Takeaways from the interview
In this edition of Market Makers, ET NOW’s Nikunj Dalmia understands the art of identifying multibaggers & mega trends with Ravi Dharamshi – CIO at ValueQuest Investment Advisors.
- China crisis can be black swan event- Ravi Dharamshi believes that China economy problems are not yet over and can be a trigger for next black swan event.
- It will incrementally contribute to a global slowdown. Problems in China will definitely weigh on India in the short term, but it will be an opportunity for India’s investors in long term.
- Trouble in China an opportunity to buy raw materials at low prices as India being net importer of global commodities.
- He also discussed about the domestic flows cushioning the markets and always to invest in equity at time of crisis.
- He also made beware that corrections can be part of this bull market which can range to 20-30% with time frame of 6 to 9 months.
Talking about mega trends in sectors
- The Economic environment is still deteriorating, but stock picking will be the key. They have used current market condition as an opportunity to buy.
- They are betting big on consumption especially Rural-urbanization as a trend is picking up.
- India will remain a consuming economy and once this $1.8 trillion economy with 1500 dollar per capita goes towards $4 trillion with closer to $3000 kind of per capita, there will be a disproportionate rise in disposable income and discretionary spending.
- Betting on discretionary spending as urban centric.
- Bullish on textile plays with branded products
- Expect certain home grown brands to become into global centric
- Seeing time-based correction in FMCG stocks
- Real estate is going to face a lot of problem going forward. He is not referring to real estate stocks, but the sector as a whole. Bearish on derivatives of the real estate plays.
- Within consumption, he is bullish on brand. Brands where aspiration has always been there. Affordability is there and now availability is there. For instance, the H&M store opening in Delhi saw over 700 people lined up to get into the store.
- The good business model is definitely where they have their own brand where pricing power can be exerted. That is the segment in the value chain that he is bullish on.
Changing paradigm of Pharma
- Pharma based stocks will see some headwinds.
- There can be some pressure on drug pricing in the US going forward, as they go into the election season.
- An active USFDA augurs well for Indian Pharma companies in the long run as they will give opportunity to upgrade standards of manufacturing which will build competitive edge among other nation’s companies.
- US generic market is about $50 billion and Indians are picking away 10% of the market share.
- Investments are moving into financial assets due to incentivisation towards financial savings as savings rates are high and Inflation is low
- In metal sector money can be made in three months and six months, because they have gotten so inexpensive. But it would be very difficult to generate outsized returns over a three-four-year period if we believe that China has just begun its downward spiral.
- PSU Banks can generate trading returns bur poor technology will outweigh on PSU Banks performance. They will be doing constant equity dilutions due to need for capital.