With global commodity prices surging over the past year, Emkay Global's Krishna Kumar Karwa sees an opportunity for investing in oil companies.
“As far as oil is concerned, there's a definite case for further hardening,” the managing director at the research firm told BloombergQuint's Niraj Shah during an interview. "In a global economy which is expected to do well in the next few years, oil consumption is expected to go up."
In India, opportunities in oil stocks remain limited, but lucrative, he said. “If you look at the number one public-sector oil explorer, the opportunity is there for investors to look to investing in that company. The valuations seem very attractive.”
How To Play The Metals Cycle
Karwa said that the surge in metal stocks will continue for a few more years before coming to a halt.
The metals, ferrous and non-ferrous metals have had a "dream run" in last 12 months, he said. "The debt reduction we have seen as far as the domestic steel majors and non-ferrous metal majors are concerned that's something very heart warming."
Still, he is unsure whether this debt reduction will lead to higher valuations. "The odds are in your favour. Will the market give improved valuations? I don't know. But I am very confident that as the cycle ends few years down the line they will settle at higher valuations than they traditionally have been."
For domestic investors who have missed the opportunity of investing in metals, Karwa suggests looking elsewhere now.
If you have missed the bus then might as well figure out how you're going to deploy that money into other segments of the market rather than trying to invest. Because it is a question mark.Krishna Kumar Karwa, MD, Emkay Global
Tailwinds
Further, Karwa sees a lot of potential for investors in building material and manufacturing spaces. Especially, if looking from a two-three-year perspective.
A lot of consolidation has happened in that space, he said. “Unorganised players haven't been able to catch up in last one year. And again, there are tailwinds in terms of demand itself because real estate seems to be doing well, the need for larger houses, etc.”
Other Opportunities
Indian manufacturing is another space where Karwa sees pockets in besides oil and building materials. “In manufacturing, you will see opportunities in speciality chemicals, agro chemicals and in pharmaceutical wherever there are contract manufacturing opportunities. We have seen some of the companies doing very well.”
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