Why It Could Be the Right Time to Buy Banking Stocks, Even Amid Economic Slowdown; A Balasubramanian explains

A. Balasubramanian, the Managing Director and CEO of Aditya Birla Sun Life AMC, believes that the best time to invest in the market is when things seem bleak. Historically, when bad news keeps piling up, the market starts pricing in those concerns, which could lead to buying opportunities at attractive prices. He emphasizes that despite the current economic slowdown, India’s long-term growth ambition of becoming a $10 trillion economy remains intact, and the banking sector remains a strong bet as long as credit growth continues to drive the economy.

When asked whether it’s risky to buy banking stocks during a slowdown, Balasubramanian explained that while the economy is experiencing a cyclical downturn, it doesn’t signal a fundamental crisis. He believes the market often reacts ahead of time, and the current challenges have already been priced in. The key is looking at the potential for recovery when economic conditions improve, which could lead to strong returns.

He gave an example using banking stocks, which have underperformed the market in recent years. With their current valuations now looking attractive, it might be a good time to consider them. The ongoing restrictions on credit growth by the RBI are aimed at ensuring stable, long-term growth in the banking system.

Balasubramanian also pointed out that sectors like IT could benefit in the coming years. He explained that if there’s a cut in corporate tax in the US, companies might reinvest that extra profit into technology, helping boost the IT sector. Additionally, a weaker rupee could benefit export-driven sectors like auto and exports.

Looking Ahead with Infrastructure:

Balasubramanian shared that Aditya Birla Sun Life AMC has launched the BSE Infrastructure Fund. Unlike the NSE’s infrastructure index, which includes banks, the BSE Infrastructure index focuses purely on sectors like roads, railways, ports, and energy – key drivers of India’s economic growth. He believes infrastructure will play a major role in India’s economic development over the next decade, and this fund offers investors exposure to that growth.

He acknowledged that infrastructure stocks have faced a significant drawdown in the past few months, but this could present an opportunity for long-term investors who are willing to take on some risk for higher returns over the next 5 to 7 years.

In Conclusion:

Despite the current economic challenges, Balasubramanian suggests that investors should focus on the long-term potential, especially in sectors like banking, IT, and infrastructure. For those willing to ride out short-term volatility, these sectors could offer significant rewards down the line.