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Dalal & Broacha’s Milind Karmarkar Expects This Sector To Do Well In Long Term

While there may be some issues in short term, consumption space will continue to do well over 3-10 years, says Milind Karmarkar.

A vendor sits at a fruit stall at Crawford Market in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)
A vendor sits at a fruit stall at Crawford Market in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)

As Indian equities continue to reel under the impact of the coronavirus pandemic, investment adviser Milind Karmarkar suggested looking at the consumption space with a long-term perspective.

“This sector, including retail, FMCG and insurance, has significant benefit of rising per capita income and economic growth,” the director and senior fund manager of Dalal & Broacha Stock Broking told BloombergQuint in an interview.

While there might be some issues in the short term, he said the consumption space would continue to do well over 3-10 years. “It’s all about the belief that India will do well... If you believe this will happen in 9-10 months down the line, then consumption is the space to be in.”

Indian equities have tracked the worst global selloff since the 2008 crisis after the novel virus outbreak. While the market recovered in April after the Reserve Bank of India and government announced stimulus, it has again declined in May so far. Prime Minister Narendra Modi announced the world’s biggest lockdown to tackle spreading of infection, allowing nothing but sale of essential goods in the first phase. The nation partially eased restrictions in areas that are less affected from second half of April, but a complete recovery will take some time.

Some key highlights from the conversation:

  • In 2001-02, GDP growth dropped to 3.8 percent but after that consistently for five years growth was at 7.5 percent. At least in history there is an example that this has happened, so one should try and look at history. One should stay invested.
  • For the first quarter of financial year ending March 2021, most of the sales for consumption sector are expected to be zero. It will return in third quarter and growth for consumer discretionary is expected to return in the fourth quarter.
  • For FMCG and insurance, the fall in valuation is quick but the recovery will also be reasonably faster than other sectors.
  • For retail and finance, the downfall has been sharp but recovery will be steady/slower over next nine to 12 months.
  • India is extremely under-penetrated in insurance. Times like these help you understand the importance of insurance, so people will go back and buy. In a sector where huge growth potential is available, these times give you an opportunity to invest at reasonable price.
  • If one is invested in financials, continue staying invested. Asset quality will be stretched for some more time, so bounce back will be slower. Over the next six months, divide money into 10 pockets and invest 10 percent each, so that one gets the benefit in case markets go up or down.

Watch the full video here: