India is a mid cap but the nation’s per capita income is that of a micro cap. If that goes up structurally, it will transform the economy.
Well-known investor and fund manager Porinju Veliyath is betting on that. He expects a boost in economic and earnings growth, saying that the naysayers will be surprised over the next few years.
Earnings have been depressed temporarily due to one-offs, Veliyath said on BloombergQuint’s special series Alpha Moguls. While the transformation period is painful, certain companies will be surprised with the kind of earnings growth they will deliver, he said. Mid- and small-cap industry leaders will be good bets, alongside managements that are working to improve their companies’ balance sheets, he said.
Macro tailwinds getting over doesn’t mean there is a cause for worry. The micro, the corporate earnings, will now start working. Managements will be surprised with the earnings growth, and the GDP growth numbers will surprise even the finance minister.Porinju Veliyath, Partner, Equity Intelligence India Ltd.
Those betting on the NSE Nifty index may clock 5-10 percent compounded annual growth rate, stock pickers may make 25-30 percent and smart stock pickers may make 40-50 percent in the next four to five years, Porinju said.
There are opportunities in the infrastructure sector if investors were to look closely. “You have to take a bit of chance. There is nothing 100 percent foolproof in equity investing,” he said.
But added in the same breath that sectors don’t matter as much as company strategies and management capabilities do - citing that his portfolio management service made some of its biggest gains this year in two pharma stocks - Biocon Ltd. and Jubilant Life Sciences Ltd., an otherwise beaten down sector.
Business scalability, with a relevant model and fewer chances of being disrupted by technology, is the single biggest opportunity for equity investors, he said.
“Whatever you produce, goods or services, will get sold, because of the magic number of 130 crore (Indians). Those who believe in this, will benefit, and others will keep on regretting.”
Watch the conversation here: