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Trideep Bhattacharya, Chief Investment Officer of Equities at Edelweiss Asset Management, stated in an interview with Moneycontrol that despite catering to financials, EMS, and defence sectors, these companies are projected to have a consistent earnings stream in the medium term.
Amongst these themes, he expects a manufacturing upcycle to play out over the next five years.
Further, Trideep with over two decades of experience in equity investing across Indian and Global markets, expects tailwinds for companies exposed to the electronic manufacturing sector (EMS) theme to be multi-decadal in nature.
Do you see any risk to the expected domestic growth (of 6.5 percent by RBI) for FY24?
We expect the earnings of India Inc. to remain robust for FY24 driven mostly by strength in the domestic economy. More specifically, we expect the earnings of India Inc. to be marked by strength in the manufacturing/industrial space and weakness in consumption-driven companies.
According to you, which sectors will report healthy earnings growth in coming quarters?
We see the following pockets of earnings resilience to shine for India Inc. over the next medium term:
1. An upcycle in the Manufacturing sector driven by private sector-driven capital expenditure.
2. Robust earnings growth of lending financials driven by strong loan growth
3. A real-estate upcycle driven by bottoming out of inventories
4. Policy-driven strength in the electronic manufacturing sector (EMS) space
5. “Atmanirbhar Bharat” driven Indigenisation of defence
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While the companies that cater to the above-mentioned themes fall across multiple sectors, we expect these companies’ earnings streams to be resilient over the medium term.
Which Is the sector that you don’t want to miss if the equity market corrects significantly?
We are bottom-up stock-pickers. While we are positive on quite a few sectors, we expect manufacturing upcycle to play out over the next five years. Also, we expect tailwinds for companies exposed to the EMS theme to be multi-decadal in nature. Hence, we would like to use any meaningful correction in equity markets as an opportunity to increase our exposure in these areas.
Are you bullish on the defence segment?
As India marches on to realise its ambition to become the third largest economy in the world over the next decade, we view the indigenisation of defence to be a decadal theme for India Inc.
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While the listed space today is populated mostly by PSUs at the moment, as indigenisation increases, we expect an increase in private sector participation over the next decade, leading to plenty of investible options over time.
Do you expect a big stimulus from China to boost its economy?
While we wouldn’t want to hazard a guess on future actions by the Chinese government, we note that the rebound of the Chinese economy has been weaker than expected so far. On one hand, the real-estate sector is yet to rebound meaningfully, its exports have also suffered due to trade-related skirmishes over time. We watch the developments on this front closely.
Do you expect further push for a rate cut cycle if inflation stays elevated (in India as well as the US)?
We have been believers of the “Stickier inflation for longer” theme for some time now. In this context, we view the recent push-out of rate cuts in the US to mid-CY2024 as a data point in sync with our view.
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We believe that while interest rates have broadly peaked and we don’t expect significant moves upwards globally as well as in India, we also think that it will take time for interest rates to come down from hereon due to stickier inflation globally.
While we expect Inflation to come down over time, we expect the move to be more gradual as compared to general expectations. We monitor the developments closely on this front.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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