When it comes to value investing and picking the right themes, there is none other than Porinju Veliyath, of Equity Intelligence India, who says there is still a lot of opportunities in Indian market right now as the economy is changing structurally which is giving way to value migration.
The man, who is known for spotting small and midcap stocks at the right time, says he sees over 2 dozen themes which are yet to be explored.
“There are a lot of themes in the economy in a country like India which is changing structurally. When the economy changes from black to white, from unorganised to organised results in value migration in numbers of pockets and that is where investors can make 10-baggers and 20-baggers in coming years,” Veliyath said in an interview with CNBC-TV18.
There is a lot of opportunity in India and if investors are able to pick the theme at the right time, wealth creation will happen. One such opportunity lies in the real estate sector, said Porinju.
Real estate is a very important sector where the value migration is happening. A similar theme was visible in the banking space a few years back when private sector banks created wealth and something similar has already started happening in the real estate sector.
Real estate is a very important industry for the stock market going forward. But, why now?
If you remember real estate was considered to be an ugly sector where mostly black money dealings use to take place and was not organised earlier, but now with the introduction or RERA, REIT, or Real Estate Investment Trust, and participation of PE players is making the sector attractive.
RERA or Real Estate (Regulation and Development) Act Once the RERA becomes an enforceable law, it will change the way in which residential housing projects are planned, offered, sold and possessed across India.
“All these changes/things are going to create huge value migration within the sector,” said Porinju. A lot of companies will get organised and buyers will be well aware of their rights. In terms of revenue real estate sector is very small when compared with that of China.
In 2007, China recorded a revenue of $4-5 billion from real estate which now stands at $40 billion. Profits today moved from $1 billion to $10 billion, he said. “We are nowhere when it comes to revenue from the real estate sector despite having such a large population,” said Porinju.
There is a lot of structural change which is happening in the sector. “The governments push towards housing, and entry of new players and new IPOs to name a few,” he said.
To become expert stock picker, Porinju advises investors to track changes which are happening in the sector, learn it and assess which companies will benefit from the value migration.
The market share of real estate companies will go considerably in Sensex, Nifty or BSE 500 index, said Porinju. He holds Godrej Properties, Oberoi Realty and Sobha Developers in his portfolio and all of them have doubled.
Media is another sector where value migration is happening and hence investors should be watchful.
Top five stocks where Porinju holds more than 1%:
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