Managing Partner, Ampersand Investment Advisors

Rahul Singh

Managing Partner

Ampersand Investment Advisors

Thematic (Sector/Industry)

India Industrials / Thematic (Sector/Industry)

In our June newsletter, we had highlighted that uncertainty over Brexit vote and FOMC meet would induce stock market volatility, and the ensuing correction should be used as opportunity to increase exposure to Indian equities - and indeed it did. Post events (including RBI Governor Rajan's surprise exit announcement), stock markets globally and here in India have more than recouped losses (Nifty up 5.5% post Brexit).However, NIFTY currently trades at 20% premium to historic averages. In addition, market is again awash with ideas across market capitalisations, led by strong domestic flows. We therefore opine it is poised for a corrective or consolidation phase, with near term peak values potentially coinciding with the passage of the Goods and Services Tax (GST) bill. We also recap and review of our three preferred sectors – Specialty chemicals, Non-banking Financial Company (NBFCs) and Cement – which were in focus in the first three editions. Cement remains our preferred sector despite recent rally and premium valuations. We believe that while the widely expected strong Q1 performance may be priced in, a sustained medium term demand and earnings upcycle is not.Extending the logic for our positive stance on cement (rising public expenditure, rising E&amp;C order books, gradual return of pricing power), there are a few building material segments (Pipes, cables) which will stand to benefit too. In this newsletter, we focus on pipes (both steel and plastic), where the segment leaders have neutralised the commodity elements of their business by attaining scale.

In our June newsletter, we had highlighted that uncertainty over Brexit vote and FOMC meet would induce stock market volatility, and the ensuing correction should be used as opportunity to increase exposure to Indian equities - and indeed it did. Post events (including RBI Governor Rajan's surprise exit announcement), stock markets globally and here in India have more than recouped losses (Nifty up 5.5% post Brexit).However, NIFTY currently trades at 20% premium to historic averages. In addition, market is again awash with ideas across market capitalisations, led by strong domestic flows. We therefore opine it is poised for a corrective or consolidation phase, with near term peak values potentially coinciding with the passage of the Goods and Services Tax (GST) bill. We also recap and review of our three preferred sectors – Specialty chemicals, Non-banking Financial Company (NBFCs) and Cement – which were in focus in the first three editions. Cement remains our preferred sector despite recent rally and premium valuations. We believe that while the widely expected strong Q1 performance may be priced in, a sustained medium term demand and earnings upcycle is not.Extending the logic for our positive stance on cement (rising public expenditure, rising E&amp;C order books, gradual return of pricing power), there are a few building material segments (Pipes, cables) which will stand to benefit too. In this newsletter, we focus on pipes (both steel and plastic), where the segment leaders have neutralised the commodity elements of their business by attaining scale. 

Adani Ports & Special Economic Zone (ADSEZ IN)

Mahindra & Mahindra Fin Services Ltd. (MMFS IN)

Cholamandalam Investment and Finance (CIFC IN)

ICICI Prudential Life Insurance (IPRU IN)

Raining Cats and Dogs - July 16