While we have interacted for a while right now if you look at the way how the markets have actually panned out, we saw Trump take over, then you saw the tariff announcement, you saw the markets correcting, then you saw markets rallying back. How are you actually digesting all of this news flow given the fact that yes, there is a 90-day pause, there are a lot of trade talks happening at this point in time, how should one gauge the entire market and plan, strategize at this point of time?
Rushabh Sheth: Never a dull moment in the markets as they say. So, our sense is that there has been a lot of motion but not too much movement as we have seen in the markets because of various announcements and that is basically our short-term view of the markets in terms of reacting to every news which comes in.
Our view is that there is a 90-day pause and we will kind of hopefully at least from India perspective get some kind of a deal in place before the 90-day period ends. So, from India perspective, we are hoping that that is kind of puts to an end this whole uncertainty regarding tariff, at least partially if not fully.
What is the strategy that investors should adopt right now because pretty much start of the year, October actually when the correction began for Indian markets, many actually started off the year with a fair amount of dry powder. April or last month gave you kind of that confidence A) the market, of course, recovered from those March lows, FIIs have been coming back, and now you have got a big tailwind in crude cool off. But just wondering whether Indian investors should still be a little cagey or should you now be all in into Indian equities if you are not already?
Rushabh Sheth: My sense is that it will be a stock pickers market. You are not going to see a big move in the market. It is going to be a sideways consolidating market for some time because there is still a lot of uncertainty around. Economy has slowed down and clearly we do not see the significant recovery in the first half of FY26.
It is only going to be in the second half post the monsoon that you will start to see some sort of a recovery coming back and that kind of helping earnings in the second half of the year.
So, my sense is that you are going to have a sideways market, consolidating market. It is going to be stock pickers market. You have to pick and choose. So, I am saying from an investor perspective it is going to be more challenging. Staying invested over time has always been the right strategy and being selective about what you do. You are not going to see a broad-based market like we have seen in the last four-five years post covid, it is going to be a more narrower consolidating market and therefore, there is going to be more challenging to make money but there will be, according to us, a lot of opportunities. As markets consolidate and correct, you see more and more opportunities opening up. So, since October as you mentioned we have seen significant corrections in small and midcaps. We still believe that maybe there is some room to go, but there are very interesting opportunities also opening up.
What do you do then when the market does give you that ripe opportune time? Do you buy more of the same? I mean, select banks, consumption via premiumisation, select autos, etc, or do you look for newer horses?
Rushabh Sheth: No, my sense is you will have to look for newer kind of ideas. My sense is the kind of growth we will see over the next four, five, six years, the colour might be very different from what we have seen.
So, very different set of businesses will do well in the future as compared to what has done well in the past. So, looking in the rearview mirror and betting on the same horse might not work. You will have to think different. You will have to act differently and a different set of businesses might be the leaders for the next leg of the market over the next three to five years.
So, let me start by asking you what new are you looking at because we believe that you have been holding your positive stance in pharma which could be the next big consumption driver for the next 5 to 10 years, telecom is another space. But other than that what is that that is catching your eye and what is catching your attention right now?
Rushabh Sheth: So, payments is a big opportunity. There are few companies listed in payment space and we own some of them. We believe that more companies will get listed. It is a decadal opportunity. The whole industry is growing very rapidly because of UPI and our sense is that that is not going to change in a hurry.
So, from our perspective the digitisation and the UPI is going to lead the growth in payments over the next 5 to 10 years. So, we believe payments is a large opportunity.
Similarly, the speaker before me was talking about HDFC Life. We like life insurance. We believe life insurance there was a lot of noise or there has been a lot of noise over the last few years regarding various regulatory interventions. However, we believe that the structural opportunity in the business continues to be very large.
The business is consolidating. The top four-five players control now. If you exclude the PSU, LIC, the top four-five players are consolidating the markets and that is going to be really a big growth driver for them. Similarly, in payments also we see consolidation. So, these are markets where you are seeing consolidation. The top four-five players controlling significant part of the market and a significant long-term opportunity in the market. You cannot get better dynamics than that.
Sticking with that theme, within payments just wanted to check upon are you still holding SBI Card in your portfolio because I believe that was one such theme that you were driving and given the other players that the kind of competition and the kind of tensions then those players were facing SBI Card was indeed the winner but what is your current take now?
Rushabh Sheth: No, if you look at the credit card market, penetration is about 3.5-4% of the population. Very long way to go. Top five players control 80% plus of the market.
So, highly consolidated. The top four-five banks control pretty much the whole of the market and if you see what is happening with UPI, so people did not understand but UPI will be a big long-term driver for credit cards because if you look at what the RBI is doing now, is encouraging more and more of credit cards to get linked to UPI instead of the directly the bank accounts and that is going to be a huge long-term driver.
So, you have low penetration, high consolidation, very-very strong parentage in terms of the guys who are leading the industry and a very large opportunity and it is not a small business. I mean if you look at SBI Card, it is a 2,000 crore profit business even this year, it was a difficult year for them. So, it is a very large opportunity, with very large companies kind of really going after those opportunities. Again, as I said very-very good dynamics for the business.