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This unloved and under owned sector could be the dark horse of FY25Jitendra Sriram, Baroda BNP Paribas MF, Mumbai

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RBI pulling up prominent banks is not so much indicative of regulatory risk but underinvestment in scalable operating platforms that support rapid business growth. Banks will need to spend a lot more on their IT infrastructure – which in a way is positive for India’s IT services companies.

Baroda BNP Paribas Large Cap Fund delivered a strong 750 bps alpha over benchmark in FY24, driven by overweights in autos, capex theme and utilities. Underweights in consumer staples, financials and global cyclicals also contributed to alpha over benchmark.

Jitendra has been dynamically managing the residual 20% of portfolio to invest in mid and small caps. His allocations came down from 15% to 7% when the segment got overheated and he has now taken it up to 13% post correction.

After riding the power utilities boom, Jitendra took profits in mainline utilities when valuations became expensive and focused on power equipment and raw material suppliers like coal to continue participating in the power theme, but with more reasonably priced plays.

In the capex theme, he is focusing more on long cycle project plays rather than short gestation projects as the next few months can perhaps witness some decision making delays due to the ongoing electoral process.

For FY25, he believes the capex/manufacturing theme and power including renewables will continue doing well. He feels consumer staples can emerge as a dark horse in FY25, now that weather forecasts are pointing towards a normal monsoon, which will come on the back of a deficient CY23 monsoon – which can boost rural consumption. Too early to jump in he believes, but certainly worth tracking very closely.

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Mohsin Bijepuri ARN NO :33913 Chennai , 01 May 2024

Staples sector is under owned & neglected. Will need allocation

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