Infrastructure, financial services, new-age tech, hospitality and consumer discretionary, and capital goods and engineering industries are the five themes to bet on for the next five years, Raghvendra Nath, Managing Director at Ladderup Wealth Management says in an interview to Moneycontrol.
Raghvendra Nath with more than 30 years of corporate experience, who previously headed the Strategy and Business Development team at Birla Sun Life AMC, sees no need to adjust existing allocations in the portfolio based on the election outcomes as the current economic momentum is expected to continue.
Will you prefer to rejig portfolio considerably after election results?
This year's elections are taking place amid a thriving economy. In Q4, the GDP grew by 7.8 percent, and for the full year, it expanded by 8.2 percent, surpassing the Reserve Bank of India's (RBI) estimate of 7.8 percent. India remains not only one of the fastest-growing economies globally but also one of the largest economies experiencing rapid growth. Post-COVID, nearly every sector in the country has performed well due to various factors. Increased government spending, driven by improved tax collections and compliance, has bolstered the infrastructure sector and related industries.
The focus on manufacturing, fueled by trade tensions with China, has attracted numerous multinationals to establish operations in India. The rapid growth rate necessitates substantial investment in the power sector, which has benefited power sector and related businesses. Additionally, the improving economic status of the population has boosted the consumption sector.
With a young population possessing diverse aspirations, credit growth has been strong due to both corporate capital expenditure and retail credit demand, leading to robust performance in the banking and financial sectors. While the election results may lead to some policy changes, the current economic momentum is expected to continue, and therefore, we see no need to adjust existing allocations based on the election outcomes.
What do you see in the 100-day plan of Modi 3.0 as exit polls singalled NDA coming to power?
Examining the current policy framework in India, we do not anticipate any major announcements related to industry or taxes. The government's primary responsibility is to the citizens, and thus, their policies and schemes are likely to focus on benefiting the common man. Key areas of emphasis will be employment generation and extending benefits to the lower section of the country.
Additionally, the government may lay the groundwork for future growth by investing in education, healthcare, and skill development. In the first 100 days, the focus is expected to be on enhancing citizen empowerment, fortifying institutions, and setting clear goals and targets for the third term.
Do you expect a significant jump in PSUs valuations in the third term of NDA government?
PSUs have experienced a significant rally over the past 18 months. While some argue that this surge was warranted due to the previous undervaluation of the sector, the efficiency of PSUs when it comes to delivery is something which has been questioned time and again, with a few exceptions. Moreover, this rally has pushed many of these companies to valuations that seem to have factored in the expected future growth. We believe it is now prudent for investors to exit some of these positions and reinvest in high-quality, high-growth opportunities.
Five themes to bet on for the next five years?
Infrastructure - we foresee significant opportunities given the rapid expansion of the government's balance sheet. As it amplifies investments in physical and social infrastructure, sectors closely tied to this development are primed for substantial growth.
Financial services hold immense promise as one of the pivotal pillars of any economy. With India's projected high economic growth, the financial sector, including banks, insurance firms, and capital market players, stands to directly benefit from this trajectory.
New-age tech companies - given their pivotal role in driving innovation through technology-based solutions. These firms are reshaping business models and sparking the creation of novel ideas, making them a compelling bet for the future.
Hospitality and consumer discretionary sectors are poised for growth fueled by the ongoing trend towards premiumization and the escalating consumer expenditure on travel and tourism. This trend is expected to sustain over the next decade, offering lucrative opportunities.
Capital goods and engineering industries - are well-positioned for growth, supported by both government and private sector expenditure. With anticipated increases in government and private sector capital expenditure, these sectors are likely to witness robust expansion in the coming years.
Do you expect more reforms from Modi 3.0, to increase FDI?
If the present dispensation wins comfortably with a good majority that will provide confidence to foreign investors with respect to stability in continuation of major policies.
Since 1991 all the governments have made conscious efforts to provide further comfort and confidence to foreign investors to boost FDI in India. So even if the election outcome is contrary to the consensus, we do not see any major setback in the long term as far as FDI is concerned.
What are three challenges for the NDA government in the third term?
The foremost challenge lies in revitalizing consumption, especially in rural India. Recent surveys indicate that over the past decade, private final consumption expenditure has only grown by 3.2 percent, significantly lower than the real GDP growth rate. The government's priority should be to ensure that its schemes reach the common man effectively, thereby increasing disposable income in their hands.
Another significant hurdle is the limited employment opportunities in semi-urban and rural areas compared to the number of job seekers. The government must incentivize the private sector to establish industries and infrastructure in these regions, promoting economic decentralization and generating employment opportunities for the youth.
Additionally, India's small share in global trade presents a persistent challenge. Despite efforts spanning decades, our participation in global trade remains modest. To sustain and bolster economic growth, it's imperative to enhance the share of exports in GDP, thereby expanding India's footprint in the global market.
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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