Where to park money and where to create wealth now? Jyotivardhan Jaipuria answers

Time of India

6 days ago

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, Founder & MD,, says despite uncertainty surrounding US tariffs and the stalled India-US trade deal, a focus on domestic opportunities is advised. Anticipated improvements in domestic demand, fueled by liquidity, interest rate cuts, and tax breaks, make the banking sector attractive due to its valuations. Cement stocks are also promising, with consolidation expected to boost pricing power and earnings over the next 18 months.As you said, Trump's tariffs are the uncertain thing for the market just now and what is probably more critical is like one is the tariffs itself and the other is our tariff versus relatively other countries we compete with. So, at some point, if all the tariffs are going to be 20%, it is not great for US demand, it is not great for inflation in the US, and probably it leads to a slowdown in the economy.But on a very competitive basis, we do not lose out with some other country. At the moment, the way it is seeming, we probably will be better off versus a lot of other competitors. We are probably not going to lose out much on the tariff, but it is still a wait and watch because the India-US deal has been on the cards for a long time but still not finalised. In this environment, we are looking at two-three buckets. One is focusing on domestic things which are easier to play, which are less impacted by what happens to the US tariffs and within domestic, we have to remember that we have had easy liquidity, interest rate cuts, and a tax break for the consumer.So, to some extent, we probably will see improvement in domestic demand. We like the banking space more because of the valuations because that is one thing we have to keep in mind. In the last three-four years, most of the domestic names have seen a sharp rise in valuation. So, banks are one area we like. The other is cement, where a lot of cement stocks have not performed for the last two, two-and-a-half years.There has been a consolidation in the sector and we think that will help pricing powers going forward and so the next 18 months will probably be good for cement companies in terms of their earnings as well as the share price, and that is the other domestic segment we are focusing on.: One of the reasons why FMCG has done well is that the stocks have been underperforming massively. Whenever markets start going down on a relative basis, FMCG starts to do well. The other thing is that as we look at the situation just now, monsoons are looking fairly good, cropping has been good, and it looks like the crop will exceed last year's number by a fair margin. We will have a record agricultural crop and when that happens, it will help rural demand. So, FMCG is going to be one of the gainers from rural demand and they will probably benefit from it.At the same time, we have been quite negative on the consumer staple companies and the main reason for that has been valuation. We find it very expensive at these valuations even though these are great companies, and have a lot of the cash flow. The ROEs and ROCs are very high but just given where they trade on valuation, we have been avoiding it. From a structural perspective, as the consumer gets richer and per capita income goes up every year, then it probably doubles over the next six, seven, eight years.So, at that time, the share of wallet of consumer staples will go down and consumer discretionary will go up. For us, one way to play the consumer story in India has not been the staples but some of the discretionary names. That is why we have been quite cautious on the consumer staple side.I find the markets having a time correction good. We had quite a steep correction and the markets have seen a bounce-back since then. The macro in India is very good if you look at the current account deficit, fiscal deficit, the RBI monetary policy, inflation, and interest rates falling. The macro looks very good. We are the fastest growing economy on a GDP basis. At the same time, earnings are just missing.So, the valuations are not cheap and earnings are not coming. We will probably end this quarter also with a single digit earnings growth which in some sense if you think about it, earnings are growing at less than nominal GDP growth. So, for the market to see a sustained rise, you probably see earnings need to start coming back. We need to start seeing double digit earning growth come back. But in the meanwhile, it is very good for us that we are going through a time correction because it helps absorb some of the recent gains. We have seen in the market and probably time correction will help valuations become a little cheaper and which probably makes it easier for the next bull run to come.In general, the domestic story is relatively insulated from what happens to the tariff scenario and anything international has got a risk. Just to give you an example, we like pharmaceuticals. We think the pharma industry is good and over the next five years, we will have visible growth in pharma.At the same time, the fact there is a threat of tariffs on pharma means that in the short term, you do not really know what this quantum of the tariffs will be and whether it will impact the pharma stocks and the pharma companies in a significant way or a very small way. So, you would rather have the tariff come and then you know what the tariff is, it is easier to evaluate how bad the scenario is going to be in terms of earnings before you really start to buy it.At the same time, there are some stocks which we find very cheap and compelling. So, we have been buying IT but in general, I would say stick more to the domestic names in your portfolio and avoid things that can get impacted significantly by the US tariffs.