Bullish on infra, industrial and manufacturing stocks: Shibani Sircar Kurian

“Our view is that public capex over the next year-and-a-half is likely to remain strong and there is adequate fiscal support to continue with public capex especially where roads, railways, ports, water are concerned in these particular segments,” says Shibani Sircar Kurian, Senior EVP, Fund Manager & Head -Equity Research, Kotak Mahindra Asset Management.

What is your take on the entire home financing pack? Repco Home is on a tear, it is up 60% already this month. We also have Aptus Value, which was reacting positively to the FTSE inclusion today. Home First Finance was also quite excited. Is there any HFC that you are betting on?
Without getting into any specific names in the HFC space, it is the affordable housing segment where there is a large runway for growth. Typically what has happened in the past, especially where retail home loans are concerned, is that there has been a significant amount of competition from banks, especially in the price mortgage segments.

However, in the affordable housing space given that penetration levels are lower and also competition from banks are significantly lower than what it is in the price mortgage space, especially in the larger cities, there appears to be a significant runway for growth.

The second aspect is that in a rising interest rate environment, home loans, especially retail home loans are largely floating in nature and so there is a possibility of passing on higher interest costs to the customers thereby protecting margins and spreads.

Also Read: This is year of bottom-up stock picking with bias towards largecaps

In this segment we would be looking at companies which have the ability to maintain higher return ratios, maintain a larger trajectory of growth as well as of course valuations which are commensurate with the return ratios. The affordable housing space does give some opportunity for growth which is what we saw in the markets on Monday.

Infrastructure has been a forgotten theme because it has not done much for the last two to three years. But now we are hearing commentary from Titagarh Wagons as well as KEC International about the conventional railway capex coming back to the fore. Is this a theme which could be a good investment bet?
Yes. If you look at infrastructure and industrials, the entire space is seeing a significant amount of improvement. Over the last many years, this is a segment which has largely stagnated. However, coming from the public capex side, there are clear improvements in terms of order flows and industries are seeing some amount of that reflecting in their numbers already.

Our view is that public capex over the next year-and-a-half is likely to remain strong and there is adequate fiscal support to continue with public capex especially where roads, railways, ports, water are concerned in these particular segments.

The second question that is often asked is whether private sector capex is likely to improve. If you look at the data on capacity utilisation levels at a headline level, clearly that number has been inching up. Even when one talks to some of the banks and some of the commentary that we have heard in the quarter gone by, there are signs of incrementally some small private sector capex coming to the fore.

Therefore, our belief is that growth especially where infrastructure, industrials and the overall space in manufacturing is concerned, is likely to see improvement in terms of growth and therefore this is a segment that we are positive on.

Policy also continues to focus on ensuring that from a growth perspective at a macro level, growth moves from just being consumption-led to investment-led growth and therefore over the last few years, we have seen that the government is very strong in terms of accelerating spending in infrastructure.

Finally from a risk reward perspective, this segment continues to be favourable and valuations especially in the medium term appear to be reasonable as well.