I would not say that we would have significant upside from a market as a whole but there is a lot of stock picking opportunities that we have been able to sort of benefit from in last two years, but I think that is a trend which is going to be there even into the future.
Banks are your top holdings whether I look at your PMS portfolio, your contra strategy. Now some would argue that banks have done well, but is the peak of the earnings behind us because now NIMs will not expand, now the base effect would kick in, so do you think best of the bank earnings and gains are behind us?If you see within the banks also there are a set of banks which were very corporate oriented and to that extent they also suffered a lot post the asset quality review in 2015 and subsequent challenges that we had in the macro economy be it NBFC crisis, be it more slowdown in the economy in 2019 and more recently COVID wave one and two. So, these are the banks which have been underperformers for a very long period of time. I think I agree with you to some extent the NIMs are sort of not going to further sustain the earnings growth rate, but the surprises will come from asset quality.
It has been a very long period of time when the asset quality in banks had not been great in India, but a few reforms have happened. So, IBC, even the CIBIL data points and the GST data these are all coming together over the last decade which is helping banks to do better lending, a more informed lending and my take is that in years to come the credit cost on the banks would continue to surprise.
The one theme in the market and a frenzied one at that clearly seems to be manufacturing and I do not think there is a naysayer out there who does not believe that you have got to be in this space given that the economy is looking inwards. But what is the best approach to try and adopt and take advantage when it comes to manufacturing via equities? It is a pleasant surprise and that was not the case two years back when we were talking about manufacturing but yes, you are right I think at last people are warming up to manufacturing. I believe still the valuations in manufacturing sector on overall basis are not anywhere close to what the consumer facing businesses are. Coming back to the segments of the market, I think the easiest segments of the market are market segments where China would keep on losing its competitiveness. If you go back into the decade, a lot of manufacturing ex-China, outside China suffered because China had access to low cost of labour, had access to low cost of capital, low cost of energy prices and more importantly very little pollution costs and significant incentives from the government for exports.
Many of those areas where it is labour intensive, it is energy intensive are the easiest areas to capture because those are the areas where actually China being a lot more prosperous today than it was a decade back, would want to let go some of those industries which are polluting, which are energy intensive or which are labour intensive.