Tawakley said the insurance regulator’s consultation paper is likely to result in a one-time reset in policy sales, but expects growth to resume from the new base. He also said banks are well positioned to benefit as credit intermediation shifts back to the banking system.
“I expect a cyclical pickup in the banking space with good volume growth, and that’s my favourite space at the moment,” Tawakley said.
On insurance, he reiterated his preference for manufacturers over distributors, arguing that the regulatory proposals primarily affect distribution incentives.
“There’ll be a one-time dip in the VNB, but then the VNB starts growing again,” he said, adding that insurers with stronger brands should benefit as sales become more driven by customer demand than distributor incentives.
Tawakley said he prefers life insurers over general insurers but remains constructive on the broader insurance sector.
In contrast, he continues to avoid hospitals, arguing that valuations had already become expensive before regulatory concerns emerged.
“I’ve been saying for a while that I’m running a zero hospitals portfolio. I think valuations were way overdone,” he said. He added that increasing hospital capacity is likely to pressure margins over time, even without regulatory intervention.
The CIO also remains cautious on NBFCs, particularly those exposed to unsecured retail lending. According to him, while retail credit penetration in India remains low overall, the underpenetration largely exists in mortgages rather than unsecured loans.
“I do expect a credit cycle in the unsecured lending space… and I’m avoiding that,” he said.
Tawakley also advised caution on capital market-linked businesses, including brokerages and exchanges, saying activity in the segment tends to be cyclical and is closer to a peak than a trough.
On the technology sector, he said valuations have become more reasonable after the correction but believes the key challenge is not artificial intelligence (AI).
“At the moment, the problem is clearly GCCs,” he said, referring to global capability centres that continue to gain business at the expense of Indian IT service providers. As a result, he does not expect a meaningful recovery in earnings growth for the sector in the near term.
Discussing real estate, Tawakley reiterated that homebuilding remains critical for India’s long-term economic growth but favours developers monetising existing land banks instead of making aggressive new land acquisitions. He said companies generating cash from existing projects and returning capital to shareholders are better positioned as the property cycle matures.
For the full interview, watch the accompanying video
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