Agarwal said the latest draft regulations on insurance commissions could have some impact on the earnings of banks and NBFCs, although he expects the hit to banks to remain relatively limited.
He pointed to strong credit growth, stable margins and benign asset quality as factors supporting the underlying banking business. For banks, he expects earnings estimate cuts to be limited to a few percentage points, while the impact could be deeper for some NBFCs.
On insurance, Agarwal sees a longer-term growth opportunity as the sector has gone through a significant derating over the past three to four years. He believes valuations across life and general insurance have become more attractive.
“It’s still a sector that has long runway for growth in this country, and valuations are quite attractive across the board, whether it’s general or it’s life. I’m quite constructive that this this this is probably the time to be buying insurance companies. Insurance companies, some of the private banks are pockets of value across the market, not just in financials.”
Agarwal said he has stayed away from PB Fintech because its valuation did not fit his value-investing approach. He also flagged the possibility of regulatory changes affecting the distribution side of the business.
Beyond banks and insurance, Agarwal sees opportunities in select NBFCs, particularly in the microfinance segment. He cited benign asset quality, recapitalisation, reasonable growth prospects and improving cost-to-income ratios as factors supporting the space.
He also sees scope for bottom-up stock picking in services and domestic manufacturing. Domestic chemicals and pharmaceuticals, particularly smaller companies that have not seen the same level of rerating as some peers, remain another long-term area of interest for him.Agarwal remains constructive on NSE despite the softer-than-expected grey market premium ahead of its listing.
He added, “It’s a market leader, cash flow machine, valuations are not expensive. It’s very hard to take significant market share away from a market leader of the dominance that NSE has. Over a period of time, I am continuing to expect reasonable returns from here, from a longer-term perspective.”
However, he remains watchful of regulatory concerns around futures and options trading, including recent changes to the closing price mechanism. He said regulators face the challenge of addressing excessive speculation without damaging an important revenue stream for exchanges.
Agarwal disclosed that he owns NSE private shares and has been holding them for some time.
For the entire discussion, watch the accompanying video
