Daily Voice: This fund manager bets on these 4 themes ahead of general elections

"As the US Fed embarks on rate cuts, global investors will look towards emerging markets, and given India’s positive macroeconomic backdrop and political stability, the country will remain in favour despite rich multiples," Dhimant Shah, Senior Fund Manager – Equity at ITI Mutual Fund says in an interview with Moneycontrol.

Capital goods and PSUs are among four themes that are on ITI MF's radar as the market approaches general elections.

"The capital goods sector is becoming crucial as India moves towards progress, while operational efficiency of PSUs has improved. Various segments of PSUs are thriving due to a positive business environment," says the chartered accountant with 26 years of experience in the mutual fund industry.What is your take on the overall new-age stocks that have started reporting better numbers?
In 2022, the start-up IPO landscape stalled amid a global tech stock downturn and reduced valuations, compounded by a historic dip in venture capital funding. This shift prompted companies to pivot from growth to profitability.

A RedSeer report anticipates up to 80 start-ups hitting the public market in the next five years, with a heightened challenge for the second wave of internet companies. They must formulate robust plans for EBITDA break-even, cash flow positivity, and capital allocation. This evolving market sets the stage for resilient start-ups, emphasising not just growth but sustainable and profitable expansion in a dynamic financial environment.What do you expect from the government as policy continuation is most likely?
Following recent assembly election results, the likelihood of the current political leadership persisting post-2024 has significantly increased. This is conducive to sustained growth-supportive policies, fostering political stability and robust economic expansion.

Anticipated inclusion of India in global bond indices by mid-2024 enhances the prospect of Indian rupee appreciation, and attracting substantial foreign portfolio investment. The burgeoning $4 trillion Indian economy is capturing investor optimism due to its predictable and enduring growth trajectory.

Also read: BSE rejig: Jio Financial enters BSE largecap index; Tata Tech, IREDA, JSW Infra in BSE Midcap index

Are you bullish on infrastructure stocks for coming years?

Continued government led capex growth on a high base is a positive. Going ahead, as capacity utilisation in the private sector crosses optimal utilisation levels driven by initiatives like PLI (production linked incentives), we may see an increase in private sector capex programs. This can potentially provide further triggers for infrastructure and capital goods stocks.Which themes are on your radar now?
Key themes that are on our radar as the market approaches general elections are as follows:

Capital Goods: The capital goods sector is becoming crucial as India moves towards progress. This sector, covering electrical equipment, plant equipment, and machinery, stands to benefit from the government's increased focus on infrastructure and schemes like PLI (Production Linked Incentive). The $26 billion allocated to the PLI scheme across 14 sectors is set to directly impact the capabilities of the capital goods industry.

Also read: Zomato touches all-time high, surges 200% in one year

PSUs: Public Sector Undertakings (PSUs) have seen a remarkable upswing in the past year. Operational efficiency has improved, and various segments of PSUs are thriving due to a positive business environment.

Real Estate: India's real estate market is witnessing robust growth in property prices and demand, especially in tier 2 and 3 cities. Improved infrastructure, rising incomes, and migration from rural areas are driving this growth. The affordable housing segment is a significant contributor, supported by the government's "Housing for All" initiative.

Auto: The automotive sector, contributing 6 percent to India's GDP and 35 percent to manufacturing GDP, is a key player. The electric vehicle (EV) market is expected to surge with a 49 percent compounded annual growth rate (CAGR) between 2022 and 2030, aiming for 10 million annual sales by 2030. These trends are essential considerations as the country approaches the elections.Do you expect the market to remain strong in FY25 too?
Going forward, while all eyes are on the general elections and a falling interest-rate cycle across the globe, all three elements of the capex cycle (housing, corporate capex and government capex) are now firing, and hence the potential global slowdown should have limited impact on India. Government capex could slow down but private capex pick-up should more than offset it.

As the US Fed embarks on rate cuts, global investors will look towards emerging markets and given India’s positive macroeconomic backdrop and political stability, India will remain in favour despite rich multiples.What is your take on Q3 GDP data and projection for FY24 numbers?
India's GDP expanded 8.4 percent YOY in the October-December 2023 quarter and thereby significantly surpassed estimates (Bloomberg: 6.6 percent). Post these latest numbers, India is predicted to grow at 7.6 percent in the current fiscal year 2023-2024.

The big GDP beat in Q3FY24 can also be construed to indicate the rising potential of India’s growth trajectory and that the India story remains powerful.

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