Sector-Specific Valuation — Banking, Insurance, and Commodities

Applying a standard discounted cash flow model to HDFC Bank is like using a ruler to measure temperature. The tool is technically legitimate, but it is the wrong instrument for the job.

Why This Matters

Three industries — banking, insurance, and commodity businesses — together constitute roughly 40% of the Indian equity market by capitalisation. Each has fundamentally different economics that make standard valuation frameworks misleading or simply inapplicable. A value investor who does not understand sector-specific valuation is effectively unable to evaluate a significant portion of the opportunity set.