The first theme is big becoming bigger and strong becoming stronger. We are in an era where consolidation is happening across industries. For instance, a decade ago, while there were a dozen plus telecom operators, now there are four. We are seeing consolidation across industries, such as banks, steel, cement, NBFC and aviation, resulting in big companies becoming bigger and strong companies becoming stronger. Survival of the fittest is the law of nature. It’s equally applicable in the corporate world.
Second trend is revival of investment cycle. Over the last few years, private investment was on the back foot. Now, with all time high levels of cash and visibility on economic revival, many companies are looking to invest. In cement, steel and sugar industry, capex cycle has started. Capital goods companies will do well in the years to come as their operating leverage comes into play with higher volumes.
Third theme is exports. Global supply chain managers are pursuing 'China+1' policy to diversify their sourcing base. With the production-linked incentive (PLI) scheme, India is attracting serious players to become part of global supply chain management. Multi decade growth, which we saw in IT and generic pharma sectors, is likely to repeat across many sectors supported by PLI schemes like electricals, electronics, textiles, bulk drugs, mobile handsets, chemicals, automobiles and auto components, etc.
Fourth trend is real estate and home improvement. Stars are aligned for the real estate sector. Housing has become more affordable thanks to stagnation in house prices over the last few years. Interest rates on housing loan are very attractive. With RERA, consumer and developer interests are aligned. Real estate and home improvement sector will benefit from both primary and secondary market demand.
Fifth trend is digitisation. Today, every company is saying that they are part of the digital ecosystem. However, we need to identify companies which are doing better than peers in adopting this digital ecosystem. Companies which expand market, improve productivity or reduce cost through digitisation will be winners.
Sixth and final trend is financialisation. Indians are moving from real estate and gold to financial assets. Companies engaged in providing financial solutions from sectors like banking, fintech, insurance, mutual funds and NBFC will create huge value in the coming years. Digitalisation in financialisation will disrupt the existing order.
