Marcellus Investment Managers' Saurabh Mukherjea is bullish on the financial space now as the recovery plays out in the economy. Speaking with CNBC-TV18, Mukherjea said he believes it is a good time to go long on well-run companies from the sector, which he prefers over "more speculative sectors" such as real estate, travel, transport, infrastructure and aviation.
"We are in the early stages of what looks like a market recovery in economic growth globally, and in India. Invest in well-run lenders and play the economic cycle with them," said Mukherjea, Founder of Marcellus Investment Managers.
"There are high-quality financial services companies, Bajaj Finance, HDFC Bank and Kotak Mahindra Bank, high-quality building material companies, high-quality pharma companies, high-quality specialty chemicals companies, companies that are real genuine plays on a revitalised economy, both at home and abroad," he said.
His remarks come at a time when the market has seen some correction following months of a liquidity-run rally in the market that took headline indices to unprecedented heights.
In the last one year, the Nifty50 is up 32.5 percent. The Nifty Bank has risen 24 percent during this period, as against the Nifty Financial Services' 27.2 percent return.
| Index | Return (%) |
| Nifty50 | 32.5 |
| Nifty Bank | 24.0 |
| Nifty PSU Bank | 57.8 |
| Nifty Private Bank | 14.2 |
| Nifty Financial Services | 27.2 |
Here's how banking and financial services stocks have fared in the past 12 months:
| Stock | Return (%) |
| Bajaj Finserv | 93 |
| SBI | 85.2 |
| Piramal Enterprises | 71.1 |
| Cholamandalam Investment | 54.2 |
| ICICI Bank | 49.8 |
| Bajaj Finance | 46.4 |
| Shriram Transport | 41.7 |
| SBI Life | 36.6 |
| Federal Bank | 36.3 |
| AU Small Bank | 28.8 |
| IDFC First Bank | 28.2 |
| Muthoot Finance | 27.4 |
| ICICI Prudential Life | 27 |
| HDFC | 23.3 |
| Axis Bank | 12.5 |
| HDFC Bank | 10.3 |
| PNB | 7.8 |
| Kotak Mahindra Bank | 6.8 |
| Power Finance Corp | 6.8 |
| IndusInd Bank | 6.4 |
| M&M Financial | -3.1 |
| RBL Bank | -16.9 |
| Bandhan Bank | -25.6 |
He advised investors not to worry about the recent "shallow correction" in the market.
The market veteran believes it is hard to make money in sectors where the underlying free cash flows seldom show up.
"I haven't seen for a long time any hotel stock or aviation stock generate free cash flow. So I have no idea how one buys these stocks. Anybody invests in companies so that they generate cash flow and become valuable in the years to come... Neither the hotel sector nor the aviation sector in India has met that test for the best part of the last 20 years," he elaborated.
Companies like Pidilite Industries and Titan have seen massive compounding in their cash flows, he said.
Nestle's profit after tax is expected to grow at the rate of 20 percent per annum in the coming years, said Mukherjea, the author of Coffee Can Investing and Unusual Billionaires.
Mukherjea has remained bullish on stocks such as Asian Paints in the past. Earlier, speaking on Asian Paints' performance in the July-September period, he had said the paintmaker is hammering the competition.
Asian Paints has shown “plenty of strategic aggression” in the past three quarters, and that is “gladdening our hearts, leading us to buy even more of the stock”, he said in October.
(Edited by : Ajay Vaishnav)
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