Business Spending Is India's Emerging Stock Theme: Credit Suisse
(Bloomberg) -- India equity investors should draw a line under richly-valued consumer stocks and move into companies involved in heavy-engineering projects, according to Credit Suisse Group AG.
The brokerage sees a pickup in capital spending and cheap valuations as the justification to own stocks of industrial companies contracted to implement projects, and their lenders.
"We're going through this situation where consumption growth is slowing and investments are picking up," said Neelkanth Mishra, an India equities strategist at Credit Suisse. While a 7 percent pace of economic growth trails India's potential expansion prospects, it compounds to about 40 percent over five years and “you need capex to cater to that demand," he said.
"Consumption is now going to disappoint and weigh on valuations," Mishra said, after favoring consumer stocks since 2011. A gauge of consumer discretionary stocks trades at an estimated price-to-earnings ratio of 25, compared with about 21 for the benchmark S&P BSE Sensex index.
The "massive" impact of a pay increase that added about 4.5 trillion rupees ($64 billion) to civil servant salaries and pensions will fade away, while capital expenditure is showing signs of picking up, he added.
Mishra is overweight on industrials and likes banks that will fund investments in Asia's third-largest economy. His top buy suggestions include Larsen & Toubro Ltd., Bharat Heavy Electrical Ltd., State Bank of India and ICICI Bank Ltd., according to a Credit Suisse report dated Dec. 17.
To contact the reporter on this story: Abhishek Vishnoi in Singapore at avishnoi4@bloomberg.net
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Margo Towie, Ravil Shirodkar
©2019 Bloomberg L.P.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
-
Joining The Dots | Dark Skies, Steady Diya: Why Hope Holds This Diwali
With war, a weak rupee and foreign outflows weighing on sentiment, policymakers at the NDTV World Summit and market veterans at NDTV Profit Ignite: Diwali Edition offered the same advice: stay invested and filter out the noise.
