What is your outlook regarding the banking stocks?
There is a consensus view on owning banks, but I am going to still own the banks. I have been running my Asia ex-Japan long only greed and fear portfolio since 2002, so I would say more than 20 years that portfolio has existed, if there is one sector where there has always been an allocation in an Asian context, let alone in Indian context, it is Indian private sector banks. So, to me that story remains intact, that is the most straightforward story in India. So, if there is a global investor who wants to invest in India and has not got the bandwidth to invest in lots of stocks, that is probably where they are going to invest.
But right now with the monetary tightening cycle over, the obvious place to add to, at least I think it is over. The obvious place to add to exposure are property stocks. So, the property stocks went vertical in 2022 when we got them in second half of 2022 because suddenly the market realised that the property upturn was finally happening after a seven-year downturn.
Last year, they corrected because we were in a monetary tightening cycle. But actually, the actual physical property market kept recovering. So, the moment we get a hint of easing, the property market stocks will do very well.
So, can I say that Chris Wood is in fact urging our viewers that do not buy real estate, but buy real estate stocks in India?
Well, right now that is the safer trade. The other point about real estate is because of the Real Estate Regulation Act, there was a dramatic consolidation amongst developers, which means there is a fundamental lack of supply because it is much harder to develop property now from a developer standpoint because you got to have the balance sheet to keep 70% of the pre-sale cash flow in Escrow, which means that the supply is going to run, it is going to be lagging the demand. So, I think it is a very straightforward story.
Your portfolio is in public domain. So, I am going to just read out the names of what Chris Wood’s model portfolio currently has. It has Godrej Properties, real estate company; DLF, India’s biggest real estate company; Macrotech Developers, India’s biggest residential real estate company; and I think there is Century Textiles there, which is also real estate play.
Real estate related play. So, you pretty much like four real estate stocks, even though the weightage of real estate in the Nifty is very low, you are not overweight but you are double overweight on real estate.
Yes, but in my Asian portfolio, I added to the real estate stocks last week.
So, when you tell your clients about buying into real estate stocks, do you get a pushback or are they open to the idea?
No, I think the domestic institutions here have always had a prejudice against the property business, property stocks, because they do not think it is a long-term business.
But actually that is a bit strange because people buy property stocks in the UK market, the US market, the Chinese market, so it is really a question of where you believe we are in the cycle.
But some of these prejudices against the property companies may have been valid in the past, but this time around given the very dramatic intervention of RERA, you can only be developing in India if you have got a strong balance sheet. So, you have a dramatic consolidation, which should be to the benefit of the survivors.
You track Sensex more than Nifty and we have discussed this over several engagements and separate interviews. What to your mind is not the probability, but the possibility of the Sensex touching one lakh in the next five years?
Well, I think there is a huge likelihood that yes.
Okay, so I am going to capture and recapture this headline again. You will be disappointed if the Sensex in the next five years does not hit 100,000.
Yes, absolutely.
It can go above 100,000 also?
Well, clearly.
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