Thought for the day
“When I was young I thought that money was the most
important thing in life; now that I am old I know that it is.”
-
Oscar Wilde (Irish, 1854-1900)
Word for the day
Indelible (adj)
That cannot be eliminated, forgotten, changed, or the like
(Source: Dictionary.com)
Teaser for the day
How Arun Jaitley would be a better finance minister than
Pranab Mukherjee.
If quotient differential is Modi, then how does it matter
who is FM?
All
the king’s men and all his horses
In past 10days many readers have written and called to discuss
the constitution of Narendra Modi’s cabinet. My view that this discussion is
completely irrelevant, and has mostly been unacceptable or, in many cases,
unregistered.
I would like to reiterate with added emphasis that this episode
in India’s history is quintessentially about one person named Narendra Modi –
his vision of India, his character, his strengths and his weaknesses. Any
effort to dilute this supposition will not only dilutive of the conviction but
is also bound to distract from the core.
My conviction in faster and sustainable growth of Indian economy
stems from the faith in Modi’s ability to quickly assimilate the cotemporary
environment, strategize a faster response and get it executed diligently. The
role of ministers in his cabinet would therefore logically be limited to
execute his policy direction. You need hard working, no nonsense workers for
the job. Someone with strong views or exceptional intelligence will only create
undesirable incongruence.
Coming to back our core subject, CLSA in a note issued to its
clients highlighted some interesting opportunities which I found pertinent to
share.
The research note highlights, among other things, commercial
vehicle sales in the country are at the level last seen in 2003-04 while GDP/GFCF has grown 300% since
then. It may therefore not unreasonable to expect 120-150% growth in CV sales
over the next 3 years.
I feel while
the CV manufacturers like Eicher, Tata Motors, Ashok Leylend will undoubtedly
gain from the trend reversal in CV demand, sharper gains could be expected from
ancillaries like Bharat Forge, Bosch, etc. could gain even more.
A similar situation exists in cement demand also. The report
suggests that “Andhra Pradesh
consumption is 30% lower now than 2009. From here on it will reverse and make
up for lost time. But 7-8% CAGR volumes assumption won’t take us back to 2009.
The impact on Cement companies will be exaggerated.”
IT and pharma sectors which have been out of favor for past few
weeks. The primary reason for the underperformance is attributed to sharp
appreciation in INR vs. USD. The said CLSA report highlights that stock prices
of major IT companies are presently building in an exchange rate of RS58/USD.,
an 8-9% local currency volume growth and 50bps shrinkage in margins.
With this matrix, IT sector underperformance certainly looks
overdone and a corrective up move would be in order. The trend was visible in
yesterday’s trade. In my view it can accelerate further in next two months.
Post yesterday volatility, I am even more
confident about my “leveraged but no beta strategy” and feel no need for any
material change in InvesTrekk model portfolio
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