ETMarkets Smart Talk: 5 things powering rally in consumer discretionary space: Deepak Jasani

In an interview with ETMarkets, Jasani, said: “Higher participation by local investors is also resulting in the resilience of the markets”.

Edited excerpts are below:

India has turned out to be the bright spot in the global arena. What is driving the outperformance? How do you see markets in the medium term?

India has handled its macro situation quite credibly over the last few quarters in an era when the global disruption due to inflation, geopolitical conflicts, supply disruption, and interest rate rises have impacted economies across the globe.

This is evident from its currency, inflation rate, and interest rates which have been resilient compared to other competing economies or even some developed economies.

The Indian economy is more inward-looking and depends more on the local large populace. Indian corporates have benefitted over the last few years due to reforms and cost-cutting/reducing leverages.

This has resulted in India being a continuous recipient of foreign flows over time (barring a few months of outflows).

Indian secondary markets have outperformed when compared to other markets, and despite the fact that the valuations are at the top end of historical premium to other economies, we do not see a major sell-off in the coming few months, though some correction may be overdue.

Higher participation by local investors is also resulting in the resilience of the markets.

How to spot potential wealth creators of the future? What filters do you use?

Changes in the consumption patterns or baskets of products and services is one way to spot macro opportunities.

At the micro level, management that is responsive/adaptive to emerging opportunities and at the same time is prudent in capital allocation are the ones to track.

Market share gains, timely CAPEX and tightening working capital metrics are other parameters to spot probable wealth creators.

What is driving the sugar sector? A lot of sugar stocks have hit fresh 52-week highs.

Sugar sector which was treated as a cyclical or politically impacted sector has now transformed into a structural story due to the ethanol push by the Govt. Institutional holding in these stocks continues to be on the low side.

Moves in the sugar sector are driven by the changes in sugar prices and/or demand locally, changes in the procurement of ethanol and/or prices thereof, etc.

Also, we keep witnessing sector rotation which may result in the sector coming into or going out of favour from time to time. The sector now gets a valuation that is higher than in the past due to the above changes.

There is plenty of action in the consumer discretionary space. What is driving the rally in this sector and are there any stocks which are looking attractive?

Here are a few reasons why there is a lot of interest in the sector –

a) Pent-up demand after two Covid-impacted years is driving demand across the board in discretionary space.

b) Rising disposable amount in the urban areas (due to earlier savings and pay raises) and rural areas (due to MSP increases,

c)Govt subsidies and higher crop output) is helping raise the demand in this sector.

d) The availability of credit has become easier over time to buy durables.

e) The penetration of a lot of durables in India is low and there is scope for growth in most categories from hereon.

Moody’s retains India’s rating and sees the minimum impact of inflation. Some analysts call this a Golden decade for India. What are your views?

While the relative better standing of India is for all to see, it may be a bit early to call this as the Golden decade of India. India still has to carry out a lot of tougher reforms for which we need political continuity.

We also have a rising trade deficit which can create issues for the reserves and currency if not corrected in time. The fiscal situation (Centre+States) is still precarious.

Having said that the Indian Govt. is on the right path, and we hope that this expectation turns out to be true due to some tough measures coupled with the providential turn of events.

What is your take on the small & midcap space? We are seeing some bit of outperformance – do you think the trend will continue and as the economy is seeing strength many midcaps have the potential to become large-caps?

In every cycle, there will be a lot of midcap companies that will turn large-caps. India has a wide variety of listed entities in different cap buckets and sectors.

Over years, promoters have realised the lure of market cap and have amended their past ways to become more transparent and fairer to fellow shareholders.

Growth in the economy and formalisation/shift from unorganised to organised will lead to better times for listed corporates – both large-caps and mid/small caps.

All of these means that the space will remain in the limelight, although there will always be some black sheep.

This space will perform in turns vis-a-vis the large caps with some times of outperformance and some of underperformance depending on the risk appetite in the markets and flows from institutions vis-à-vis the local non institutional flows.

Number of demat accounts cross 10 cr mark – a milestone moment. What would you advise to someone who is less than 25 years of age and wants to invest in stock markets? Can he dream of becoming a crorepati and what would be required?

India’s demat account tally topped the 100 million-mark for the first time in August 2022. Over 2.2 million new accounts — most in three months — were opened in August post a dip seen in June and July due to soft market conditions.

But a recovery in the secondary markets and resumption of IPOs have resulted in higher account openings in August.

While we may see volatility in the number of new account openings from month to month, equity as an asset class is getting more and more popular among a large strata of the population across the country to build wealth, ensuring that the number of demat accounts are headed higher year after year.

Young investors could start investing via SIP in mutual funds and once they develop the skill of stock picking and develop money management skills, go for direct wealth building via stocks – a lump sum of SIP in stocks.

For accumulating a large sum over a period of time, apart from the above, an investor would need to contribute a rising amount every month/quarter and the markets will have to be conducive and not go flat or remain down for extended time periods.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts’ are their own. These do not represent the views of Economic Times)