The market has made a solid comeback, after more than 10 percent correction seen in February and March 2018, with Nifty rising 14 percent from its March lows and Sensex gaining 15.5 percent. The market lost euphoria three-four months ago and saw deep correction which was waited for long but look at the recovery after that sell-off. The major reason behind this is corporate earnings which are more or less in line or better-than-expected.
On the domestic flow front, mutual funds have still been getting Rs 7,000-8,000 crore worth of funds through systematic investment plan (SIP), which is a decent amount of flow and will continue to do so going ahead but large ticket investors (institutional) where there has been a fall in aflow.
Non-banking finance companies have shown strong recovery in earnings and even in the stock performance after that bad era of GST and demonetization. In the housing finance companies due to rising interest rate scenario. “This space may struggle for next 1-2 years.” Rural India facing NBFCs are in a sweet spot and they seem to be doing very well going ahead. Unsecured loan space will also continue to do well while asset management company and wealth management firm are good long term stories. Capital as a commodity is the core ingredient around which you see economic activity. There are two primary purposes that capital fulfils. One is to help businesses grow and second is to help consumption. The opportunity in India is very large. The NBFC space started out with a disadvantage against the banking system. They do normally have a higher cost of capital. Their focus has always been using entrepreneurial and have very strong processes and technology to go out and build niche customer segments.
Fundamentally NBFC become a real game changer in Indian economy especially given the growth in the industry as well as growth in logistics, because of the GST. We think these businesses offer long-term opportunity to create value.