Financial Sector To See Growth Over Next Decade, Says Sundaram Alternate Assets CIO
There will be 20% CAGR in financial space and particularly in retail credit over the next eight years, Ramu says.
The financial sector will see phenomenal growth over the next 10 years, mainly driven by the India growth story, according to Madanagopal Ramu.
If the country's growth is strong, then growth in the financial sector will be stronger as the per capita income will increase, Ramu, fund manager and chief investment officer (equities) at Sundaram Alternate Assets, told NDTV Profit on the Portfolio Manager show.
"In China, the household debt-to-GDP is 100%, while it is 19% in India... Over the next 10 years, this (debt-to-GDP) will move to 60-70% in India, and as per capita increases more people become more bankable."
There will be 20% CAGR in financial space and particularly in retail credit over the next eight years if the household debt increases along with GDP growth, said Ramu, who manages assets worth Rs 1,835 crore.
Six of the top 15 stocks, which aggregate about 39% of Sundram Alternate's portfolio, are from the financial space, he said. While the company has played on banks in the past, it is betting on non-banking financial companies currently as over the next 10 years, informal lending will turn into formal lending, according to Ramu.
Going by the logic of economic growth and income level, the other sector that will benefit is consumer discretionary, the fund manager said.
"As the income level increases, the spending pattern is going to shift from FMCG to consumer discretionary." If we are betting on India growth story it is better to play consumer discretionary than FMCG, he suggested.
Capital goods space is another sector Ramu is positive on, as the power demand has seen an uptick. "I have been negative in the power sector, but in the last two years, the power demand has risen and peak demand cannot be met by renewable energy alone."
Sundaram Alternate Assets falls into the bucket of investing into high growth stocks, with reasonable valuations and targets returns close to 15-17%, Ramu said. "Our portfolio has almost given eight times return in the last 11 years, and we invest into small, mid, and small and invest in high growth with a minimum of 5 year view."
In a county where real GDP growth is of around 6-7%, not many stocks will keep on delivering more than 15-20% returns, Ramu said. "In the last 10 years, hardly 32 companies have delivered more than 20% CAGR earnings growth, and 71 companies that have delivered 15% growth."
