Stories
Investec Capital's Kochhar: Insurance Correction Overdone, Backs PSU Banks on Rate Hikes
- •Mukul Kochhar, Head of Equities at Investec Capital Services, believes the recent regulatory-driven sell-off in insurance stocks is overdone, creating a clear buying opportunity.
- •Kochhar suggests that the market has overreacted to proposed commission caps, with some stocks correcting over 40%, and expects regulators to incorporate industry feedback.
- •He anticipates businesses will adapt by cutting costs and becoming more efficient, mitigating the net impact of regulatory changes.
- •Investec Capital recommends select midcap and largecap private banks that are performing well, while avoiding underperforming top-tier private banks due to management flux.
- •PSU banks are favored as the Reserve Bank of India is expected to raise interest rates, which will benefit their earnings, a factor currently overlooked by the market.
Key Questions Answered
Mukul Kochhar believes the market overreacted to proposed commission caps, leading to an overdone correction where some stock drops have exceeded 40% and turned cheap. He expects regulators to incorporate industry feedback and businesses to adapt by cutting costs and driving efficiency.
PSU banks stand to benefit more significantly in terms of earnings when a rate increase materializes from the Reserve Bank of India, an area the market is currently ignoring. This base call for rate hikes is driven by higher global interest rates and falling domestic real interest rates.
The defense sector is thriving due to a low-cost, high-quality delivery ecosystem that supplies global systems at the right price point and top quality. Furthermore, aircraft systems that previously faced significant overhang are now catching up with platform deliveries, with strong momentum seen in the private space.
