Buy domestic stocks but avoid global-facing ones: Jyotivardhan Jaipuria

Talking about the investment themes, the government’s strong thrust on capital expenditure is the reason Jaipuria likes capital goods sector. Besides this sector, he is also bullish on companies that saw margin erosion last year due to higher input costs. Now that the commodity inflation has cooled down, several of these companies are likely to do well in the coming years as margins start normalising.

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He explains that the ceramic and tile sector was hit by a massive increase in gas prices last year. Sales growth of these companies was great but they witnessed terrible growth in profit and Earnings Before Interest Tax Depreciation and Amortisation (EBITDA). Considering a recovery in gas prices, the margins will start climbing higher, he believes.

Kajaria Ceramics, which is the largest manufacturer of ceramic or vitrified tiles in India and the eighth largest in the world, said that the primary cause of this decline was a disruption in natural gas supply and an unprecedented increase in gas prices. "However, fuel cost has started to come down since December 2022, primarily due to the increased use of alternative fuels and some fall in gas prices. The full impact of these changes is expected to be visible by March 2023."

The company saw its operating margin for Q3 FY23 decline by 500 basis points YoY to 12.20 percent.

So Jaipuria is of the view that these companies that have underperformed will now begin to do well as earnings growth begins picking up pace.

Meanwhile, the banking sector has done very well in the past year due to the low base effect. Even though he does not see a similar return coming through this year, Jaipuria believes the years ahead will witness low credit costs and non-performing loans which could make investors look at banks.