Shibani Sircar Kurian on thematic funds, BFSI space & bottom-up investing

economictimes.indiatimes.com:

Shibani Sircar Kurian, Senior EVP, Fund Manager & Head -Equity Research, Kotak Mahindra AMC, says “from an overall financial services space, we believe this is a pretty good time to be in the sector. Of course, depending upon various dynamics, one may have to shift from one segment to the other but by and large, valuations are in your favour.”The banking space, in terms of results, is making people happy. What are your readings now and going ahead?If you look at the banking and financial services sector, it is interlinked to the overall economy and what is happening from a GDP growth interest rate perspective.

One of the best ways to play India macro would be through the banking financial services sector. Now, the sector as you know, especially if you look at what has happened in the last one year period, has gone through what is called as a Goldilocks period where credit growth has picked up, net interest margins for banks have expanded as well as the fact that asset quality trends have been extremely good and benign means credit costs have come down.

All of this has meant that over the last year, year-and-a-half, the sector has seen expansion in terms of return ratios. ROEs have expanded across the board and that has resulted in improvement in the overall profitability of the sector.

Valuations on the sector as compared to long-term averages are still at long-term averages or slightly below long-term average levels even while your return ratios have improved considerably. So, from a risk reward perspective, the sector continues to be very well placed.