Thought for the day
“Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.”
-Peter Drucker (American, 1909-2005)
Word for the day
Vigilant (adj)
Keenly watchful to detect danger; wary.
(Source: Dictionary.com)
Teaser for the day
Heard Meera Sanyal and Medha Patekar – AAP candidates from Mumbai.
Both appear standing at opposite ends of the economic policy spectrum.
In search of new
leadership - II
As suggested in my clarification
yesterday, I believe that we are still some distance from the new bull market.
Nonetheless, it is a good idea to prepare the ground and sow the seed well in
advance.
I have expressed my opinion in many earlier posts also, that
the bull market in Indian equities will commence mostly due to domestic
reasons. The global factors, primarily liquidity and soft commodity prices may
provide some extra impetus.
Therefore, the positioning has to be based on domestic
growth drivers. I would therefore suggest the following areas for finding
future leaders.
(a) Industrial companies with market and
technology leadership, strong brand equity and access to global markets.
Product companies rather than services companies are more preferable as they
gain from inventory correction, pricing power among other things. We prefer the
companies with substantial operating leverage and lower financial leverage.
(b) Consumer companies both in staple and
discretionary space which may benefit from rising consumption demand, stable
global economy, weaker INR, lower commodity prices.
(c) Local units of global corporations that may
see larger participation through more investment, hike in stake or transfer of
manufacturing operations for regional exports.
(d) Financials will inevitably participate in
any bull market. Reduced financial stress, better yielding bond portfolio,
higher credit demand, geographical spread due to deeper financial inclusion
efforts, and recapitalization are some ideas that will drive value of financial
stocks higher. However, as a matter of strategy we are circumspect about the
PSBs. I would therefore suggest private sector lender including select NBFCs..
Public sector banks may
though be better prospects for a short term trade. I will discuss it with our
trading strategy in next couple of days.
(e) One of the primary premises of our bull case
is soft commodity prices. I would therefore not suggest any global commodity
exposure. Domestically however cement could see a major spike up due to better
utilization rate. Financially unleveraged large players with good operating
leverage could be looked upon.
(f) Besides some midcap ideas from
textile, auto ancillary, consumer durable are also on our radar.
(g) The exporters especially IT and pharma
should continue to do well. A correction due to cyclical strength in INR would
provide a good entry point.
It is also desirable to make some money from the current up
move that might strengthen even further once the election Euphoria subsides. I
would like to term this up move as purely trading opportunity. In next couple
of days, I shall present my strategy and ideas for benefitting from this
trading rally.
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