We are still in a waiting mode, but we see how many Fii’s India sell. We looked at the data points. It has been a pretty unbearable sale. There have been five consecutive weeks of decline. It seems that markets have consumed both rates and deserve that softness at home.
Mihir Vora: I would not say that the markets have completely digested it because the markets have fallen despite the local purchase. I would say that sentiment is a bit careful, it is optimistic but careful. What also happened is that we have seen some dollar recovery in the sense that the dollar had been continuously weakened since February and in recent weeks we saw some dollar strength.
It is more a technical jump, Dxy goes from 96 to almost 100, but on Friday we saw again that there was a correction. The dollar continues to structurally remain a weak currency. In general, as long as things are not too insecure, we must continue to get money from FIIs in India, with the exception of these fluctuations. But the bigger problem is that certain domestic growth indicators still do not pick up to the extent that they would hope that they will do that.
Bank credit is, for example, one of the largest indicators and we are still on almost a high type of figure of a figure that is not sustainable or is not compatible with the expectation of a GDP growth of 6.5%. We need some of those indicators to pick up to get the confidence that the current assumption that the second half will be better must come true.
Since the markets have not completely digested the overhangs we have, we are in store for some more consolidation or would it be the right time to say that the markets have become on a bottom and now we can go on our way to some recovery?
Mihir Vora: I would not mention a top or soil right now. I would take it a day at the same time because there are many moving parts and rates are one of them. Some of the macro indicators of growth, etc., must be followed closely. We need some improvement there. We have to take it one day at the same time. I am not very bullish or very bearish at the moment.
You have flattened the worries about credit growth when it comes to benches and it has been seen that it almost plays out across the board, in which there are now cases of high facilities for all banks at the moment. How do you dissect it within banks? While a large part of your core portfolio, what about the bottom-up approach, the smaller one?
Mihir Vora: We still stick to the larger banks in the private sector, although we have some exposure to PSUs, but not much. The call is that the price force on the assets and the liability side are usually slightly higher with the larger banks in the private sector. Because they usually have a diversified portfolio, they may not be the fastest growing, but in terms of structural price power and liability management, the larger banks are usually a bit stronger. From now on we stick to the larger banks in the private sector.
The US has imposed a provisional rate percentage of 25% on India, because we still do not know what the final figure could be. In the midst of such uncertainty, how did you win your portfolio again? Where are your current overweights and underweights?
Mihir Vora: We have not really rejected the portfolio on the basis of the tariff situation because it is still a smooth situation and it is never over until it is over like President Trump. Negotiations will go to the thread, until the last day to say. So we do not take large phone calls based on the rate situation. But I would say that in recent weeks we have mainly packed the portfolio or adjusted it again based on the results. Based on the results, we have reduced a bit of exposure to banking and it was overweight to start with, but are further overweight in the Largecap IT shares based on the results. Most of the Rejig happened after viewing the results and the trends.
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