India's macroeconomic story might no longer be as perfect as what it was 12 months ago, but the microeconomic fundamentals are growing stronger every day. In such an environment, investors should focus on stocks that'll benefit from the potential housing market recovery, the government's rural growth impetus, and a capital expenditure recovery.
That's the view coming from investment banking company CLSA's India strategist Mahesh Nandulkar.
“While the macro story for India is looking adverse on various fronts, the micro and corporate earnings is holding up better,” he told BloombergQuint in an interview, fresh off a meeting with 35 Europe-based investors.
Global fund managers are not too perturbed right now as India's growth outlook and corporate earnings outlook lean on the housing sector recovery, he said.
Housing affordability is at the best levels in the past two decades. Property prices have remained more or less flat for the last 3-5 years, while incomes have grown at 8-10 percent and mortgage rates have come down. Affordability is really attractive and we just need a trigger for the housing market to start recovering.Mahesh Nandulkar, India Strategist, CLSA
The stage for this recovery is set with the implementation of the Real Estate Regulation Act, which has increased buyer confidence, he said.
Apart from the housing sector, India's corporate earnings are showing increasing signs of improvement. The Nifty earnings per share is expected to grow at 15-20 percent over next few years, especially financial year 2018-19.
Stocks that will play to these themes include consumption and infrastructure stocks. The top seven picks include Housing Development Finance Corporation Ltd., Godrej Properties Ltd., Sobha Ltd., Mahindra & Mahindra Ltd., Larsen & Toubro Ltd., ITC Ltd., and Crompton Greaves Consumer Electricals Ltd.
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