Forget damp Diwali and auto slump, consumption will still click: Thukral


Diwali may have turned out to be a major disappointment for consumer firms and India’s Motown may be witnessing some slowdown over the past two months, but Dalal Street has not lost confidence on the consumption story.

India’s domestic consumption is expected to see solid expansion in the years ahead on the back of improving earnings and spending power across the population, says Arun Thukral, Managing Director and Chief Executive Officer, Axis Securities.

He says fast moving consumer goods (FMCG), consumer durables and auto should to do well over the next one year.

Thukral says the rupee depreciation and improving US economy would bode well for the information technology (IT) sector while improving regulatory environment along with rupee weakness should aid pharma players. The rupee has depreciated 12 per cent in the past one year till date.

Thukral is also positive on textiles, chemicals and corporate banks for the new Samvat year, the Hindu accounting calendar year that begins on Diwali.

A liquidity squeeze in global markets due main to the ongoing quantitative tightening by central banks, disruption due to the disorderly exit of Britain from the EU (and in case Italy too plans to quit the EU) and a possible fractured mandate in the general elections of 2019 will be three major risks for domestic equities over the next one year, says he.

Thukral said volatility in crude oil prices can surprise in the coming year, given the tumultuous situation in West Asia and India’s dependence on crude imports. Brent crude soared over 27 per cent since last Diwali, but prices have started easing since last week.

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He said in the current market scenario, equity will be the best asset class for long-term investors with average risk-taking ability. “It is the only asset class that has beaten inflation with a wide margin in the long term to create wealth,” he said.

He said while there is no standard formula for asset allocation, if the basic necessities like home and minimum gold and cash in the bank are in place, one should look at equity as an investment class.

“Even if the above-mentioned needs are not in place, one should keep a good share of his investments in equities. Equity returns are lumpy in nature, which often makes it difficult to time the market. But investing over the long term can help beat volatility and create wealth using the power of compounding. Equity investment can be made on a regular basis through SIPs or in lumpsum as and when the investor has a surplus,” said Thukral.

For stock-specific investors, Thukral recommended Trident, L&T Infotech and Steel Strip wheels (SSWL) from the midcap space.

Thukral said should Italy decides to exit EU, it would come as a shocker for markets, as would any major spike in crude prices and escalation of liquidity crisis.

Elections are going to be another key factor. “If the poll results go against the general perception of the investing community, the market will be surprised and react accordingly, although this would be a knee-jerk reaction that can be viewed as buying opportunity by long-term investors,” he said.





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