Jaiprakash Toshniwal sees value in 3 segments; goes contra on IT & specialized capital goods
ADVERTISEMENT Since you are a fund manager, let us begin by looking at value in the markets right now. What is your strategy on the value front? How does the marketplace seem in terms of value- based sectors?
Jaiprakash Toshniwal: In terms of value in the market, currently there are certain pockets of the sectors where the earning growth is much higher than the nominal GDP growth and that is where the valuations are reasonable in terms of growth. In some of these sectors like pharma and chemical, we are very positive in terms of valuation and we are also seeing growth, especially in specialty chemicals. So, these are the three sectors where I see value emerging from a medium to long-term perspective.
What is your perspective on tariff concerns? August 7 is the new deadline. In that context, how should one bet in the market?
Jaiprakash Toshniwal: Yes, on the tariff side, August 7 is a deadline and what we have seen in terms of this 25% tariff is already there now but a large part of the tariff, almost 40% is basically India export to the US through specialised electronics as well as pharmaceuticals where no tariff has been announced yet.
So, to that extent, the concern simmers down. Having said that, some of the exposures which are very much focused on US exports are basically gems and jewellery and textiles. Those are the most impacted sectors and at this point of time, when we see the numbers compared to the other south Asian countries, the tariff in India is very high. So, to that extent, there would be an impact on the market opportunity for Indian companies in these two sectors.
If someone is willing to park funds and build a portfolio, what should be the strategy at this point in time? Which sectors will be insulated from the news events which will come later and at the same time, what is your view on the specialty chemical space and how are you eyeing the earning season because the first half of the earning season was weak, but the second half is still giving us a few hopes?
Jaiprakash Toshniwal: It is very hard to say where to allocate and where not to allocate now because February and April onwards the world order has been very different in terms of war and different terms of tariffs. At this point of time it is okay to say that a diversified portfolio is a good approach for investors in India and historically also, we have seen that our earnings growth is in line with the nominal GDP growth rate and investors have made a reasonable amount of wealth from investing in a diversified portfolio approach. Having said that, going ahead, we are seeing that on the earning side, the nominal GDP deflator is lower because of lower inflation. The nominal GDP is settling at 9% level and in Q1 also, whatever numbers we have seen on the headline indices, is between 6% and 8% depending on which indices you take. So, to sum it up, earning growth is reasonable across sectors if you want to focus on the medium-term, one should probably avoid auto and auto ancillaries but there is a certain value emerging in pharma, specialty chemicals and capital market companies. All these segments look good. The agrochemical sector looks good because that sector is now coming out of the cyclical bottom of the last two years.
ADVERTISEMENT All these sectors look interesting at this point of time and as a portfolio manager of an investment house, we are all positive on these few sectors which I mentioned. Specialty chemicals is a very specialised segment and there the companies have to be evaluated on a company specific and chemical side specific manner. I want to highlight one data point that for most specialty chemical companies, the balance sheet became so strong in the last four-five years, that they can invest almost Rs 1,000 crore capex on a cumulative basis on a specific name. This Rs 1,000 crore is a very reasonable number to expand capacity and to cater to the market globally and not only the US market. So far we are talking about long-term strategies. But if someone wants to make the most out of this volatility, is there any contrarian bet that you are focusing on or is there any specific concentration in any theme or sector or type of companies?
Jaiprakash Toshniwal: Two sectors to stand out if one has to take contra call. We as a house are also taking in some of the funds which are predominantly in the IT sector as well as the capital goods or a specialised capital goods segment. IT sector valuations are very reasonable. We are worried about the earnings growth but the Q1 numbers show that most of these companies made deal wins recently. As the macro turnout happens in the US, at least on the US side, the BFSI segment is doing good as well as the high-tech and healthcare segments.
ADVERTISEMENT The other manufacturing segment is not that great. Once that picks up and there is a macro tailwind story in the US, the IT sector should do well and in IT, the sub-segment ER&D segment also has a reasonable green shoot because of the EU and US deal because most of our IT R&D companies are exposed to European auto OEMs and as European relationship improves in terms of the tariff side, we see auto OEMs started spending in the Europe market and that is a positive for ER&D space. In the specialised capital goods segment, we believe India in terms of power sector is a very long-term story and there are a lot of good, niche players available in the power equipment industry and that is where we are positive on.
(You can now subscribe to our ETMarkets WhatsApp channel)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hans India
14 minutes ago
- Hans India
India-Oman free trade pact to open new economic gateway with Gulf
India and Oman are poised to sign a Comprehensive Economic Partnership Agreement (CEPA) covering goods, services, investments, and labour mobility with a formal announcement expected this month. The India-Oman CEPA is more than a tariff deal as it will open up a strategic economic bridge between South Asia and the Gulf. It offers India tariff-free access to a receptive market, secures energy and labour interests, attracts Gulf investment, and deepens geopolitical engagement in a region critical to global trade and security, according to an article in India Narrative. The free trade agreement (FTA) will reduce or remove customs duties on a wide range of products traded between India and Oman. The 5 per cent customs duty on Indian exports such as iron and steel, electronics, textiles, plastics, automotive components, and machinery will be reduced to zero which will make these commodities more competitive. These sectors align closely with Make in India goals, offering scale expansion opportunities and job creation at home. For small and medium enterprises (SMEs), tariff-free access can open lucrative Gulf markets without the pricing disadvantage they previously faced. The CEPA is also expected to encourage Omani and broader Gulf capital inflows into Indian strategic infrastructure projects - ports, industrial corridors, and logistics hubs. India, in turn, can participate in Omani ventures such as the Duqm Port, enhancing maritime connectivity. A sensitive point in talks was Oman's 'Omanisation' policy, which mandates private companies to hire a minimum quota of Omani nationals. India pushed for explicit carve-outs to safeguard its large expatriate workforce - over 480,000 Indians - ensuring they are not disproportionately affected by future policy shifts. Oman is a reliable supplier of crude oil, LNG, and fertilisers. Tariff reductions on these imports will lower input costs for Indian refiners, power producers, and farmers. This adds stability to India's energy security strategy, reducing exposure to price shocks and supply disruptions. Oman's location near the Strait of Hormuz, through which 20 per cent of global oil shipments transit, is of immense global strategic importance. Stronger trade and investment ties deepen trust and open doors for defence cooperation, maritime security initiatives, and coordinated infrastructure projects. India's CEPA with Oman would strengthen the country's position as a preferred partner in the Gulf, where China is expanding its economic influence.
&w=3840&q=100)
Business Standard
14 minutes ago
- Business Standard
'Indian refiners can do without Russian oil, but with trade-offs'
Indian refiners, the world's biggest user of Russian oil, can operate without supplies from Moscow from a technical standpoint, but the shift would involve major economic and strategic trade-offs, analysts said. Russian crude supports high distillate yields - the share of crude converted into fuels like petrol, diesel, and jet fuel through distillation. Replacing Russian crude, which accounts for up to 38 per cent of India's refinery intake, with alternatives will shift yields, resulting in lower middle distillates (diesel and jet fuel) and higher residue outputs, according to global real-time data and analytics provider Kpler. US President Donald Trump last week announced an additional 25 per cent tariff on US imports from India -- raising the overall duty to 50 per cent -- as a penalty for the country's continued imports of Russian oil. Since the steep tariffs are likely to hit the USD 27 billion of non-exempt exports that India does to the US, there has been chatter around stopping or curtailing oil imports from Russia. "Indian refiners can operate without Russian crude from a technical standpoint, but the shift would involve major economic and strategic trade-offs," Kpler said in a report, 'US Tariffs on Indian Imports: Implications for Energy Markets & Trade Flows'. India turned to purchasing Russian oil sold at a discount after Western countries imposed sanctions on Moscow and shunned its supplies over its invasion of Ukraine in February 2022. Consequently, from a mere 1.7 per cent share in total oil imports in 2019-20 (FY20), Russia's share increased to 35.1 per cent in FY25, and it is now the biggest oil supplier to India. In terms of volume, India imported 88 million tonnes from Russia in FY25, out of the total shipment of 245 million tonnes. In July, India received 1.6 million barrels per day of crude from Russia, ahead of China's nearly 1 million bpd and Turkey's around 5,00,000 bpd. Kpler said deep discounts and strong compatibility with India's refining systems led to a surge in imports of Russian Ural crude oil. "Russian crude supports high distillate yields (diesel and jet fuel) and is ideally suited to India's advanced refining infrastructure. It has enabled both state-owned and private refiners to operate above nameplate capacity while maintaining strong margins. "A reversal of this will result in a mild yield shift (lower middle distillate yields, higher residue yields) and probably a small reduction in primary throughput rates, as margins will no longer command a sizeable premium against regional benchmarks, considering existing discounts on Russian oil," Kpler said. The Indian government has issued diplomatic but firm responses to the US tariffs, emphasising the importance of maintaining energy security. "Should Russian oil become inaccessible, India could face an additional USD 3-5 billion in annual import costs (based on a USD 5 per barrel premium on 1.8 million bpd). If global prices rise further (a scenario in which Russian crude exports are being curtailed, in the absence of sufficient buying interest from India), the financial burden could increase significantly," the report said. This may prompt the government to cap retail fuel prices, which could strain fiscal balances. A spike in the import bill could even lead to a reduction in overall crude purchases. India's limited storage capacity further constrains its ability to manage such disruptions. While Russian flows to India continue under a 'business-as-usual' stance, the escalating US rhetoric has reopened conversations about supply diversification, with some Indian refiners reportedly booking increased volumes of Middle Eastern crude. According to Kpler, replacing 1.8 million barrels per day (bpd) of Russian crude would require a multi-regional approach. The Middle East remains the most viable option operationally, grades such as WTI Midland from the US could contribute 2,00,000-4,00,000 bpd. These (US crude) are lighter and yield less diesel, a disadvantage for India's distillate-heavy demand. Long-haul freight and cost considerations will also restrict scalability, it said. West Africa and Latin America (LatAm) crudes offer moderate potential. "A balanced replacement strategy may involve 60-70 per cent of substitute volumes from the Middle East, with US and African/LatAm crudes serving as tactical fillers. Nevertheless, none match Russian barrels in cost, quality, or reliability (some of the Russia-to-India barrels have already been contracted under term agreements)," it noted. According to Kpler, Indian refiners can technically adapt to the loss of Russian barrels, but with significant economic consequences. "Replacing 1.7-2.0 million bpd of discounted, medium-sour crude would erode refining margins and misalign product yields. Lighter substitutes like WTI or West African grades produce more gasoline and naphtha, reducing diesel output and hurting both domestic and export economics." Even Middle Eastern grades, while closer in quality, are priced tightly to official selling prices (OSP), leaving limited arbitrage opportunities. "In addition to higher feedstock costs, Indian refiners would face elevated freight and credit charges," it said. "The transition is commercially painful, even if technically feasible. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
&w=3840&q=100)
Business Standard
14 minutes ago
- Business Standard
Shrimp exporters seek govt aid as Trump tariffs threaten $2 bn of exports
The Seafood Export Association of India has approached the ministries of commerce and finance to seek emergency financial support as USD 2 billion worth of shrimp exports to the US face severe disruptions due to increased tariffs imposed by President Donald Trump, a statement said on Sunday. The association has requested a 30 per cent increase in working capital through soft loans, with margins covered by interest subvention and a 240-day moratorium for pre- and post-packaging operations. "Close to USD 2 billion worth of shrimp exports face severe disruptions," Seafood Export Association of India (SEAI) Secretary General K N Raghavan told PTI, adding that Trump last week further increased reciprocal tariffs from 25 per cent to up to 50 per cent. India exported USD 2.8 billion worth of shrimps to the US in 2024 and has shipped USD 500 million worth so far this year. The new duties make Indian seafood significantly less competitive compared to China, Vietnam and Thailand, which face US tariffs of only 20-30 per cent, Raghavan said. He warned that these Asian competitors would likely capture US market share by lowering prices while Indian exporters cannot reroute existing shipments as it would attract additional 40 per cent penalties for contract violations. "The only way is to explore five new markets, but it would take time. For instance, the free trade deal with the UK, although signed, will take time for implementation," Raghavan said. The tariff escalation threatens one of India's largest agricultural export sectors, which employs millions across coastal states and contributes significantly to the country's foreign exchange earnings.
