Firstly, to start off with, the RBI has continued to maintain its stance. Now, market experts are expecting the rate cut to happen in December. How are you reading into what RBI said in its meet today and what are your expectations going forward?Dikshit Mittal: I think RBI has clearly indicated that rate cuts are going to happen. It is just a matter of when, not if. So, accordingly, we are positioned to that extent that rate cuts are going to happen. So, timing may be little uncertain, but it will happen in December, maybe later. But what we think is within the next six months, we think we are decisively on the rate cut trajectory.
And let me just continue with what the Governor had to say. He did flag off some of the risks coming in for the NBFC players. Now, you have the press conference that is going on where you have RBI Deputy Governor also talk about that select NBFCs are showing elevated slippages and high credit costs. How are you actually seeing this NBFC space? Have you actually looked at any of these NBFC names? And are they a part of your portfolio?Dikshit Mittal: Yes, so one has to be very selective while investing into NBFCs. So, the NBFCs which are basically into more secure space or whichever history of basically good credit appraisal and all, so I think that one needs to look favourably. But obviously, these things keep on happening. Some of the guys take larger risk, so that reflects in their overall historical NPAs. But that reflects in the short-term growth rates also. So, one has to be very careful.
The NBFCs which have been growing very-very fast and the segment which they have been growing, if it is a very-very high-risk segment, so to that extent one has to be cognizant where one is investing.
So, coming to our portfolios, we have been very selective in terms of investing. So, NBFCs which are mostly into secure space or which have a good track record. So, even though they may be lending to some of the unsecured segments, but who have basically shown their skills over the last three-four cycles, I think those have been invested into in our portfolios. If you look into the markets broadly, last week, the story was money flowing from India to China. This week, again, the story has reversed and we are seeing some kind of an up move in the Indian markets as well. So, how are you dealing with such kind of volatility and post the correction that we had seen recently, any pockets or any sectors that are looking attractive?Dikshit Mittal: I think this China trade has been a short-term technical trade because prior to this rally, a valuation gap between China and Indian market as a whole, I think it was very-very high. So, we were trading at 20-21 times one year forward PE multiple and China was in high single digits. But after this rally of I think to some extent that gap has been bridged and this has been a short-term technical trade, but I do not think it will impact any long-term investors, because long-term investors, they look at the kind of growth any market is offering. At the same time, the return on capital which that market is offering and the policy stability and the kind of broad base of the growth. So, I think, looking at that India is still I think placed very well from a medium to long term perspective but this short-term correction is keep on happening because Indian market has also given very-very robust returns. So, we needed some kind of excuse to sell off, I think that has come in, in the form of China doing well. But we do not risk too much if one is taking a slightly longer-term view.
Extending that point of view, then what is your take coming in on the entire IT space right now actually given the fact that we are on the cusp of getting the Q2 earnings for the IT majors, what is your take coming in for IT sector going ahead?Dikshit Mittal: So, we are more or less neutral as a weight in terms of the IT exposure. But we think, incrementally, things are turning positive. If we look at the order books of these leading IT companies, I think they are all time high and incrementally looking at the kind of commentary these companies are giving in the wake of expected rate cuts in US, so to that extent, some of the IT spending may come back, maybe in the second half of this year and we will see incremental positive growth returning to this sector as a whole. But on a slightly medium to long-term perspective, I think this sector is poised to grow because globally cost cutting, digitisation, cloud migration, these are the longer-term themes and to that extent Indian companies are well-placed. So, in the light of a sharp rally in the IT stocks, we are close to neutral. But over the longer-term period, I think these companies have their merits to be invested in.
