Madhusudan Kela Says Market Must Go 'Back To Basics' During Modi 3.0, PSU Banks Still Offer Opportunity

Market veteran Madhusudan Kela said in an interview that he continues to be bullish on public sector undertakings (PSUs), particularly PSU banks.

What Happened: Kela emphasised in an interview with ET Now that with the Bharatiya Janata Party-led National Democratic Alliance set to form the government for a record third term, the market is “back to basics”.

“I don’t think the bull market is over, I think the easy money is over,” Kela said, adding that it was important to look for undervalued stocks in sectors that have seen recent run-ups.

Kela said that he was still bullish on PSU banks as he believed they were not trading at extremely high valuations. “Some of the large banks, you can still find, they are trading at 5-6 PE (price-to-equity) multiple if you’re willing to take a two- to three-year view.”

He did mention that he was not broadly bullish on the PSU sector as a whole.

Kela expressed confidence in a stable government for the next five years, noting that the government's lack of reliance on a particular party is a positive factor. “Not for the markets, it’s business as usual… back to basics. Now this is the time for wealth creation and not just income generation,” he said.

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He added that the new government is unlikely to dilute its agenda significantly, and reforms will remain on track. “Reforms will be accelerated, allies like Chandrababu Naidu are very reform-oriented,” he noted.

Kela’s Other Favourites: Kela said he sees space to grow in the liquor sector that can reach the heights of that in China with policy support, premiumisation and investments. He said the industry could be a long-term growth story.

He said that among the non-banking financial sector, the biggest opportunity may lie in the housing finance sector as the stocks are available at cheap valuations and regulatory pressure has eased. “The housing finance sector has a very good tailwind in India over the next decade,” he explained.

Regarding the manufacturing and defence sectors, Kela warned that some stocks are highly overvalued and may face de-rating. However, he maintained that the structural argument for mega themes in the power sector remains intact, advising investors to take stock-specific calls.

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