We recently released our strategy note that focuses on seven disruptive trends with sustainable ideas emerging from these but masked by the wild swings of global and local tides:
Agriculture incomes to rise: Doubling of farmer income
Auto: Emission norms, Change in stages of the cycle
Banking: New players, PSU consolidation, Digitization, Clean-up
Engineering (Railways, Defense) and Logistics: Major investments and indigenization
GST, Demographic macro, etc.
Power and equipment: Emission norms, Renewables
Telecom and Media: Data flood in telecom with disruption in Media
We also reviewed our Model Portfolio to incorporate the near-term view with overall macro backdrop (hardening crude, probable Fed hike, Brexit, stressed domestic B/S and upside risks to inflation). However, Micro seems to have troughed out. Q4 results show signs of earnings recovery. Earnings growth of BSE-500 companies (exFinancials and Resources) stood at ~9% YoY – a six quarter high! Sectors barring banks, infrastructure and retail have notched notable earnings growth. Moreover, there is some discernible improvement in select lead and urban consumption indicators (auto, fuels freight rates and cargo etc), and with hopes of a normal monsoon, the focus will remain on urban consumption. We believe recovery will continue to lag in rural consumption and private capex.
Our key portfolio stance – Rationale is provided alongside each stock wherever changes have been made in the portfolio
OW sectors: Auto, Cement, Engineering, Infra, Power, Telecom (partly due to ABNL classified under this sector)