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.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain has applied for certification under SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com