Market’s next big cue may come from earnings and rural revival: Shiv Puri

"One thing that we have clearly seen over the last 12 months is a tightening of unsecured personal lending and that was done correctly because there was a lot of issues happening out there. But as that outlook changes, you are going to see consumption also get a tailwind," says Shiv Puri, TVF Capital Advisors.

Other than large private banks, is there anywhere else where you are seeing some hope of positivity, you have been upbeat on healthcare for quite some time now, any views on that?
Shiv Puri: Within healthcare one of the areas that we have been very optimistic on is in hospitals, but then again, it is an area to be very careful about because hospitals are actually a very difficult business, but if done correctly are one of the best businesses you could own. And there are some operators here who are able to deliver quality healthcare, attract the right kind of patients, attract the right kind of doctors, understand the capital allocation process very well and therefore deliver very high return on capital and healthcare is underpenetrated in India. So, if you are able to build that trust with consumers, the runway for growth is very long.

I just wanted to touch upon the consumption space because India has been one of those biggest consumption stories and of late, we have seen government also taking some steps with respect to RBI cuts, tax cuts as well. Do you believe that there are good opportunities to still play this particular sector or the valuation comfort is still there?
Shiv Puri: Well, consumption is very broad in India. So, you could have something like FMCG that could be pretty highly penetrated and very competitive as well and you could have certain areas like retail where their runway for growth is very long. So, within the broad theme of consumption, the Indian markets are very underpenetrated, but you have to be very selective in terms of where you look in that stories.

One thing that we have clearly seen over the last 12 months is a tightening of unsecured personal lending and that was done correctly because there was a lot of issues happening out there. But as that outlook changes, you are going to see consumption also get a tailwind.

When you talk retail, while that may be as basic as buying a particular thing, the format of how you buy is where the sizable opportunity is, everything from quick commerce to traditional retail and unfortunate as it may be the listed pool is very-very limited. So where is it within retail that you find those opportunities and you think there is that longer runway?
Shiv Puri: So, again one of the things that we have looked at in India is that typically if a business is very difficult, it is a double-edged sword because it means that it is hard to make money but it also means it is harder for other people to enter. And if you look at retailing, if you look at fashion retailing, these are businesses that are very difficult to do, but you do have success stories. I mean, one of the largest wealth creators globally are basically owners of retail chains whether it is online or offline.

And so in India, if you have a company that has been working on that for a number of years is obviously doing really well and it is still in only a few hundred cities, but a lot more expansion that can happen that is where the opportunity lies.

Do you believe the premiumization wave that we have seen across consumption, do you believe that that play is still very much present in the market because if you talk about the entire consumption space compared to FMCG, pure play, consumption discretionary that has done much better. Would you be placing your bets in that segment?
Shiv Puri: The premiumization wave has a long way to go and it is both good and bad. The good is, of course, it creates opportunities in different sectors within consumer discretionary. The bad is the consumer base is not broadening out as well as we would like for that to happen in India. So, you are seeing more wealth getting concentrated and therefore, that is creating opportunity especially in leisure and travel and services, but in other areas where there are a lot of different companies out there, it would be great to see the consumer base broaden out a lot more.

But again, this consumer discretionary is a big basket which is playing. So, any select or any subsegment that is your preferred bet right now, be it autos, be it retail that we just touched upon?
Shiv Puri: I would say in retail there are a couple of plays that are really interesting. I think areas like autos, etc, are not something that we have looked at very closely, tend to be very competitive.

Oh yes, that is indeed. But give us some sense that where is the next big cue for the markets can come from because we are amidst that global uncertainty, the tariff, some experts do believe that the worst is rather behind and now the negotiations in and on will take place and yes, of course, the earning season is also through. So, where is the next big cue can be lying for the markets?
Shiv Puri: Interestingly in markets in India the cue ends up being earnings coming through and the markets tend to react to it. And so, like I said earlier, if two-and-a-half of the three are in place, you are in a good position for the markets to respond. And based on some of the areas where we are talking about, which is increased credit availability, rural pickup, government capex spend, you could see a pickup in earnings with a favourable base effect and all of that could then therefore mean a positive outcome for the market.

I just want to get back to the point that you were making on financials because I mean, traditionally you thought financials, private banks or maybe a few larger PSBs as well but now you have got that regulatory backing, you have got the central bank making the moves which only makes financials extremely attractive and the larger pool right, I mean everything from even insurance plays, etc, put in over there and, of course, NBFCs. Is it time to look at bottom-up stories there or still stick by with the leaders in financials?
Shiv Puri: In financials, one of the things we have observed is scale matters and therefore, the big tend to be able to withstand uncertainties much better than the smaller balance sheets. The second thing is technology matters and they are able to invest and upgrade much better than some of the smaller names.

And so in financials, you do see accidents happen and that is part of it globally and so as long as you do not let that happen to you which is not just about lending, it is about culture, it is about a whole lot of different things, then just by the fact that accidents happen to other firms means you get stronger and so therefore some of these firms are still very well positioned because India is still under penetrated credit market. We have not reached any level of saturation yet.

So, financials, healthcare, consumer discretionary, anything else that you are bullish on or buying?
Shiv Puri: That would be enough to do well in the markets.