Managing Partner, Ampersand Investment Advisors

Rahul Singh

Managing Partner

Ampersand Investment Advisors

Thematic (Sector/Industry)

India Consumer discretionary / Thematic (Sector/Industry)

In the ongoing earnings season, we have witnessed narrowing of the segments/stocks which are performing. While good results have failed to generate enthusiasm, weak numbers have been punished though somewhat salvaged by the positive management commentary regarding H2FY17. A lot therefore seems to be riding on the broader demand recovery in consumer spending as well as infrastructure spend in the near term. Expectations continue to remain high given the favorable macro tidings in H1 – good monsoons, lower rates and 7th pay commission implementation. On the balance, we maintain our view that markets will undergo a corrective or consolidation phase which could last a few months, and thereby offer better investment opportunities. As a result, while we continue to scout for new ideas (we focus on <a href="https://www.smartkarma.com/entities/3613" target="_blank" data-smartkarma-citation="entities:3613">Bajaj Auto Ltd (BJAUT IN)</a> in some detail), the new stock selection criteria should become more stringent rather than less. We recommend remaining fully invested in cement (Shree, Dalmia &amp; JK Lakshmi are our preferences) as visibility of demand improvement in H2 and pricing power (esp. in Northern and Western markets) is one of the highest. Among our other favored sectors, stay with Housing Finance companies (viz. LIC HF) and the large diversified specialty chemicals companies (viz. Aarti Industries).

In the ongoing earnings season, we have witnessed narrowing of the segments/stocks which are performing. While good results have failed to generate enthusiasm, weak numbers have been punished though somewhat salvaged by the positive management commentary regarding H2FY17. A lot therefore seems to be riding on the broader demand recovery in consumer spending as well as infrastructure spend in the near term. Expectations continue to remain high given the favorable macro tidings in H1 – good monsoons, lower rates and 7th pay commission implementation. On the balance, we maintain our view that markets will undergo a corrective or consolidation phase which could last a few months, and thereby offer better investment opportunities. As a result, while we continue to scout for new ideas (we focus on Bajaj Auto Ltd (BJAUT IN) in some detail), the new stock selection criteria should become more stringent rather than less. We recommend remaining fully invested in cement (Shree, Dalmia &amp; JK Lakshmi are our preferences) as visibility of demand improvement in H2 and pricing power (esp. in Northern and Western markets) is one of the highest. Among our other favored sectors, stay with Housing Finance companies (viz. LIC HF) and the large diversified specialty chemicals companies (viz. Aarti Industries).  

Tree House Education And Accessories (THEAL IN)

Johnson Controls-Hitachi Air Conditioning India (JCHAC IN)

Johnson Controls-Hitachi Air Conditioning India

Samvardhana Motherson International Ltd (MOTHERSO IN)

ZF Commercial Vehicle Control Systems India Limited (WIL IN)

ZF Commercial Vehicle Control Systems India Limited

Cholamandalam Financial Holdings (CHOLAHLD IN)

Waiting for Godot - Oct 16 Newsletter