"We view consumer discretionary category as a major driver of growth and keep a bullish stance on stocks of consumer discretionary companies," Anirudh Garg, Partner and Fund Manager at Invasset, said in an interview to Moneycontrol.
"The growth in incomes, the acceleration of urbanization, and an increase in the middle class, all contribute to the tremendous growth of the discretionary spending on such products like cars, electronic goods, travel, and leisure," he said, explaining one of reasons behind bullish stance on discretionary space.
With more than 17 years of research experience in the stock market, Anirudh Garg, who leads the Quant team, also remains bullish on the domestic cyclical sectors, including power, capital expenditure (capex), and manufacturing, viewing the recent market trends as part of a broader "old economy" resurgence.
Do you see the risk of NIM compression for the banking names given the possibility of beginning of interest rate cuts? Despite this, are you bullish on the space?
The chance of interest rate cuts can firstly give rise to a case of net interest margin (NIM) compression in the banks, because lower rates may cut the spread between the interest revenue generated from the loans and the interest paid on the deposits. However, the impact is not uniform across all banking names. Those banks having strong CASA (Current Account Savings Account) balances and low-cost structures are the ones who can better endure this compression. Further, the sequences of rate punches are the major causes of triggering the interaction of credit activities and demand for increased credit which counterbalances some of the NIM pressure; thus, the influence on the economy of India could be one of the main causes.
With the current quest for India's economic growth and digital financial inclusion in progress, we are still positive about certain banking names with outstanding fundamentals, high-quality asset portfolio, and diversified product offering. These factors, as part of a comprehensive approach that includes the efficient management of costs and the embrace of digital banking technologies, are likely to provide support to their profit and growth, although NIM compression is inevitable.
Will India’s share in the global manufacturing space more than double in the next decade?
The Indian market is expected to have an important spot in manufacturing on a global scale soon. Many factors are cited as reasons for such an upbeat outlook, such as government campaigns like Make in India, Production-Linked Incentive (PLI) schemes, and infrastructure investments. What is more desirable is the fact that India benefits from its demographic dividend: the country has a young and skilled workforce.
The change in global supply chains, driven by the complex of geopolitical factors and the drive to reduce the China embracement also aids India's manufacturing quest. However, the difficulties including the infrastructure deficiencies, regulation issues, and the lack of high-tech progress must be resolved. If India effectively overcomes these obstacles, the country's production scale in the global market will greatly increase, thus making it possible for India to become a $ 5-trillion economy as it aspires.
Will India maintain 6 percent economic growth in the coming years?
India showing 6 percent economic growth in the coming years is a sustainable scenario as the best macroeconomic parameters include both, democratic dividend plus the reforms the government does. The country's growth is built on diverse economic sectors like the increased services, industrial, and economic parts. However, this growth will demand prolonged structural reforms, investments in infrastructure, and policies that stimulate innovation and entrepreneurship.
Though there is a high degree of uncertainty concerning global scenarios of geopolitical conflicts, commodity price instability due to potential external interventions, India shows a strong domestic demand, is digitized, as well as is in the process of becoming a global manufacturing center, which gives a sound base for sustainable growth. A realistic goal of 6 percent is feasible with prudent fiscal care and wise policy decisions.
Are you overweight on the consumer discretionary space?
Due to the consumer space's favourable macroeconomic conditions and transforming customer buying patterns in India with the premiumization trends we are optimistic. The growth in incomes, the acceleration of urbanization, and an increase in the middle class, all contribute to the tremendous growth of discretionary spending on such products like cars, electronic goods, travel, and leisure. Moreover, the digital revolution has driven the e-commerce sector to flourish and it has given all the consumer discretionary companies new challenges thus supporting them.
Although the threat of inflation and economic slowdown is there, the narrative of India's consumption is strong, due to its young population and improvement in consumer confidence. Companies that will stand out through the force of branding and novelty, alongside potent and well-organized distribution networks, predictably are going to capitalize the most. Therefore, we view this category as a major driver of growth and keep a bullish stance on stocks of consumer discretionary companies.
Are you positive on the domestic cyclicals including power, capex, and manufacturing?
We remain positive on the domestic cyclical sectors, including power, capital expenditure (capex), and manufacturing, viewing the recent market trends as part of a broader "old economy" resurgence. This resurgence is primarily driven by sectors sensitive to interest rates and focused on capital expenditure, which are pivotal in the current economic environment.
While some stocks in the capex sector have experienced price corrections, we see this as a natural phase in market cycles, reflecting a period of consolidation and adjustment. These corrections may extend into a time correction phase, where prices stabilize over a period, preparing for the next growth leg. Despite these short-term fluctuations, the long-term outlook for these sectors remains robust.
The government's emphasis on infrastructure development, energy transition, and "Make in India" initiatives provide a strong foundation for sustained growth. In the power sector, particularly renewables, substantial investments are expected to drive future expansion. Similarly, increased public and private sector spending on infrastructure, industrial projects, and smart cities indicates a promising capex cycle ahead. Manufacturing is also positioned to benefit from this momentum, supported by favourable government policies and a shift in global supply chains. Therefore, we maintain a bullish stance on domestic cyclicals, anticipating solid growth opportunities in the long term.
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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