GST reforms a growth trigger, dips offer opportunity, says Rahul Shah

Even as the government’s GST-led stimulus was expected to give markets a strong lift, equities have shown only a muted response. In an interaction with ET Now, Rahul Shah shared his perspective on where the markets are headed, sectors that could benefit, and why near-term dips may present attractive opportunities for investors.

Reforms Seen as Growth-Driven, Not Just Tax Relief
Commenting on the broader market trend, Shah said, “The way the markets have reacted, I do not think we have seen a fair rally in stocks that are direct beneficiaries of this entire tax cut. My sense is that this will continue, and if we look at this kind of reform, it is not just a tax cut reform but a growth reform for the equity markets. We believe the government is realising this and has been taking steps to revive consumerism in the country.”

Private Banks and NBFCs Remain Attractive
Asked about sectors yet to fully price in the positive developments, Shah pointed to financials. “One clear winner is obviously the private banks and the private NBFCs. Yesterday, we saw some private banks moving up along with the NBFC space.”

He emphasized that valuations remain favourable. “If I look at the valuations and compare them with the 10-year average, they are still trading below that level. So, they are still cheap and there is visibility. In this quarter, the large private banks reported stellar numbers — HDFC Bank and ICICI Bank both delivered solid results, and the outlook was also good from their perspective.”

Shah highlighted HDFC Bank, ICICI Bank, Bajaj Finance and L&T Finance as top picks. “I feel that private banks still offer reasonable valuations. The top bets are HDFC and ICICI, and from the NBFC space the top idea is Bajaj Finance. You can also look at L&T Finance, which reported a stellar performance this quarter. My view is that this sector can be re-rated and should rally over a period of time.”

Insurance Seen as a Long-Term Structural Story
Despite recent selling pressure in insurance counters, Shah remains optimistic. “This is going to be structural. As I said, it is going to be a long-term reform. We may have seen some nervousness, and the markets gave up the gains during the day, but I still feel these are opportunities. Whenever we see a sell-off, we continue to view insurance as a sector worth investing in.”

He added that selective investments make sense in the space. “If I look at the valuations, most of them have rallied post-15th August and even earlier. So, we have been very selective in insurance as a play as well. The sector looks good and deserves a meaningful allocation in a portfolio. SBI Life and HDFC are at the top, followed by the rest. My sense is that corrections in any of the insurance companies should be seen as good opportunities.”

Outlook
With the government’s policy stance aimed at reviving consumption and supporting growth, Shah expects equities to see gradual but steady upside. Financials, insurance and select consumer plays could lead the way, while market corrections may offer investors opportunities to build positions in quality names.