Former Chairman of Housing Development Finance Corp. Deepak Parekh and his team were "ahead of their time", while they worked on a sound business model with a valuation at one times earnings, according to Vinod Sethi.
The former Managing Director of Morgan Stanley recalled his early interactions with the team at HDFC in an interview with NDTV Profit's Icons With Ramesh Damani show. A research analyst earlier had briefed Sethi about the bank. He admitted he wasn’t initially inclined to dig deeper.
However, upon meeting them, Sethi found a disconnect despite the clear potential. The business was solid but no one could explain why the stock was so cheap, he said.
"Decent guys doing a decent job, running a good business. Country is homeless and basically getting it (stock) at one times earnings."
"I kept asking smart investors here on what's the catch," he said. "No one had an answer. When something is supremely cheap and expensive, there are 100 reasons to justify it. My job is to figure out the justification and the real analysis."
India investors have lost out on a huge rally but are beginning to catch up, Sethi said. Back when the index was at 700, few investors participated in what would later become one of the most remarkable rallies, he said. Today, with the index touching 80,000, a new wave of domestic investors is finally stepping in.
In the US, financial equities account for 42% of the average family’s financial assets and that number is far smaller in India, he 22said. The country's equity markets have a long runway for growth and the cycle is just beginning, Sethi said.
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