DSP Mutual Fund sees long-term opportunities in insurance, auto ancillaries and specialty chemicals

Vinit Sambre, Head of Equities at DSP Mutual Fund, which manages assets worth over $242 billion, said the earnings pressure on private sector banks appears to be easing, while auto ancillaries continue to stand out as one of the most promising long-term investment opportunities.

Sambre said the latest earnings season has broadly been encouraging outside commodities and large private banks. He noted that many companies have maintained healthy profitability, supported by higher revenues and stable margins, even as commodity-linked sectors remained volatile.

Within BFSI, Sambre prefers life insurance over general insurance. Although regulatory changes and slower growth have weighed on the sector in recent quarters, he believes the long-term opportunity remains intact because insurance penetration in India is still low.

"The sector should see the momentum come back because there is definitely a big need of insuring more people. I feel the opportunity size is big. The players are have also sort of in a way consolidated. They are doing well, so, from that perspective, I would say life insurance, in my mind, is a better play at the moment."

On private sector banks, Sambre believes the worst of the net interest margin pressure may now be over. While deposit mobilisation has remained challenging, improving liquidity and healthy asset quality should support earnings going forward.

He said, “On the private sector banks, the valuations are pricing in some of these challenges, and hence it makes a case to hold on to the private sector.” He also expects investor interest in the sector to improve as earnings growth becomes more visible.

Among sectors, auto ancillaries remain DSP Mutual Fund's strongest conviction. Sambre said these companies are no longer dependent only on automobile demand and are increasingly expanding into newer areas such as aerospace, electronics manufacturing services (EMS) and semiconductor-related components.

"The auto ancillaries should continue to do well. They are expensive. They are not cheap. But at every possible opportunity, one should be looking at that from a long term perspective."

He also said the fund is gradually increasing exposure to specialty chemicals and agricultural input companies after signs of improving pricing and profitability. While commodity price volatility remains a risk, he believes the sector's medium- to long-term outlook is improving after several weak years.

The fund house remains selective on the information technology sector. Sambre said AI-related concerns continue to weigh on investor sentiment, but several companies have started reporting large deal wins and management commentary suggests the worst of the pricing pressure may be behind them.

He believes businesses that adapt quickly to AI-led opportunities are likely to emerge as long-term winners.

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