Baliga said defence has remained a policy priority for the government, as reflected in sustained order inflows. “Orders are not the issue. The challenge over the last one-and-a-half to two years has been capacity bottlenecks, which led to execution delays at companies such as PSU banks preferred over private lendersWithin financials, Baliga said he currently prefers public sector banks (PSU banks) over private sector peers. “Private banks have underperformed over the last few months, while PSU banks have d ...

Core Insights - India aims to become a developed country by 2047, necessitating the extension of more bank licenses to non-banking finance companies (NBFCs) and universal bank licenses for small finance banks (SFBs) [1] - The transition to digital credit offtake is expected to be significant by 2047, highlighting the need for new banks to cater to diverse segments and industries [2] - Compliance standards must be prioritized by lenders as they grow larger in size, with NBFCs and SFBs being potential sources for new banks [3] Regulatory Environment - Indian NBFCs operate under different regulatory standards compared to banks, with many large NBFCs being run by major corporate groups, such as Bajaj Finance and Tata Capital [4] - The Reserve Bank of India restricts corporate groups from owning bank licenses due to conflict of interest concerns, and many large NBFCs do not possess deposit-accepting licenses [4] Economic Goals - To achieve the vision of Vikasit Bharat by 2047, India's GDP must expand to $30 trillion, with per capita income increasing to $20,000-$22,000 [5] - Banks are required to grow credit at an average annual rate of 13%, while GDP must grow by 9.3% each fiscal year to meet these economic targets [5] - There is a need for banks to focus on providing loans for agriculture, micro, small and medium enterprises, and education to support GDP and per capita income growth [5]

Core Viewpoint - The Indian market has underperformed compared to the US and other emerging markets, presenting a long-term equity investment opportunity as it trades at a 49% PE premium to the EM index, which is attractive historically [2][3] Market Performance - Year-to-date, the Indian market has lagged behind the US and other emerging markets, with a notable 49% PE premium to the EM index, down from a peak of 97% in September 2024 [2] - Domestic Institutional Investors (DIIs) have invested $65.2 billion in the Indian market, while Foreign Institutional Investors (FIIs) have sold $17.4 billion, indicating a shift towards domestic investment [2] Investment Strategy - The focus remains on "Growth at a Reasonable Price," emphasizing quality stocks, monopolies, and market leaders in domestic sectors [1][3] - A cautious stance is maintained on export-oriented sectors due to tariff concerns and macroeconomic uncertainties [3] Sector Preferences - The market outlook favors sectors such as BFSI (Banking, Financial Services, and Insurance), Telecom, Consumption, Hospitals, and interest-rate proxies [3] - Positive views are held on retail consumption plays and certain capex-oriented stocks that show growth visibility for FY26 [3] Stock Recommendations - Recent changes in top picks include booking profits in Varun Beverages and adding Mahanagar Gas, reflecting a preference for growth at reasonable prices [4] - Recommended stocks include HDFC Bank, Bajaj Finance, Shriram Finance, Avenue Supermarts, State Bank of India, Lupin, Hero Motocorp, Max Healthcare, Kirloskar Brothers, Kalpataru Projects, APL Apollo Tubes, Mahanagar Gas, Bharti Airtel, Prestige Estates, and Sansera Engineering [5]