For India’s $11 Bln Kotak Fund, Banks a Favorite

Everyone has their favorite sectors to invest in. Nitin Jain, a fund manager at the $11 billion Kotak Mahindra Group likes India’s banking, pharmaceuticals and automotive firms listed on the Bombay Stock Exchange.

“The banking space, pharmaceuticals and autos are attractive on growth adjusted valuations. Infrastructure-related segments are very attractively priced but have some head winds at the current juncture and we are continuously scanning for a great combination of value and growth in that segment,” Jain says.

He says consumer and IT stocks have had quite the run over the last 18 months and are not so attractively priced. “You have to be selective in buying companies in this sector,” he warns.

Jain owns Housing Development Finance Corp., HDFC Bank, and ICICI Bank shares and says these are long term holds. “When you look at India’s banking system you see that credit cards, insurance, mortgages, all are underpenetrated markets. India is not a rich country, but per capita incomes are improving steadily at 5-7% in real terms for the past decade and for that reason we see a lot of room for banks to grow these segments. Then, if you look at leverage and asset quality, for instance, you see a healthy system with low stress points. Sure there are some stresses in some banks, but nothing so serious that warrants investors to sell bank equity. The biggest problem at the moment for the sector is inflation and a tight monetary policy that is restricting lending. Take a look at some of the banking sector results. Look at HDFC Bank’s results last week: strong growth numbers and a decline in non-performing loans. The same holds for Indus Ind Bank, Yes bank and Axis bank. They all have strong growth and impeccable asset quality,” he says.

Kotak launched its first US based mutual fund for the American retail market on April 11. The fund investors in shares of Indian companies listed in India, London and New York.

Jain manages $500 million in offshore funds.