You cannot lose sight of the fact that compared to the rest of the world, we are in a much better place. Do you think this performance against the rest of the world is here to stay? Also, where might leadership emerge in the market?
You are right. India’s equity markets turned in strong performers from a one-year perspective. What is really driving the markets is that India’s growth prospects look remarkably stable and proportionate in a world where many global factors are at play with rising interest rates and inflation.
When we look at our markets, there are a few things to consider; First, we think earnings will be the main driver of the markets going forward. Earnings estimates have recently seen some decline in the last quarter and Q1 numbers. However, we believe that growth in youth income is possible in the medium term.
Commodity cost pressures have taken off and that is positive from a margin perspective. We believe that operating strength will be the main driver of revenue growth. On the flow side, we have seen some turnaround in FII flows recently and that is something we will be watching.
The main thing is the prices, because we have such a large output. Relative valuations are extremely long and from that perspective, it is possible that at current valuation levels, we will see some degree of volatility. We now believe this is going to be a year of stockpiling and that is something we will continue to do.
“ Back to the recommended stories
The following stock selection is likely to be the way forward and this is how we view our portfolios as well.
What are your thoughts on some of these new age tech companies? The situation is very wrong when it comes to , and . Today, they are very exciting, but in the medium term, should one look at buying these contracts?
When you talk about new age technology companies, remember that in terms of address pool, they are looking at very different and different things across sectors and so each of these businesses has to come in its own way. evaluation
We see that in some cases there is a real opportunity. However, we evaluate these companies from three main perspectives; one of their ability to increase in terms of market share. Hence the growth and market opportunity of the address.
The second is a kind of competition in the sectors in which they work and therefore entry barriers in the sector are possible.
Third and most important, their path to profitability and focus on capital distribution. We have some details with these new age companies. They are a small part of the portfolio, but we will be selective in terms of choosing the type of business where we see a long-term cycle, both in terms of growth and profitability.
How did you look at the whole defense, the train cover cycle?
When we talk about capex, so far the growth coming from capex is general capex, but there are also some early signs of recovery on private capex spending. We believe that the government in terms of roads, railways, defense and water are some of the main sectors that you have seen that the government will continue to spend in terms of spending.
We believe that despite some changes in the financial side, the focus in terms of growth will remain on capital expenditure and that something will continue and will help the overall consumption of the public capacity.
In terms of sectors that look good in terms of strength, the four main sectors are road, rail, defense and water. The move towards defense localization is also something that may attract investments and it will be something that will be for the government for a longer period of time.
We were generally positive on the industrial and defense sector of the infrastructure and the focus and positivity in the portfolio continues.
Where do you still find auto package value, if any?
We continue to be fairly positive on the auto package. Earlier, our preference was for the passenger vehicle segment, but on the margins, even on the two-wheeler side, we are picking up signs of improvement on the demand side.
In the two-wheeler space, there was a huge inventory in the system. Channel checks indicate that inventory levels are currently on track. If the rural recovery starts to accelerate or at least the demand of the rural segment starts to show initial signs of recovery, this is the segment where we see growth.
Also, for the entire auto package, not just the two-wheeler, but also for the passenger vehicles keeping in mind the material cost adjustment, some of these companies have taken the price hike. That margin should also start to increase, especially in the second half of the year.
From a longer perspective, there has been no growth in the sector in the last five to six years. Now we are starting to see the early signs of growth. The normalization of long-term growth rates means that despite the kind of performance we have seen, there is fair room for growth for the sector. Overall, we remain positive on the auto portfolio, both in passenger cars and two-wheelers.