This $130 billion fund manager explains why he chose SBI over HDFC Bank: Exclusive

GQG Partners manages assets worth $22 billion in India. The stocks they own span across sectors from airports, to banks to oil and even PSUs. But HDFC Bank, which used to be one of their core holdings, is no longer present.

In an exclusive interaction with CNBC-TV18, Rajiv Jain of GQG Partners explained the rationale behind choosing other lenders like SBI over the likes of HDFC Bank.

"These two names (HDFC Bank & HDFC) made me look a lot smaller as we bought them and we didn't have to do anything. They just kept compounding," Jain said, adding that he likes such managements where they take the back seat and the management delivers.

He explained that he exited HDFC Bank as there were better opportunities available last year. Jain had first bought shares of HDFC Bank in 1998 and those of the erstwhile HDFC at the turn of the millennium.

HDFC Bank shares have been under pressure since the start of the year after its December quarter results missed estimates and the management commentary was on the cautious side. Currently, shares of India's largest private lender are the worst performers on the Nifty 50 index on a year-to-date basis, down over 15%.

"These are some transition issues (on HDFC Bank) where two big entities have merged but there are no structural problems," Jain said. "From our standpoint, we have limited amount of dollars which we could invest so we always look for the best bang for the buck," he further added.

Instead, Jain placed his bets on India's largest lender, State Bank of India, whose shares are up 20% so far this month. 

"We thought SBI has far better disconnect than HDFC Bank which is a very high quality franchise," he said. "It is likely that we will own it somewhere down the line," he added.

Although Jain does not see any further re-rating potential for India's state-run lenders unless the entire market re-rates, he believes it is now earnings growth that will have to do the job for these banks.

In a separate discussion with CNBC-TV18, Saurabh Mukherjea, Founder of Marcellus Investment Managers and Digant Haria, Co-Founder of Greenedge Wealth Services, extensively discussed HDFC Bank.