Lets look at the major events that has happened in India and across the world in last 6-8 months.
Lets start with global first and its impact on India:
1) Crude has declined from US$90 to US$40-50 currently: This will positively impact Chemicals, Pharma, Consumer, Aviation and Transportation companies.
2) There has been much emphasis on Carbon reduction****: IMHO govt might focus on renewable energy to a greater extent in the upcoming budget. Companies in renewable energies like suzlon or Inox Wind or companies that provides solar panels should benefit.
3) Imminent Interest rate hike by the FED: No major impact except for the sentiments. In my view market is already discounting most of it
4) Terrorist activites have shot up a lot in last 6-8 months: In my view this is a big risk.
Coming to India
1) Rate cuts: big positive for all the sectors. Banks need to pass on the rate cut benefits to customers. If that happens we may see Industrial revival in the country. Make IN India campaign may get a doser from the rate cuts. Keeping fingers crossed. Big sectors would be HFC, debt laden sectors.Watch out for Pennar PEBS.
2) GST (if & when happens): It will lift the GDP by 1.5-2% after 2years of implementation. I have a family business and I can definitely tell you TDS, TCS, CST etc is a big big pain. One uniform tax rate will improve the ease of doing business. Watch out for companies in the sectors like Transport (TCI, Gati), Logistics (Concor, Gateway Distriparks Snowman, Gati for its Gati Kausar subsidiary, DTDC – if and when gets listed), Road construction companies ( IRB infra – incase you are comfortable with corporate governance), Consumer companies as mentioned by Hitesh.
3) Railways: Mr. Prabhu (I would call him Chanakya for Railways) is a very smart man. He knows what he is doing and more importantly the action that he is taking will benefit the country in the long run. Look for companies like Titagarh Wagons or RK Forgings. Also look for Pennar Industries whose one segment caters to Railways. Segment might positively surprise.
4) Aadhaar: Govt has been focusing on making Aadhaar as the primary card for the needs. Companies that maintains the database for Aadhaar is a prime beneficiary. Watch for HCL Infosystems.
5) Agri-chemical companies: Recently I read that govt is focusing on improving the land productivity, educating farmers etc. This should benefit Agro-chemical companies like PI Industries etc.
My hunch is one should invest in sectors that are more B2C than B2B. In B2C businesses like Nilkamal or Supreme Industries or WimPLast, they don’t have to pass on the entire benefit of lower crude prices. Also B2C businesses are more recession proof (except discretionaries). But not denying that some B2B businesses creates lot of wealth purely looking at BQ & MQ.
Discl: Invested in PI Industries, Pennar Industries, Pennar PEBS & TCI from lower levels.
Best,
Kunal
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