Specialty Chemicals Or PSU Defence: What Invasset's Anirudh Garg Is Betting On

While specialty chemical companies are poised for a bearish outlook because of anticipated price corrections; state-owned defence companies are on the way to becoming the darlings of the market, according to Anirudh Garg of Invasset LLP.

Specialty chemical space has got high multiples, as compared with the FMCG sector, Garg, partner and fund manager at Invasset, said on NDTV Profit's The Portfolio Manager show.

With all the capacity additions happening since 2013, the run-up in 2020 made sure that the valuations were compared to FMCG companies, Garg said. "They picked up something from the very bottom and made it exuberant. Everybody was interested in chemical companies, which are now about to take a rest."

Corrections were due in specialty companies, and in a couple of years, price corrections in stock and product will happen as well, according to Garg.

According to him, the fittest companies will survive and the run will resume again. "For the next couple of years, we are not very bullish on specialty chemical to chemical side, until some extraordinary innovation happens," he said.

Garg manages assets worth Rs 156.13 crore, with a one-year return of 115.25%. The fund has about 4.45% of sectoral allocation in the specialty chemical space.

A very big story is unfolding for India in the defence sector, Garg said. With very hostile neighbouring countries and high import dependence, decisions had to be made to ensure indigenous production, he said.

The government is planning for the next 15 years and defence has to be in-house, according to Garg. "What has happened in defence and railways is a very significant shift."

PSU defence companies will become the darlings of the stock market very soon, he said. They started as small caps and now are transitioning from mid to small caps, Garg said.

The companies in the defence space have a robust business and are poised for growth, according to him. Hindustan Aeronautics Ltd. is the strongest bet in the sector, he said.

Interest rate-sensitive themes, like real estate and auto companies, will begin to perform well soon, with the global inflation coming down, Garg said.

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