Amazing concall by Prashant Jain (HDFC MF) !
Thread on the key takeaways from the call -
Thread on the key takeaways from the call -
1. #Coronavirus will be positive for India given lower global interest rates, lower crude oil, and higher urgency by companies to now diversify outside China. Coronavirus is an opportunity to buy cheaper.
2. See very 'deep value' in utilities, PSUs, few corporate banks, and good value in some engineering cos. Last seen in 2001-03. Near-term pain is an essential part of deep value bets, but expect to outperform over longer time. Roughly 50% of HDFC's portfolio is in deep value.
3. Positive on PSUs. Have not done well due to PSU ETFs given at a discount. Going forward, expect that to stop as strategic sale will be the preferred route.
Also, 2021 should be a year of normal profits for corporate banks after 4 years as large NPA provisions get done with.
Also, 2021 should be a year of normal profits for corporate banks after 4 years as large NPA provisions get done with.
4. Utilities: For example, no one likes power companies. But power demand has increased by 7% in Feb. In fact, won't be surprised if power demand increases above GDP rate going forward. Remains a value pocket to invest.
5. Consumption is extremely richly valued. In 2000, IT was trading at high multiples. In 2007, majority bought infra. In 2014, pharma was a consensus buy. You know what happened to these sector's returns. In 2019, its consumption.
6. Consumer finance companies: Expected to face strong competition from banks; expect banks to gain market share in retail finance business. Banks have gone digital (on-tap loans), have deep customer relationships, have full data of the customer's history and touchpoints.
7. Auto production volumes dropped 20% last year. Auto is 5% of GDP. Hence -1% contribution to GDP. Next year, even if there is no de-growth, GDP growth rate should improve. Currently, India is at a very attractive Mcap/GDP ratio.
8. Small, mid and large caps valuations have converged as per risks involved. Correction in small/mid cap stocks due to very high expectations built-in in 2017. Best way to approach is to invest 2/3rd in multi-cap/large-cap funds and 1/3rd in small/mid-cap funds.
9. Few stocks providing attractive dividend yields that are higher than bond rates. Appreciation in these stocks will add to performance. Have seen such deep-value opportunities after 2001-03.
10. Overall, a good external environment for India with low interest rates, low crude prices. GST disruption now stabilizing. IBC showing good progress. Tax cuts for new mfg. units very positive. Coronavirus an opportunity to buy cheaper.
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