4 sectors offer good valuations despite tariff issues; eyes on specialty chemicals: Jaiprakash Toshniwal
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, Fund Manager,, says the market has absorbed past negativity, anticipating a positive impact from a potential mini-deal or a temporary setback from delays. Domestically, strong macroeconomic policies support growth, while globally, NBFCs, manufacturing, IT, and pharma sectors offer reasonable valuations amidst tariff issues.Further, Niti Aayog projects India's market size to potentially reach $1 trillion, driven by investments in specialty chemicals. With policy support, companies are poised to capitalize on ready markets in Europe and the US. This shift towards specialty chemicals could double India's market size in the next five years, offering significant growth opportunities.About the US tariff as such, you put out the right word – ambiguous nature. We were earlier thinking about the things to come on 9th July, but now it is most likely to be postponed to August. It is difficult to comment on what can come. But having said that, whatever discussions we have with our investee company and everyone is waiting to see how things pan out, it will be difficult to clearly comment how the impact is going to be.In terms of the deal, we already know that whatever happened in the past, the market has absorbed all the negativity around it. The deal, either comes in a mini form or gets delayed to some extent. If it comes in a mini form, it would be positive, and the market will have positive buoyancy because it gives more clarity as such. A postponement may have some negative impact for some time because the opportunity or clarity gets delayed for some time and that would be a negative.Along with the US tariff issues, we have various other factors – both working domestically and globally. Domestically, we are on a very strong footing because both the macroeconomic factors – fiscal policy and monetary policy – are in sync, working, pushing for growth at least in the domestic market. Export is hardly 12% and so we should not worry much about the export side.On the domestic side, we are very positive on NBFCs as a trade because we believe that the sector is very good in getting tailwind benefit from the rate cut as well as the other regulatory scenarios. On the other side, we are very positive on manufacturing, pharma, and even the manufacturing subsectors like chemicals or auto components and other related manufacturing sectors, There, we are very much positive as a house.While one or two sectors can directly get impacted by that ambiguity. there would be N number of sectors which also indirectly get impacted. Having said that, at this point of time one, given the valuation comfort which we have and given the growth rate scenario, NBFCs, manufacturing, IT, and pharma will be the four sectors which come out with reasonable valuations from the tariff issues or the global issues.These sectors have already seen some kind of valuation multiple derating. These are very good sectors to find out newer opportunities to pick up for investors. Having said that, recently, Niti Aayog has released reports about chemical sectors. A lot many things were discussed about the policy initiatives needed from the government side.The Niti Aayog reports talk about the market size of India moving to $1 trillion from a $200-250 billion market. If any policy support comes, companies will invest in specialty chemicals and others. India as a country is very positive on the specialty chemical side and we have seen numerous chemical companies talking about and having a ready market in Europe, and the US.The commodity market is dominated by China. In that context, if more investments come into the speciality chemical side, it will be very positive for companies in this sector and also for India as we would be doubling of the market size in the next five years.FMCG has bucked the trend today and the commentary which we have got for Q1 is fairly reasonable and strong. But on a historical basis, this commentary has come after three to four quarters of a lull period. We need to see the sustainability of this commentary or the flow going ahead as such. Even in the commentary side, we have seen HPC doing better but the other food category or the juice category companies are not doing that well. So, we need to see the sustainability as well as the continuity of this trend going ahead.As a house, we do not distinguish between the largecaps and midcaps purely because of the market cap definitions. We go by earning growth expectations of the sectors as well as the stocks and we try to find out stocks which can deliver reasonably 1.5x to 1.6x more than the nominal GDP growth in terms of earnings and that too on a sustainable basis. That is how we go as such.In terms of growth, in the Nifty indices or the larger broader indices, the earning growth over the next two years could be in the lower double digit numbers, but there are certain sectors, stocks, as well as segments, in manufacturing or where the earning growth can be much higher than the 15% kind of number and that is where we are focusing on as a portfolio construction.Jaiprakash Toshniwal: Yes, that is true. Most of these five schemes which we got were from the merger of the IDBI MF which we got merged in somewhere around 2023 and most of these schemes we want to reposition. We have built the portfolios and now we want to go ahead and give it to our investors. To state our strategies in this fund, some of the names are the smallcap multi-asset allocation fund in which we recently had a NFO. Some of the names mentioning value and other schemes are there in the focused portfolio.
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