lending businesses, Gautam believes the new fund will have an optimal blend of stocks to deliver alpha over the long term.