Daily Voice: This CIO bullish on power, clean tech sectors, believes BFS undervalued now

Vikas V Gupta is the CEO & Chief Investment Strategist at Omniscience Capital

Vikas V Gupta, chief executive and and chief investment strategist at Omniscience Capital, is bullish on sectors such as power and clean tech that are crucial for a fast-growing economy.

The man with more than 20 years of experience in capital markets believes the demand for AI technologies and applications is expected to drive growth in semiconductor companies, cloud platforms, and data centres. "We also see opportunities in Banks and Financial Services, especially those enabling capital growth, as these sectors are currently undervalued," Vikas says in an interview to Moneycontrol.

Your take on the Reliance Industries-Disney deal?

It is good to see an Indian company joining hands with an American company to take on other American behemoths, such as Netflix and Amazon. With the strong presence of the Reliance group across the Indian households and synergies with Reliance Jio, this digital media streaming company could potentially become an important and possibly the largest player in the market.

The strong content creation skills of Disney and the understanding of the Indian psyche at the Reliance group could result in highly differentiated, high quality content tailored for the vast majority of Indian households. This would be in strong contrast to the existing content of the streaming giants such as Netflix and Amazon which caters only to a niche, westernized and affluent Indian household segment. The merged entity could produce content with more mass appeal. However, we will keep a close watch on how things evolve.

Your take on the recent Household Consumption Expenditure Survey? Have you observed any great change in urban or rural consumption patterns?

The recent Household Consumption Expenditure Survey reveals significant shifts in consumption patterns, particularly in the allocation of expenditure. One notable change is the decline in the percentage of expenditure on cereals, which has dropped drastically for both rural and urban households. This indicates a shift away from basic food items towards more diverse spending.

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Moreover, the survey highlights a decrease in the proportion of expenditure on food as a whole, indicating an increase in disposable income and a move towards a more balanced expenditure pattern. The concept of "Roti, kapda aur makaan" (food, clothing, and shelter) has also seen a decline in expenditure share, suggesting a diversification in spending habits.

Additionally, there has been an increase in urban expenditure, narrowing the urban-rural divide. If this trend continues, it could lead to a more equitable distribution of resources and opportunities across different regions.

Which are your overweight bets for the next financial year?

For the next financial year, we are bullish on sectors that are crucial for a fast-growing economy, such as Power and Clean Tech. The National Rail Plan 2030, which aims for a higher share of railways and increased electrification, presents a compelling investment opportunity. Additionally, the Electric Vehicles (EVs) sector, with a projected increase in market share, and the potential shift to Green Hydrogen as an energy storage technology, are having attractive prospects.

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Furthermore, the AI (artificial intelligence) Revolution, led by companies like NVIDIA, presents significant growth potential. The demand for AI technologies and applications is expected to drive growth in semiconductor companies, cloud platforms, and data centers. We also see opportunities in Banks and Financial Services, especially those enabling capital growth, as these sectors are currently undervalued.

Do you expect the FII flow to move to China in the coming financial year given the cheap valuations?

The fundamentals of the Chinese economy raise concerns about the attractiveness of FII flows to China. High debt levels and a real estate crisis could have a ripple effect on other sectors, starting with banks and financial services companies. These factors, along with global efforts to reduce dependency on Chinese goods, make it unlikely that FIIs would significantly increase allocations to China.

Do you expect strong earnings growth in industrial sector in coming years given the strong order book?

The large multi-year order books bode well for the industrial sector. In fact, with the right policies in place, India is experiencing a virtuous cycle of investments in the right assets, triggering economic growth, which generates surplus capital, which can again be reinvested in productive capital assets which triggers further growth and so on. India is at an inflection point for multi-decadal growth during the Amrit Kaal.

Selected industrial sectors, such as defence, railways, capital goods, besides automobiles could prove to be a wise exposure over the medium term.