The Atmanirbhar Bharat project of the Indian government has opened up significant commercial and financial prospects for investors in a variety of areas. One such vista that has opened up before investors is the push for defense equipment manufacture. Videsh K Totaare, CEO and MD of Archers Wealth Management, feels that keeping defense stocks for 15-20 years can yield multifold profits. He advises accumulating the IT area at lower valuations and pricing in an interview with Moneycontrol. “Because of the new free trade agreements between India and Australia and India and the United Kingdom, we are keeping a close eye on price corrections. It’s a huge potential for IT companies to grow “According to the seasoned financial expert.
According to STPI (Software Technology Park of India), software exports by the IT companies connected to it, stood at Rs 1.20 lakh crore ($ 16.29 billion) in the first quarter of FY22. I would recommend accumulating IT stocks at lower valuations and prices. We are keenly watching out for price corrections because of the new free bilateral trade agreement between India – Australia and India – Britain. It is an enormous opportunity for IT companies to expand. Technology-based exchange-traded funds (ETFs) are a great way to invest in the technology sector.
The information technology and business process management (IT-BPM) has emerged as one of the fastest-growing sectors in the Indian economy, positioning the country as one of the world’s most prominent software superpowers. It contributed 8 percent to India’s GDP in the fiscal year 2021 and has generated an estimated revenue of $ 194 billion, with an increase of 2.3 percent on-year.
India is the second largest cement producer in the world. The demand for cement is expected to reach 550-600 million tonnes per annum (MTPA) by 2025 because of the expanding demand from different sectors such as housing, commercial construction, and industrial construction. The new policy reforms, new production technology, higher capacity, better distribution channels and decontrol of pricing has only elevated the overall growth.
In fact, the prices of crude derivatives jacked up significantly – vinyl acetate monomer (VAM) skyrocketed to a 90 percent high, palm oil soared up by 55 percent, and aluminum and copper are jacked up by 40 percent in comparison to their FY21 average prices . Inflated vegetable oil and sugar prices have put tremendous pressure on food.
In India, one of the important factors that determine the well-being of its people is the per-capita consumption of cement. Right now, the entire cement sector is trading at a higher valuation, and I would recommend buying cement stocks on dips / price corrections. Yes, investors can bet on commodity consumer companies, but for a longer time horizon of 5-10 years. Commodity consumer companies have been consistently well-performing over the last two decades. However, commodity prices have massively inflated recently, forcing these companies to take a hit on margins by a long shot.
Despite increasing input prices, most FMCG companies have a strong foundation and have a favorable business environment to protect their margins. A deep and well-optimized distribution channel, increasing consumption, increasing population, widening geographies and higher volumes will continue to empower these companies with expansive pricing power.
Finance Minister Nirmala Sitharaman in Union Budget 2022-23 announced an increase in allocation for the Ministry of Defense (MoD) by 9.8 percent to Rs 5.25 trillion ($ 70.6 billion). Russia war against Ukraine has pumped up every country in the world to strengthen its defense system.
India must be on its toes more so now than ever, with escalating heat with rival countries like Pakistan and China. Also considering the issues of Kashmir and Arunachal Pradesh. India imports around 75-85 percent (by value) of defense equipment from countries like Russia, Japan, Israel, and the US. Moreover, India has been the largest importer of arms globally in recent years. Our government is now pushing for ‘Atmanirbhar (indigenous development)’ in defense equipment production. The Government of India has a futuristic vision to produce 70-80 percent of Defense equipment in India. It has set a target of $ 25.00 billion by 2025. This is a massive investment opportunity for everyone.
Yes, they are available at attractive valuations. New-age tech companies are disrupting the traditional business environment and defining new norms pertaining to how consumers and businesses interact with each other. And there is an enormous untapped and untouched market ready to be harnessed and reap profit from. India has a population of 1.4 billion. Nearly 750 million have a 4G connection, and only 120-150 million people buy and transact online. The short collaboration with these tech companies is only speeding up the digital penetration. If we are to forecast, the online buyer’s population will soar to 300-500 million by 2025-2027. This will upthrust the market valuation of many new-age tech companies – and to simply put it, this implies that they are currently available at attractive valuations.
I believe that the green infrastructure concept in India is at a nascent state. At least for the next few years, its acceptance and growth will depend largely on its inclusion in government policies. I personally support green infrastructure, but it is too early to comment on this sector and make any conclusion. Banking and Finance, NBFC, Pharma, Metal, IT, Defense, Consumer Goods, Chemical are top themes.
- According to Videsh K Totaare of Archers Wealth Management, holding defense stocks for 15 to 20 years can yield multiple gains.
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