A worker takes a rest in a basket at a stall in a vegetable market in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Take Shelter In These Three Stock Baskets As Commodities Surge, Ambit Says

Investors should take shelter in stocks of companies with high pricing power as commodity prices continue to shoot up, according to Ambit Capital’s Managing Director and Head-Institutional Equities Pramod Gubbi. Reason: These companies are better equipped to protect their margins, he said.

Ambit’s three stock baskets that should remain unscathed when commodity prices surge are:

  • Consumer facing companies with strong rural markets.
  • Private sector financial companies.
  • Information technology companies.

“You need to hide in companies with pricing power which have the power to withstand inflation,” Gubbi told BloombergQuint in an interview.

Brent oil has risen 16.7 percent in the last one month amid rising geopolitical tensions and a fallout between U.S. and Iran regarding their nuclear deal. Metal prices have also risen more than 5 percent in the same period.

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Here are the other key highlights from the conversation:

  • Globally, we are headed towards the end of the expansion cycle.
  • India macro picture has deteriorated.
  • Inflation will start looking up the way commodity prices are looking.
  • Money will go back to the U.S., making it difficult for emerging market asset classes.
  • Don’t know about a crash but things are not looking good.
  • Commodity prices have impacted company margins.
  • Would want to look at companies with strong pricing power ability.
  • Rural consumption, private sector banks and I.T. theme should be watched closely.
  • Like auto financiers from the NBFC space.