Edelweiss AMC's Trideep Bhattacharya Lists Four Themes Key To India's Growth Story
If the country gets a stable government in the 2024 general election, the bottom-up story of India looks robust, he said.
Indian markets are likely to face recessionary conditions this year rather than a rebound, given the probability of a downward revision of FY24 earning estimates and soaring benchmark indices, according to Edelweiss Asset Management Co.'s Trideep Bhattacharya.
Interest rates are likely to peak and inflation might seem to finally wither, Bhattacharya, chief investment officer at Edelweiss AMC, told BQ Prime.
Therefore, the current rally in the market is more of a "volatile" period, where the market braces for a fall in earnings estimates and discounts recessionary conditions, he said.
Key Themes
However, if the country gets a stable government in the 2024 general election, the bottom-up story of India from a two- to three-year perspective looks robust, Bhattacharya said.
The four themes that would be favourable to the Indian growth story and for which Bhattacharya sees a bottom-up movement are:
Capex cycle and financials: Lending financials that fund the capex cycle will do well even as private sector capex drives the markets higher.
Indianisation of defence: Defence will transform India's manufacturing landscape in the coming decade, Bhattacharya said.
China plus one morphing into Europe plus one: Many cash-rich global companies are looking at India as a potential outsourcing opportunity after Chinese gates closed due to the pandemic.
Real estate: Unlike the situation of this theme in other developing economies, India's real estate looks stable from a long-term view. A real estate cycle lasts five to seven years, he said. "Housing unsold inventory is at a 12-year bottom at present, which gives direction to a sustainable, positive uptrend," he said.
Buying Opportunity:
Companies that have the most element of surprise coming through would turn out to be the winners.Trideep Bhattacharya, Chief Investment Officer, Edelweiss AMC
Static valuations, such as PE and Ebitda multiples, are functions of how well the earnings estimates have transpired, Bhattacharya said.
When sectoral tailwinds exist and macro takes a bottom-up trajectory, then sometimes, especially in the case of cyclical companies such as capital goods, the earnings could seem "undercooked", he said.
This is where he sees the opportunity to make the most money.
