Four investment themes from a fund manager who delivered 102% returns in one year

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Prasanna Pathak, managing director of Asit C Mehta Financial Services, spoke to Moneycontrol about his top four investment themes. Based in Mumbai, Asit C Mehta has over Rs 200 crore in assets under management. Its ACE Multicap fund is the third best performing portfolio management scheme (PMS) with a 102 percent return in the past one year. The PMS received its license in 24 Aug 2017 and started the PMS in Nov 2017. It has a total of four portfolios.

Railways

Pathak said that India is planning to bring down the average logistics component in total cost  from 14 percent currently to 7 percent, and the biggest beneficiary of this would be the railways sector. Moreover, he says that currently there is a pipeline for 10 bullet trains, over 30 metro stations, around 12,000 new railway stations and additional freight corridors, which is a big growth trigger for the sector. He also said that the government is planning to improve connectivity to and from mineral-rich areas, which bodes well for the sector. Within railways, wagon players, logistics players, and engineering, procurement and construction (EPC) players are a better way to play the theme, he said. Even when valuations have become expensive in the railways sector, he says that valuations for companies in the supply chain are cheaper. "Under the belly there are a lot of players who are away from the limelight," he said. BHEL and Concord Control Systems are a good way to invest in the theme. The PMS has Indian Railway Finance Corporation Limited in its portfolio.

Premiumisation    

Pathak said that the premiumisation trend is playing out in alcohol, luxury hotels, luxury housing, high-end interiors and other segments. He said that India's per capita income is increasing and, hence, a significant portion of the middle class is shifting from a needs to a wants economy. Just to give a sense of the numbers, he said that almost 60 percent of the 140 crore population who were grappling with basic needs are moving to seeking wants, which will drive the premiumisation trend.

Defence

He said that the ‘Make in India’ programme and government’s policy of almost 80 percent procurement of equipment domestically is playing well for the sector. He pointed out that government spending, localisation, offset clause, increasing defence exports, creation of defence corridors coupled with strong order books and visibility are the growth triggers for the sector, adding that this would continue for the next seven-eight years, supporting the order book of such companies. In defence, he said that shipbuilding companies could benefit.  Mazagon Dock Shipbuilders, Bharat Electronics Ltd, Hindustan Aeronautics Ltd, BHEL, Bharat Forge and Data Patterns are on his radar. The PMS has Larsen & Toubro and Mazagon Dock in its portfolio.

Digital

Pathak said that he is seeing the convergence of social media, mobile, cloud, and AI or artificial intelligence, which presents enormous opportunities for businesses to transform themselves, capture vast information and introduce new businesses.  He added that AI, cloud, blockchain, software as a service (Saas), internet of things and 5G constitute a $100-trillion global opportunity that will help e-commerce and fintech companies. Within the theme, specialised IT services companies, Saas, cloud companies, beneficiaries of smart city projects and new-age companies can be looked at from an investment angle. Apart from traditional software companies like Tata Consultancy Services, Wipro, Zensar, Tech Mahindra, etc, companies like PB fintech, Zomato, Affle, Onmobile, Indiamart, Infoedge, Route Mobile, Ease-my-Trip and the like will also benefit.

Disclaimer: The views and investment tips expressed by 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.