I’m an India optimist. In times like ours when there’s gloom and doom all around, it’s bold to make that call. For me, it’s not bold, but a way of life. Some people willl forever want us to live like a third rate country while I have faith that we will be a $10 trillion economy in 20 years. I’m also placing my money where my mouth is, and if the bets go right, the rewards will be outlandish.
First, for the naysayers. There is a growing tribe in our country which is professionally pessimistic. Besides, they also hate most things Indians and are perennially trying to bring out the worst in our nation to somehow pin us down. They report that the people are suffering due to Covid-19 not because that they care, but because it tarnishes the India story. Oh, Indians are dying and the government is helpless. I am sure if 1962 were to happen today, they won’t pitch in for help, but be happy that India was losing the war. Just because their political opinions aren’t aligned with the party in power currently, they go at lengths to pin the blame for everything on government while carefully avoiding the fact that every single developed country was on its knee before Covid-19, not until too long ago. I recall a TV serial Khichdi when Babuji would say “meine to pehle hi kaha tha ye ladki Raju ke liye theek nahi hai” for everything wrong in this world. Replace Modi with ladki and Raju with India, and you know what I’m saying.
Coming back to our discussion. India is currently closing on to a gdp of $3 trillion. Over the next ten years, even at 5%, we will be close to $5 trillion gdp. However, the incremental growth will not be evenly distributed, like it’s the case with all economies. Some businesses which are well run and can reap the rewards will be benefitted beyond belief. On the other hand, those struggling to survive will either be forced ro shut down or merge with the bigger ones. HUL currently sells close to $5 billion annually in India. However, Unilever global sales are close to $150billion thereabouts. The combined AUM of Indian MF industry is close to $400 billion whereas Fidelity or Vanguard individually handle more than $500 billion each. Diageo has market cap of $105billion while United Spirits is
hardly $5b. The profits for some of the companies are going to be mind boggling,
Indian household savings are slowly moving towards the financial sector. Non lending financial companies, such as brokers, stock exchanges, asset management companies, etc. will see their revenues grow 10,20,50x over the next 10-15 years and profits growing even 50x, as they require little to no capital for expansion. Since there is no likely dilution of equity, the share prices will grow 100x and maybe more. This is one sector you must put some money to work.
Second, as I mentioned earlier, the consumption companies are going to grow like anything. This FMCG story is still in its infancy in India. As our per capita income rises beyond $2500, we will see discretionary consumption shooting trough the roof. Well run leaders will be able to capture even larger market share and they can deliver steady returns, even at these lofty valuations.
India still has a large rural market where people are slowly moving up the economic ladder. In these markets, buying the first two wheeler,or the first car is still a big play. So atleast for the next few years, market leaders in these sectors will only grow bigger.
Electric vehicle is a long shot on the future. Now that Tesla is down 40% and most fancied EV stocks in the US like battery companies are also less frenzied about, this market is slowly maturing. Nobody should have a doubt that the biggest car makers of the world, BMW, Merc, JLr won’t be able to make and sell electric cars just because they aren’t first off the bloc. JLR is already selling half it’s total sales in electric vehicle and this is only going to go up from here.
I’ll give you a number. In 2010-11, Tesla sold close to 5000 ev in US, and was valued at close to $10billion. Last year, it sold close to 500,000 sales and is now valued at over $500billion. Tata Motors sold close to 5000 EVs last year and is currently close to $15billion. If it manages to sell close to 100,000 electric cars a year in let’s say 5 years, which is still going to be a small part of India car market, and if it remains the leading player with over 50% market share, just imagine the kind of valuation it can have. Why I belive that it will be the largest player is common sensical- Maruti has no electric car, even in pipeline while Hundai Kona and MG ZS are too costly at close to 25lakh. Mahindra sells e-Varito but it’s anyways a fringe player in sedans. Nexon EV has first mover advantage and if Tata can bring Altroz EV close to Rs 10lakh, sales can grow exponentially.
However, it is important to know what not to do, what is that you should avoid. In a market when junk has begun to go up everyday, don’t punt with your money on debt laden stocks. In a low interest rate environment, highly indebted companies rise up the most. However, when the tide turns, the downfall is equally ferocious and without an easy exit. When the music stops, it’s always a stampede on the way out. A man who doesn’t owe anyone anything, can not go broke. Give up on the temptation to make quick returns in a bull market and preserve capital for the rainy days. Bet big on India, it has always worked, it always will
Life is all about Compounding! 