Vyas said consumer discretionary companies continue to offer better growth visibility than staples, while select mid-sized banks could benefit from stronger credit growth and a possible rise in interest rates. He also expects telecom companies to see an improvement in profitability as tariff hikes are likely over the next three to six months.
“We have been reasonably more positive on the consumer discretionary as a space versus staples,” Vyas said.
According to him, the pricing-led improvement in staples is likely to be temporary, while discretionary consumption continues to benefit from stronger underlying demand.
“We still believe that the growth trajectory, especially in the consumer discretionary and maybe in the retail space, remains fairly strong,” he said, adding that companies such as Trent and Vishal Mega Mart could continue delivering double-digit growth over the medium term.
On financials, Vyas said strong FCNR deposit inflows and above-average credit growth favour smaller and mid-sized banks that can grow lending faster than the broader banking system.
He expects interest rates in India to move higher in the coming policy cycle, which could support lenders with a larger share of repo-linked and external benchmark-linked loans.
“I think interest rates in India will probably start to inch up… definitely from next policy onwards,” he said.While he remains constructive on large private banks, Vyas believes their net interest margins could face pressure in the near term because of the higher share of FCNR deposits until these liabilities are repriced.
In telecom, Vyas said subscriber additions remain healthy, but tariff hikes have been delayed longer than expected. He believes operators are now likely to focus on improving profitability.
“The tariff increase… is more likely to happen now… in the next three to six months,” he said.
Within the sector, Vyas said Quest Investment Managers is more inclined towards Bharti Airtel. He also finds Reliance Industries attractive but said he would prefer to wait for the proposed Jio Platforms IPO before increasing exposure. He clarified that these are existing portfolio holdings and not fresh investment recommendations.
For the full interview, watch the accompanying video
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