Banking, Automobiles, And Capital Goods Might Constitute The New Wolf Pack

In the upcoming years, banking, data centres, renewable energy, robotics & automation, and efficiency-driven capex will be the main drivers of capex growth.

From being a quiet part of our lives, the budget market took great importance when the coronavirus epidemic broke out. COVID-19 filled the Indian subcontinent, leading many Indians to view the stock market as a second source of income.

Investment in stores grew momentum and the Indian equity market was penniless.

Encouraged by this growth, stocks – everything else – went up. The shares of many companies that were never traded, suddenly jumped into life, prices skyrocketed, and people invested in the market out of ‘fear of loss’ (FOMO).

All this led to an unprecedented bullfight in the Indian market that lasted about 18 months.

Then, as a natural law, everything that goes up should go down, and the same thing happens in the Indian market. Excitement filled the panic as the market intensified.

Injured and beaten, many first-time investors were bitten by the dust. But as they felt the blood, they entered the mutual fund route to stay in the race. It is at this point that foreign institution (FIIs) investors rush to the exit door, and local financial institutions (DIIs) withdraw their cash from retail investors.

Clearly, equity markets have captured the fashion of investors who sell more than ever before. But what about next? This is the theme of the 3rd mid-year PMS AIF World conference which started on July 8th.

“Equity is in the air – but what will be the engines / growth sectors in the coming months?” This was a question that was asked of the panels.

Anirudhha Sarkar, CIO and Portfolio Manager, Quest Investment Advisors, bet on India’s domestic story, which lays all the eggs in Indian food.

According to him, the Indian banking and finance sector could quickly see the next growth cycle. This is simply because if India is to become a $ 5 billion economy, the country’s banking and financial industry will play a key role in achieving that goal.

Rates of almost all banks have seen strong adjustments and traded below their 10-year average. However, the banking sector came out strongly after the epidemic and debt growth appeared to be strong.

The real estate loan proves a strong connection that makes me strong in the real estate sector. Sarkar added. He believes the Indian commodity cycle has a long history that will grow after a long, devastating seven-and-a-seven-year episode.

Demand for real estate continues to grow and has not yet shown any signs of decline even after rising interest rates. Said Sarkar.

Sarkar’s third bet on the automotive and related vehicles sector, which is part of India’s consumption issue and proves a strong need not only for passenger cars but also for other sectors. With prices falling, companies that have raised prices will see an increase in prices in the short term.

Vikas Khemani, Founder, Carnelian Asset Advisers, agreed with Sarkar as he excels in the Indian banking sector. He believes that with the reform of the banking sector, India’s credit costs have fallen sharply. This will lead to an increase in sector profits although margins may be hit hard.

The second theme Khemani hopes for is India’s manufacturing sector, especially with the government’s drive to make India independent, and the ‘China Plus’ strategy adopted by international players, which has created a huge demand for export markets beyond that. before. Also, India competes with more costs than China, and the Indian labor costs are $ 250 per month compared to $ 750 per month in China. Said Khemani.

India’s manufacturing sector currently contributes 16 percent of its total GDP (GDP) and the government has set a target of taking this up to 25 percent of GDP.

According to Khemani, even if these targets are made more secure and reduced to 20 percent of GDP, the contribution from the manufacturing sector will exceed $ 450 billion currently to $ 1 trillion, which will boost the manufacturing sector.

If the manufacturing sector sees this growth, another sector will stand out, according to Khemani, a major commodity sector.

In order to achieve the desired growth of production, India will need to significantly increase capex (both public and private) and who will directly benefit from capex growth will be a major commodity sector.

Rajesh Kothari, Founder and MD, AllfAccurate Advisors, has supported this idea about financial assets as he feels that apart from the usual rail, irrigation, electricity, and road construction sites, there are new growth areas that have emerged and will see humungous. the amount of capex in the future.