This India bull says banking & IT best bets for next 10 years


NEW DELHI: Value migration from the public to private sector banks and technology migration from Boston to Bangalore are among the two biggest themes to play in the Indian stock market over the next 10 years, says Dalal Street veteran Raamdeo Agrawal.

In his book Value Migration, Adrian Slywotzky had defined the term as a flow of economic and shareholder value away from obsolete business models to new, more effective designs that are better able to satisfy customers’ most important priorities.

Motilal Oswal Financial Services, where Agrawal is the current chairman, itself had published a paper on value migration in 2017, after the passage of the GST Amendment Bill and demonetisation of high value currency notes, which the brokerage said marked the beginning of the next phase of India’s evolution.

Agrawal says value migration in banking has been going on for a long time. “In over 25 years of privatisation of Indian banking, it has taken about 30% of the market share of the growing economy. The next 30% value migration will happen in the next 10 years,” he said.

Value migration in banking is happening in credit disbursal and that is going to give a massive edge to the lenders that do well, he said.

“Economic development happens on the back of credit intensity. Credit intensity of an economy trying to double from near $3 trillion to $5 trillion by FY25 will be far higher. There are only five, six banks which can underwrite. Even the government wants to fold up all the PSU banks into four or five SBI-type large banks,” he said.

So five PSU banks and five private sector banks — all in all 10 banks will underwrite maybe another Rs 110 lakh crore worth of credit and that is a huge opportunity, says Agrawal. “So value migration from public to private sector for credit disbursal is already happening and that is going to give a massive edge to the lenders which can do well,” he said.

Large banks will gain large market shares and grow at the rate of 20-25%, while the small and mid-sized players can grow at 25-30% for many years to come. That is why Bank Nifty has done significantly better in the last 10-15-20 years compared with Nifty, says the MOFSL chairman.

Technology is King
The migration of Indian techies from Boston to Bengaluru is the biggest ever thing that has happened in the last 20 years. The next 10 years will be the most interesting period.

“In the next 10 years, we will go from $150 billion exports to $300- 500 billion exports. We are a powerhouse, but we will become a super-powerhouse because of the digitisation of the global economy. We are the enablers of this digitisation,” Agrawal said.

The role of services sector companies will be further increased once they are transferred to cloud, because then the management control will be far lesser. “My sense is, there is a golden era unfolding for Indian IT. The world has become flat because work from anywhere has become a reality thanks to Covid, ” Agarwal said.

“Why should you have a 10X differential in the remuneration for the same work? As the world opens up, all intelligent work will come to intelligent Indians, and hence, we will have extraordinary time in the next five years. My sense is, the Indian tech and Indian services companies will also offer very good opportunities,” he says.


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