The Indian equity market outperformed the developed world markets in 2022 despite facing headwinds on growth, volatile commodity prices and rising inflationary pressures. We believe that India is on the verge of a revival of a capital expenditure (capex) cycle and cyclical recovery in the foreseeable future. We all know that the government is keen to make India a global manufacturing hub and is making deliberate efforts by lowering tax rates and offering a Production Linked Incentives (PLI) scheme to stimulate manufacturing activity within the nation to enable India to be a part of the global supply chain. In the forthcoming period, these efforts may lead to operating leverage benefits to companies.
We are positive about India’s growth story going ahead due to favourable risk reward which is available to Indian businesses on a global scale. Considering the premium valuations currently commanded by our markets, we believe earnings delivery will be the key lever of value accretion to investors in the medium to long term. On a sectorial basis, over the medium to long term we currently find risk-reward to be favourable in financials, consumer discretionary, consumer staples, telecommunication and industrials. We believe that these sectors are more insulated from the current global threats because they depend on variables that are local and controllable in nature.
This story is from the January 30, 2023 edition of Dalal Street Investment Journal.
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This story is from the January 30, 2023 edition of Dalal Street Investment Journal.
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