Right now government is spending money like anything. So all PSU and private companies doing business with government, directly or indirectly will do well.
Private companies, banks are not doing well, there is liquidity crunch and there is high interest rates. Very difficult to survive.
Unless the next cycle of interest rates decrease start, we will not see much movements in other sectors.
But as @1957 Om bhai suggested, defense, railway, infra will do. Government is actually spending. We just have to see this government should be remain in power for the next 5 years and we will be fine.
(invested from lower level, not a buy recommendation. Please do your own analysis)
Yes, it is the Govt capex push which is driving infra , Railway , renewable , defence sectors.
Pvt capex is yet to take place in a big way, though it has started gradually.
So to encourage PVT capex spends, the Govt has implemented a lot of PLI schemes by awarding incentives to pvt sector to kick start Pvt capex in a big way.
On consumption led demand side , perhaps the govt may try to give enough money in hands of people to spend. Tax concessions , interest rate reduction , interest rate subsidy for affordable housing etc may help further.
You post is not well-researched and very emotional. It’s important to be factual and rather than be political and biased. I list down fallacies below.
1) capex as a % of GDP is 0.5 in 2000s?? Please do some basic research. It was never this low and can never be. In fact, we had the highest investment(Public+Private) as a % of GDP in 2000’s infra boom. Now, its primarily the government and private capex is still anemic as a % of GDP. To say that the govt didn’t spend in 2000 is factually wrong. It was spent, but misallocation, corruption led to NPA crisis of last decade.
2) cyclicality of a business and stock market rotation are not the same. FMCG as a sector never had a degrowth in decades. I would say similar with IT (barring 2008,09), pharma.Quality and certainity of earnings is important and hence why certain stocks and sectors will always command higher multiples. A rational investor, would never pay similar multiples for certainity vs cyclicality in earnings, revenue
3) The best performing stocks in 20003-2007 were infact infra,power,steel, real estate.Please do your homework
4) Current govt’s major capex push only started after covid. 2023-2024 was an exception as we had a 30% growth in infra and defense allocation. It will more likely taper to a sustainable low double digit as its estimated in 20224-25 as fiscal deficit as a % GDP is on a gliding path to a normalized level. It’s important to factor this into growth and earnings in infra stocks. In case of defense, import substitution also helped domestic firms
@1957 , Om Bhai, I am holding some defense and some railway stocks. I have seen all your posts, and you seem to be enthusiastic as well as strong proponent of current PSU rally for some valid reasons and my views resonate with you. So I have a query…Not asking any buy sell advice…but tomorrow if Govt change or their policy towards railway and defense changes, then what is your crietria to sell defense and railway? Have you kept some selling criteria, when you would.like to get rid of these stocks? Any stop losses or any marked performance related to revenue or profit? Assuming , you are not marrying with these stocks ,like Pulak Prasad of Nalanda Capital? Kindly throw some light.
With my limited knowledge I can share few points here.
Stocks are over valued. Few are in bubble state for sure, because there is no insights on their current happening (we only know last quarterly result and few news here and there) like BDL, krishna, bharat forge, etc.
I find HAL, Mazdock still under valued. (not a buy recommendation)
Defense cycles are quite long and it take lots of time for government to decide on something, frame a policy, allocate budget and start working. There are also lots of parameters from international arms companies, other countries, politics and so on.
Right now it look like government is very much clear on their agenda, they want to establish India as a defense hub. Second, there is huge potential in terms of business, because of the India’s current foreign policy and strategic position we are in to. This business will definitely flourish.
But current government has to continue for next few year, which may add risk to this scenario.
We may see news related to this in the upcoming budget in this month. So this may further push this sector.
Let’s see how this goes. Depending on the risk appetite of the investor, one can take the decision. Also I would advise everyone to do their due deligence on each company before investing, at least to basic calculations of valuation, PE, current orders, management, policy, etc.
Not sure if this is the best forum or the best way to ask this question:
A close friend of mine is the CEO/founder of a company that does precision manufacturing for the defence industry especially in recoil systems. He is exploring the idea of bringing on a strategic investor. If you are that investor or if you know someone who would be interested please DM me, and I will connect you/them.
Thanks
@adminph2 please delete this post if you think it’s inappropriate.
Came across Lokesh Machines, They manufactured the first Indigenous sub machine gun in a private firm. Almost all guns that are domestically produced and are done by the Ordinance factory board. Over time to improve costs ( and drive other incentives ) a lot of the gun components have been sourced from MSMEs . There had been some work toward making the OFB a PSU, I am not sure how much it has progressed but a lot of critical things are already shifting to private players.
Indian army and Police are in severe shortage of fire arms and the above video instills confidence that Govt is also slowly shifting to Indegeneous production of Arms. The main reason that gov’t is paranoid is if the manufacturing capability and knowledge shifts to private citizens how would they control.
We have around 20 Lakhs Army personal and another 20 L of Police personal ( got from google) in India. Avg cost of a fire submachine gun is around 1 lakh. INSAS should be around 3-5 Lakhs.
Off course this will not change overnight but if government starts to also reduce defence procurement cost, this might be an area which is a low hanging fruit.
War in Ukraine is not going anywhere. Even if Ukraine is forced to swallow the bitter pill for now, the Russian threat is looming over Europe. Europe is worried that if Russia is not stopped now, they will all be in peril. According to an American General, when Putin was asked what was the worst moment in the history, he did not mention the great depression or the Second World War, but the dissolution of the Soviet Union.
So, the arms race is going to restart in right earnest.
Will the Indian arms manufacturers be there?Ukraine war: Can Europe deter Russia without US military? Ukraine war: Can Europe provide a credible answer on ceasefire and defence?
Shekhar Gupta has given very useful input on the European rearmament. Europe is going to spend 800 billion euros. https://youtu.be/QE9xiDaGVz4?feature=shared
Lokesh Machines was put under sanctions by the US for supplying CNC machines to Russia. These sanctions were not justified IMO because CNC machines are used in all industries which have anything to do with metal parts. This did affect their business - M&M severs business ties with Lokesh Machines over U.S. sanctions.
Astra Microwave already has a AESA radar(GaS not GaN though) with lesser TR modules, but it has already completed trials and will be fitted into 41st Tejas onwards. The Hawk-I radar by Data Patterns is to compete for the Virupaksha radar that will be used for Super Sukhois(upgrade program). This radar hasn’t undergone any trials yet and also Data Patterns isn’t the only company to provide this radar, it could face some stiff competition from four other vendors - Astra Microwave, ICOMM Tele, HAL, L&T. .
