X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
What's a good buy and what's a goodbye... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 31, 2007

    What's a good buy and what's a goodbye...

    As we bid adieu to 2007, we look back and evaluate which sectors bore fruits for investors in 2007 and those that failed to generate wealth. While a single calendar year is too short a duration to make judgment about a sector's potential, and certainly not a rational benchmark for future performances, the same can only give a perspective on the upsides here from.

    Looking back at 2007

    While the capital goods and banking stocks brought smiles to many faces, pharma, FMCG and auto stocks barely managed to conserve the wealth, while the software stocks actually destroyed some of it this year. The returns were, however, not commensurate with the growth potential and valuations in all cases, but was partial to certain sectors in terms of factoring in long-term opportunities. Sectors like capital goods raked in the benefit of overflowing order books thanks to a capex boom, while banks were buoyed by the retail as well as corporate demand for loans. Nonetheless, there were other sectors whose fundamentals despite remaining intact failed to garner investor interest due to certain short-term concerns. We would like to remind investors that there are a couple of sectors with equally sound long term potential that they may be blissfully ignoring in the meanwhile.

    Are you missing out on these?
    Pharma

    Medicines for chronic diseases and life saving drugs will continue to remain a necessity for generations to come irrespective of geographic diversity. What will make the difference will be the pharma companies' ability to make them more accessible and affordable. India's per capita health expenditure at US$ 20 is very low as compared to China (US$ 33), Brazil (US$ 309) and Malaysia (US$ 81) (Source: World Bank). However, with growing health awareness coupled with the growth of the health insurance schemes, the per capita health expenditure is bound to rise. As per IMS, the India pharma market is expected to grow at a CAGR of 9.5% for the period 2004-2009 driven by chronic (cardiovascular, diabetes etc.) and niche specialty (oncology etc.) segments. Further, the product patent regime is expected to result in the introduction of patented drugs into the country and possibly, higher growth rates for the MNC pharma companies in the long term.

    Textiles
    Clothes are no more limited to being a 'necessary commodity' but are lifestyle indicators thanks to the advent of branded garments and increased affordability of the same. India's textile industry has been on a growth trajectory since the quotas were phased out. With policy initiatives in place, capacity expansions and India's rising market share, there are rapid export growth opportunities in the sector. Changing lifestyles and accelerating preferences of the urban population for branded apparels are also some of the growth drivers. Identification of the textile sector as a priority one for 'job creation' by the government certainly augurs well for the long-term. This is particularly a positive for players in the garmenting side, the same being very labour intensive. Similarly, the subsidisation of debt cost by way of TUF (technology upgradation fund) has given impetus to the capex plans of these companies. Given the latent opportunities present in the global scenario, these measures are likely to help textile companies become more competent and attract sizeable orders from the US and European markets. More importantly, it would enable textile companies to increase capacities and gain scale, which is a critical element while bidding for global orders.

    Software
    Global technology spending seems to be on an up-trend, with the offshore component seeing impressive traction, driven by increasing acceptance of the 'global delivery model'. As such, Indian IT companies that provide a broad range of services and have proven capabilities in executing large and complex projects are likely to emerge winners over the long term. Notwithstanding the fact that the rupee's appreciation against the dollar at an accelerated pace over the past 12 months, has been a bone of content for the sector, the speed of acceleration and the business models of the software companies might not just remain the same forever. Even if an investor does not wish to take a call on the rupee dollar rate, the fact that the IT companies are slowly adapting themselves to the changed industry dynamics and currency scenario must not be ignored.

    Auto
    Lower age of first time car users, shorter replacement cycles or above all, lower car penetration will continue to grow the automobile industry at a robust rate in the long term. Rising income levels, introduction of new models and easy availability of finance have acted as the major catalysts in driving the recent growth in the domestic passenger car industry. As per SIAM (Society of Indian Automobile Manufacturers) estimates, the Indian auto industry has the potential to grow its turnover at an impressive CAGR of 16% between 2006 and 2016 and reach US$ 145 bn from the current US$ 34 bn levels.

    While it is imperative that valuations do not take a back seat while you take your pick from these sectors, identifying the latent opportunity in these sectors - that the crowd is shying away from - will only relieve you of the herd mentality. We leave you with these thoughts to introspect and evaluate your portfolio so as make it a more balanced one. We hope that a well-researched and long term investing discipline in 2008 brings more cheers to you. Happy investing!

     

     

    Equitymaster requests your view! Post a comment on "What's a good buy and what's a goodbye...". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

    Aug 17, 2017

    Mr Trump is in the White House and the gods are in their heavens; what's not to like?

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 17, 2017 (Close)

    MARKET STATS