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investment themes: Where to look for the next Pandya and Kohli in Indian market? Dharmesh Mehta answers

“The way the government policies have been announced to favour the manufacturing sector, with the financials, manufacturing sector will be the Hardik Pandya of next year and I am very sure together with financials, India will do very well with these two sectors performing at the top,” says Dharmesh Mehta, MD & CEO, DAM Capital.


The consensus view this Diwali was financials. Last Diwali, it was IT and digital. Those themes have not made money. What are the chances that what is looking good today may end up becoming a consensus idea and consensus seldom makes money?
Well everybody has consensus on being bullish on India. Everybody has been bullish on India in the last two years and that idea has played out very well. So I would not go buy just because consensus does not work. Eventually fundamentals work and I believe financials’ fundamentals are looking very strong and will work this year.

Last Diwali, fintech and consumer tech were the buzzwords whether it was listing of or Policybazaar EV was occupying centrestage in terms of the go to sector. ESG was a powerful theme but look at the reality! Not every EV business has made money. Fintech and consumer tech have completely become the back bencher. Energy and tobacco/sin stocks have made a comeback. What will be the dominant theme this Samvat year?
Last year, a war came in which nobody envisaged. A lot of things changed last year which was not a normal year and a lot of themes changed. So I would not compare last year to this year. But this year, the capex cycle is really strong and demand for projects is going up substantially and India in the overall pack of things have done phenomenally well.

When you meet the corporates, you see the kind of conviction and the kind of confidence of putting up more projects. That is the reason the banks will do better rather than what is expected of a consensus call. We are going to have a very eventful 2023. It is not going to be an easy year and 2023 actually can be a difficult year for global markets and also for India. I would not like to crystal gaze and come and tell you what is going to happen this year. I would rather play by the yield.

I know what a cricket fan you are although you have already spoken about . But just taking a leaf from what India did to Pakistan, we want to know who is going to be the next Kohli of equity markets?
I wish I knew who is Virat Kohli. Also let us not forget Hardik Pandya. He is the one who actually started the game for us but this a classic match like the time it was Dhoni’s world cup but Gautam Gambhir sone through. So I would say, it is not only HDFC Bank, we will see other sectors also performing. I am very bullish on the manufacturing sector and the kind of opportunity with China plus one or Taiwan plus one which India has got.

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Narrow it down. Manufacturing is a very large pool. Who exactly do you think is going to be Pandya?
I think electronic manufacturing. We just got one company to IPO, there are few more coming on the way. Foxconn is announcing a large tie-up with . Electronics and consumer goods related contract manufacturing will do very well. We are talking to a few companies now. A dual sourcing model which is coming up where the large customers of the contract manufacturers are telling those companies to put up a plant or a warehouse next to their plants in the international markets.

They can get anytime delivery which generally gets disturbed because the supply chain logistics goes for a toss and these events happen. India is now the most favourable destination, people want to move away from China and Taiwan and I do not think there is any other option except India especially with the policies which has been announced especially on the PLI policy. India is going to be a huge beneficiary and that will bring huge FDI money if not FII money.

Another sector that you have been bullish on has been the auto space. What about identifying autos and auto ancillary as a bullish theme for the year? Will that hold?
We are going to see a lot of contract manufacturing in the auto space. So a lot of auto ancillaries will see China plus one kind of opportunity coming to them. A few of them are going for IPO in the coming year. That model is going to become very large but basically whatever is manufactured in China, I think India is going to get market share of that. I believe 40% of infrastructure equipment are manufactured in China. That market is going to come to India also.

The whole China plus one story has not played out at all. We are just at the tip of the iceberg. If things do well, that is going to be a huge exporter for the Indian side.

Since you represent the institutional brokerage, one man’s food is another man’s poison and vice versa. Is this the swing moment for India now?

Definitely it is so. When we talk to institutional investors, it is clear that people expect China to come back at some point but they are going to hedge themselves from China and India is currently the biggest beneficiary of that. There are no two ways about it.

Real estate, hotels, fashion retail – where are Indians spending? Where will they continue to spend?
The spending this year will come down. I am not too bullish on the consumer side. Retail will continue to do well but overall, it would not be as great as the last two years. I will be little bit conservative and be cautious, selectively obviously few companies will do well and they will continue to do well but overall, the consumption trend has started literally slowing down. Especially in the rural side, there is a slowdown coming, if not in urban areas.

What are the stocks or themes which are worth gold but are available at the price of silver? Similarly, which are the businesses where gold is trading at the price of diamond?
I will not be able to comment on individual stocks and sectors right now but my theme is very simple. It is manufacturing and I will look at whatever is in that zone. If some of them have got a good valuation, I will like to pick them up.


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