How will we analyse the commentary coming from or even ? Some of these consumer companies no doubt are best in class but are also pricey in valuations and raw material scare is around the corner?
The biggest concern right now that we see at least in this quarter is the commodity prices and the input prices have gone up for most of the sectors. That will keep the margins in pressure for most of the companies. For FMCG companies like HUL and Nestle, the problem is that there has been significant challenges in terms of income especially in the semi-rural and rural areas. That part is something that we need to figure out going forward. In the short term, these price rises are going to be a concern not only for FMCG but for everyone.
Do you think the market is factoring in the speed at which vaccinations are rising?
First of all it is very commendable, especially in India in terms of the numbers and the complexities. Not all the places can be easily reached, plus this year, we have had inclement weather. We have had rains in major parts of the country and that is making things a little more difficult for vaccination to happen but collectively, both the government and the private sector has done a fantastic job in getting their employees vaccinated. It would be not only good for us, but good for the economy and business as well.
What is your take on metals? Even if we are in a super cycle which JSPL MD told us on the channel yesterday and it may last many years, where do you see the best risk reward during this phase of consolidation and correction in metal overall?
I have a slightly different perspective in the sense that steel or all metals especially infrastructure related metals are likely to do well in my opinion in the future. In the last 20 years, we have seen this being fueled by China but increasingly a lot more is going to happen in the US and Western Europe to drive demand. So that is one part.
The other part is when one looks at metals like aluminum, copper, industrial metals. those probably have a better future in the next two-three years but these are cyclicals and it is very difficult to call tops and bottoms. We will have to dig deep into how things are likely to pan out and then take individual calls based on which one is probably the lowest cost producer that has access to raw material.
What is catching your attention while reading the markets?
Currently, I am mostly focussed on what is happening in and around China. It is going to be a very important determinant in the future both for Indian markets as well as globally. But domestically, looking at what is happening in the real estate front and auto, because big shifts are happening after many years. Real estate is picking up nearly after a decade. Autos have been not doing so well for quite a few years and that is one.
Also in autos, we are seeing a distinct shift from ICE to EVs both in terms of vehicles as well as the infrastructure. These are the interesting areas at least in these two sectors that we can look at and look at their ancillaries in both these sectors.
Any category in direct consumers — B2C — which you like?
Shoppers Stop. We just had Durga Pujas in Kolkata and that is the biggest festival that we have in this part of the country and it was amazing to see the queues in not only Shoppers Stop but all the big retail chains. So revenge shopping was visible in and around Calcutta at least. There is a distinct segment of society which had been saving money for the last one and a half years. Now they are going out on vacations, buying clothes, gadgets, eating out etc. So consumer facing food and fashion retail look quite good as post Covid play.