What’s your take on the whole fertilizer and specialty chemicals space? Do you think Indian chemical and fertilizer companies could increase their market share?
Temporarily safe because if you take a manufacturing base like Germany out of the picture, a lot of sectors will benefit and we’ve seen some German-origin companies, even in the manufacturing sectors, increase capital spending in India because they might want to offset some of the damage. what is happening in Europe.
I think that fertilizers will benefit and chemicals even more because of what is happening with China. But with that said, this may be a one-year or a year-and-a-half phenomenon. One should play it opportunistically and not as something permanent because we have seen what a country like China can do when it comes back into action in the steel sector, when it temporarily stopped manufacturing and then came back with a bang.
Also read: When is the right time to pick up IT stocks?
I think that will be especially the case with fertilizers, but the chemical companies should continue to retain that advantage in the long run. So specialty chemicals, even some basic chemicals, are going to see a lot more demand coming from the export side.
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The question is how much of this demand is affected by recessionary trends in the West. but I still feel that even a small percentage jump in India’s global consumption will be a 30-35% jump for Indian capacity because we are so small in the overall scale of things.
Are you a PVR shareholder?
Well I used to be. I just freaked out because of the kind of debt they have, but to be honest, the movie exhibition business is a big game in entertainment, not so much in the movies themselves. But there will be times when there will be a lean period and there will be a rising period. They’re going to go through a lean period right now, but all the controversy over movies is really good for the showing business because more people come and watch no matter what we say.
So in the end, when prices drop to a point where they are more reasonable, I will be a buyer in at least one of the two names. I don’t even know if the merge is happening because I think they’re not quite done yet, but it’s a good way to play. We are the 1% who watch a lot of OTT, but there is a vast majority in India who want to go to cinemas to be entertained, to take their family for a ride. Popcorn is sometimes more engaging than the movie itself, and that’s okay.
What is your opinion regarding what is happening in the whole cement package? Is the street getting unduly excited about price increases and lower input costs? Would it be better to wait and see how it develops or do you think there are signs that the worst is over?
Let me make an ironic comment: since Adanis has entered this sector, everything is going to go up. But I think there is a lot of difference between the valuations that we are seeing today and of course the valuations have been corrected but they are still quite high.
For something that grows at 10-11%, we are paying 27-30-40 times the earnings and it is the rainy season. So there will be a lot of demand in the December season, for Diwali and so on. I think expectation plus price hikes are driving cement stocks higher, but overall I feel like it’s a very temporary move.
These stocks are overvalued. If you look at a five-year perspective, I’m not a big fan of these prices. The only action I could consider in all of this would still be
but given that everyone is adding capacity and building more and more in what is otherwise a market that is seeing more players come in, I would argue that this is not the best time to buy in a five-year cycle. I’m avoiding the sector for now.
What are your best bets? What are the sectors that seem interesting at the moment?
We remain quite positive on the manufacturing sectors. There are many companies here. A lot of multinational companies, from Siemens to a bunch of other players, from power equipment to a company called Power India, which we’ve been positive about for a long time.
This is where there is potentially a huge roadmap underway. We will change our energy sources in the next 10 years. It will go towards different sources of origin, from nuclear to some others, including hydrogen, and many more power and transmission equipment will come. This part of the sector I am still positive.
I think at this point, it pays to be positive about anything. The market seems to simply go higher and like everything else that moves, the risk of the next western recession will show us which players will really stick around and which ones are just temporary hype. So, we will wait for that as well to build more positions. We are only focusing on broad markets at the moment.
(Disclaimer: The recommendations, suggestions, points of view and opinions given by the experts are their own. These do not represent the views of the Economic Times)