Market watch | Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services on:
Spaces such as retail, jewelry, shoes and drinks are all doing well thanks to strong demand. It is expected that with the third wave well under control and well below what was feared, and now that the economy is back on track with the holiday season starting today, these segments would be doing well.
If you look to the other side as well, which is the banking space, we’ve already started getting some of the pre-quarterly updates out there, some of the banks and NBFCs, there too the initial reports have been quite enough. good. So there we love part of the capital spending theme and also like I said the unlock trade or leisure travel and the retail, beverage theme that plays out on
If you look at the commodities space, it’s something similar to what we saw during the 2005-2008 bull run. So this time the commodity prices are determined by the supply constraints and you have a good stable demand. So many of these stocks, be it CGSB, NTPC, Power Grid, Coal India, are driven by commodity prices rising globally and profiting from it. So achievements are improving for some of these players and as the economy is now running at full speed with the third wave falling below expectations and the holiday season starting. So the demand for some of these power companies is at a peak and on top of that you have the commodities and price realization benefits that these companies will enjoy.
We are positive on the whole topic of domestic investment and cement is a space that we clearly see benefiting from economic growth. Additionally, we believe the investment cycle is finally improving with many sectors seeing good demand and talking about increasing their capacity.
In the cement space of course, in the large caps, we like Ultra Tech which is our preferred choice and in the mid caps, and we like JK Cement.
Birla Corporation is once again a unique name, from the mid to small size space that we love. The company envisions a huge capacity expansion which is at the heart of our reason why we love Birla Corp. They plan to expand their capacities up to 30 mtpa by 2027. That’s a huge expansion they’re looking for. New capacities will help the company to increase its volumes. Already they are running at 90% over capacity utilization. There are cost pressures that we might see in the current quarter, but delivery is once again stable and we are seeing price increases in some pockets across the country. So this should ease to some extent, but as a long term investment it can be a good game over the next few years to play on the growth of the economy, the cycle of investment in India.