Daily Voice: Mixed trend in Q1 provisional numbers - This CIO highlights weak urban consumption, strong rural and semi-urban growth

Arpit Agrawal is the Co-Founder and CIO at Electrum Portfolio Managers

"Q1 provisional numbers have been a mixed bag, with rural and semi-urban focused businesses showing stronger growth, as reflected in the performance of tractors," Arpit Agrawal, co-founder and CIO of Electrum Portfolio Managers, said in an interview with Moneycontrol.

However, consumer demand—especially in urban pockets—continues to remain tepid, and valuations are still stretched despite recent underperformance, he added.

According to him, the chemical sector is gradually emerging from its prolonged pain period, and pockets of opportunities are beginning to surface. The China Plus One strategy, coupled with strong domestic demand, represents a long-term opportunity in this sector, Agrawal noted. Electrum is a boutique asset management firm with an AUM of almost of $100 million.

How do you interpret the provisional numbers for the June quarter announced by corporates so far? Do these figures indicate healthy growth in real terms?

Provisional numbers have been a mixed bag wherein rural/semi urban focussed businesses directing stronger growth as reflected by tractors. However, urban consumption remains weaker as reflected in weaker passenger vehicle (PV) sales numbers. BFSI companies are reflecting growth in line with expectation with improved business momentum in MFI and NBFCs.

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Arpit Agrawal

Co-founder|Electrum, the Portfolio Management Services arm of Arihant Capital

Have you observed a notable uptick in the investment cycle recently?

Government capex has witnessed notable pick up in this quarter after a disappointing capex in the last financial year. The growth has been driven by defence, railways and roads sector. Government capex is higher by more than 50 percent YoY, however, some of it could also be attributed to lower base due to subdued capex last year. Private capex still remains weak due global uncertainty and slower domestic demand growth.

Do you believe CDMO, CRO, and manufacturing will emerge as dominant themes over the next decade?

We believe there are significant opportunities in the CDMO/ CRO (Contract Development and Manufacturing Organization / Contract Research Organization) space for Indian companies specially in pharmaceutical and speciality chemical. India has been at the forefront due to strong manufacturing base with many US FDA approved plants and significant trained experts in these sectors, further government support and PLI schemes would be big enabler to further boost growth. We think that after IT services this represents a dominant long-term opportunity.

Are you optimistic about the chemical sector, considering its earnings performance over the past couple of quarters?

We think chemical sector is slowly coming out of its pain period and pockets of opportunities are emerging in this sector. However, one must look at individual opportunities. The sector is complex, and each chemistry has its own nuances, and China remains a dominant player in most chemicals. However, China plus one coupled with domestic demand represents a long-term opportunity in this sector.

Do you expect market attention to shift toward the consumer segment in the second half of FY26?

Consumer demand specially in the urban pockets continues to remain tepid and valuations are still stretched despite underperformance. However, we like some specific retail players as the long-term opportunity seems to be extremely attractive due to favourable demographics and increasing per capita.

Do you currently prefer NBFCs over banks, and do you expect a decline in the cost of funds along with a pickup in growth?

NBFC’s have better growth profile than banks as they cater to retail, MSME and unorganised sectors which have grown better in last few years. Corporate sector growth has been tepid which had led to growth pressures in banking sector. However, we believe deposit growth has started to show some uptick and credit growth pick up would be a function of growth in private sector capex.

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