The real estate sector is definitely a pressure point for the non-banking financial companies and any firm with a wholesale real estate lending book will clearly be impacted by the underlying stress in the real estate sector, said V Srivatsa, executive vice president and fund manager, UTI Mutual Fund.
“We have not had any investments to whoever is exposed to the wholesale lending part. However, there are select opportunities in the NBFC space especially the ones which are very good rated NBFCs on the housing finance and other finance companies which are being able to source the money at competitive rates,” he added.
Srivatsa further added that it is important for NBFCs to be able to source money at competitive rates and stable asset quality. “The key factor that I would lookout for a) whether NBFCs are able to source money at competitive rates and are liquid and b) whether there is any big asset stress in segments that they are lending to."
"If I look at both of them, anybody with significantly high exposure to the real estate space will continue to face stress and may see more downward pressure even from these depressed levels,” he said.
Sector-specific, he said, “Financials is something that we are buying still. We are being positive on corporate-oriented banks which have also incrementally being a bigger player in the retail space. So, we are buying that. Automobiles, continuously on every decline we have been buying in the last two-three months. I have also been buying a little bit of metals. I believe the valuations are quite attractive from a longer-term perspective.”
Srivatsa is also overweight on the pharmaceutical sector. “Companies which have very high exposure to the US, I think they are on the slightly riskier model because you just do not know when the US FDA will come and hit you with some kind of a warning letter or 483’s. However, having said that, if you look at the largecap generic companies which have both India and US, I think today if I look at the market cap, 60-70 percent of the market cap comes from the Indian operations which are still growing, quite profitable, and cash-rich,” he added.