New market leaders will emerge who will adapt to new challenges created by this unprecedented impact on global economy. Historically, every bull run had new leaders to lead the pack. Post COVID-19, we feel, Artificial Intelligence(AI), Pharmaceuticals, Speciality chemicals & Telecom might lead the broader indices, Amit Jain, Co-founder & CEO at Ashika Wealth Advisors said in an interview to Moneycontrol's Sunil Shankar Matkar.
edited excerpt:
Q: The government announced more than Rs 20 lakh crore package to revive the economy. Have you spotted any new theme/s opportunity especially after this package, which can definitely create wealth and why?
Recently the stimulus package of Rs 20 lakh crore gave an emotional uplift to the stock market, however, we believe the Indian stock market will follow the global trend in the medium term. New market leaders will emerge who will adapt to new challenges created by this unprecedented impact on Global Economy. Historically, every bull run had new leaders to lead the pack. For example, heavyweight asset models weighed the most in Nifty till 2008. Post-2008, asset light models, such as banking & IT, took the charge to build up the Economy.
Post COVID-19, we feel, Artificial Intelligence(AI), Pharmaceuticals, Speciality chemicals & Telecom might lead the broader indices.
Artificial Intelligence (AI) is going to be the way forward & any company which has major exposure to Artificial intelligence(AI) in IT space will be doing very well in the coming decade.
As of now in telecom sector, we have only 2 major players compared to 16 players in 2008, both telecom providers will do well in the coming few years as they have created a scenario of duopoly in the market. Also, we have the cheapest call & data rate compared to rest of the World, hence we believe with this duopoly market equation, ARPU will catch up with Global peers.
India being a Pharmaceutical hub for the world might continue to perform better & further build on its strength. On post-COVID-19 era each individual shall allocate more money for healthcare needs.
To take advantage of new geopolitical power equation post-COVID 19 era, India will rely more on the indigenous supply chain of speciality chemicals. This sector shall be doing well in medium to long term.
Q: US Senate has passed the bill to delist Chinese companies from US stock exchanges. Do you think the war between US and China will intensify further and will it be really dangerous for the world which has been facing the COVID-19 crisis?
In my last interview with you in April, we feared for some sort of war (Trade war, Currency war, etc.) may take place between US & China. Now it looks US has initiated the proceedings for the same. This war between USA & China may intensify further & may take ugly shape going forward, which may change World Power Equation post-COVID-19 era. If US retaliate with trade war, then China may retaliate by way of currency war as it holds approximately 17 percent of US Treasury debt in $ which may trigger panic selling on the US Dollar.
Q: What is your advice to the first time investor who came in the market with the thought that crisis time is the real opportunity to grab to create wealth in the long term? What should be their focus and what should they avoid?
The COVID-19 hit has generated great opportunities for everyone to invest in quality business models at attractive valuations, This opportunity is being presented to investors after 12 long years and should not be missed. Investors should focus on investing in right Economy, right Sector, right Business models & rightly compliant Companies.
Investors should consult SEBI Registered Investment Advisors (RIA) before starting any investments in the markets. Investors should start investing in a systematic manner & Should diversify the portfolio across asset class to generate maximum Risk-adjusted returns on their overall portfolio.
Q: Do you think 2020 is the really bad year for the world including India or the real opportune time for investors to reshuffle or make a fresh portfolio in the current crisis?
2020 has turned out to be a bad year till date for investors, however, it looks really a good opportunity for investors to create a new portfolio by keeping in mind about 'World post-COVID-19'. Every recession brings out a new leader in the market & Investors should try to figure out these Sectors & invest in their underlying Business Models. For Example, From 1950 to 1980, We were an Agri based economy which led to growth of Agricultural Industries. From 1980 till early 2000's We were an Industrial Economy that helped heavy asset model industry to grow in the market & from year 2000 to 2020 we became a service-based economy & it was led by Banking and IT Industry. In the era of " Deglobalisation " & slogan of 'Atma Nirbhar Bharat', we may become manufacturing hub in medium-term if we play our cards right.
Post-COVID 19 era lot of Western World Companies shall be looking for alternatives of China. For this alternative, India has the best chance to emerge as a leader due to favourable demographics where 70 percent population is below 35 years of age that too with 1/4th of China's labour rate. With various 'Make in India' initiatives, the economy might turn out to be a manufacturing base hub in medium term. If our Government do long due reforms in Land, Labour, Legal & Tax reforms ASAP then we have much higher chances to emerge as manufacturing superpower by 2030. Our Government has Capability of taking these decisions as it is a Majority Government, However, these steps have to be immediate.
Q: Do you think these fiscal measures will create more NPA pressure for banks?
The total advances of Indian banks are close to Rs 100 lakh crore out of which Rs 15-18 lakh crore are under asset-heavy business models which might face challenge. These loans are given to old Economy business models which may face a demand recession. From these asset-heavy business models, a lot of business models may become unviable post-COVID-19 era.
With extended moratorium, halt in business activities, and an increase in exposure of group-level book, The banks might face the additional pressure of NPA's in their books. We believe as of now it is crisis of confidence rather than crisis of liquidity. We have enough liquidity in Economy, just to support this with fact, last week Banks have parked 8 lakh crores with RBI under reverse repo window at 3.75 percent rate of interest. Today with further cut in rates, banks may be willing to take some calculated risk of lending sooner than expected. However, risk of NPA's are much higher going forward.
Q: Real estate sector barring few stocks has been ignored for a long time now. Do you think it will revive in 2021 especially after measures taken by the government recently and in the past?
Major economies like USA & Europe may be shifting their industries & Manufacturing hubs from China to India by year 2025. This shift may revive India's Infra & real estate sector in the coming few years. Infrastructure & Real estate has been one of the key sectors of development for India from 2000 to 2010. Industrial & residential real estate in emerging markets like Hyderabad, Noida, Gurgaon, Banglore, Pune may see an uplift in demand Post COVID-19. Seeing on the measure taken out by corporates, atleast 20 percent jobs of IT sector may shift to work from home mechanism which will benefit this sector in medium-term.
If timely measures are taken by the government for Land & Labour reforms, then Infrastructure & Real Estate sector can become one of the major contributors of India's growth story.
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