With a 19% allocation to reasonably valued asset financiers (banks) and 10% in cash, Srinivasan is steering HDFC Infrastructure Fund cautiously in an effort to strike a balance between harnessing long term thematic growth vs near term valuation concerns.
He acknowledges that many pockets within the broad infra theme have run up substantially to levels where valuation comfort has eroded –and he has been reducing positions in these in recent months, with a view to buy back into some of them if and when he sees a reasonable correction.
Near term valuation concerns should not however cloud the big picture – which remains strong for the infra theme. Supplementing the Central Govt’s infra push, we now have state governments also committing to sizeable projects and private sector infra capex is also running at over 2x pre-pandemic levels.
Certain themes within infra like energy transition are not only decadal, but also global – which offer high quality Indian companies opportunities beyond our shores – notably from the Middle East.
Between asset owners, asset creators (contractors) and asset financiers, he finds margin of safety in the financiers space, he finds growth comfort across several contractors and is more circumspect with asset owners.
An otherwise strong fund performance (top quartile on 3yr basis) has been impacted in the near term as his cautious call on holding cash and banks hasn’t yet played out to the fund’s advantage. He believes banks will play catch up and remains comfortable holding cash to deploy into stocks he likes at lower levels.