Date – 21st Dec 2015
At JainMatrix Investments, we expect the following to happen, in the rest of 2015 and 2016:
- US Fed to start raising interest rates. The US Fed has to get off the floor in terms of interest rates, and try to restore normalcy in its outstanding debts, asset prices and liquidity. Painful but necessary.
- Crude Oil prices to stay depressed. Crude oil production is not slowing down. OPEC is happy to boost volumes. Low prices boost savings and wealth in India. On the other hand, growth in the economies of Europe, Japan and China are flat or worse. The surprise may be renewables, where new power generation capacities may match fossil fuels in terms of (unsubsidized) power costs, crossing an economic tipping point.
- Sectors such as paint, tyres, FMCG, airlines and lubricants are gaining from lower costs.
- Indian Oil and Gas – Exploration and Production firms will need to get used to lower profits.
- GST to see the light of day but in a diluted, trial fashion. After a decade of parry and thrust, the law makers may have to bow to the inevitable. GST should roll out in 2016. However it will have to be introduced in a calibrated fashion so that States are able to handle the losses & gains across sectors.
- We feel that FMCG, pharma, power sector, logistics and auto & auto ancillaries would be the sector gainers from GST implementation.
- Structural reforms to continue in India, capex cycle to revive. The fall in costs across crude, fuels, metals and agro commodities will continue to boost the economy for 2-3 years. Flush with both funds and purpose, the Govt. of India will spend its way out of slow growth. Subsidies and inefficient expenditures may reduce, while investments in infrastructure, urban development, transportation and government reform look likely.
- In the private sector, our positive sectors are infrastructure, capital goods, consumption, pharma, exports, IT, textiles, autos and auto ancillary.
- Several profitable PSUs will also be operationally freed up, and even undergo disinvestment.
- The dynamic firms in BFSI will gain a lot but others will weaken and see some M&A.
- India to continue as an emerging markets leader. With some financial stability controlled by a visionary RBI, India could top growth rates among large and emerging economies for many years. The current economic cycle uptick will also attract global funds.
- In the telecom sector the Reliance Jio launch will see incumbents face off with this new player.
- The sectors to avoid are Oil & Gas (E&P), metals and telecom. The real estate industry may grow even as prices remain depressed.
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