Don’t read too much into Nov’24 IIP numbers – they look good because of base effect. We need to see better momentum in GST collections, credit growth and GDP numbers to get confidence of coming out of this cyclical slowdown.
Rupee is playing catch up on the way down, after a long sideways drift when other currencies were weakening against USD. INR can fall another 3-4%, especially if CNY depreciates in anticipation of US tariffs. Currency is a key variable influencing FII flows – need to stay cautious on Indian markets until INR stabilizes.
HSBC Large & Midcap Fund had a good 2024 – delivering over 28% return while the BSE Large Midcap TRI delivered about 12%. Cheenu’s decision to focus on stocks at growth inflections points across industrials and consumer discretionary spaces has been a key performance contributor.
In today’s disruptive world, moats are less relevant. What is more relevant is to identify companies that are at a growth inflection point– which may last 1-3 years – during which they can grow in a non-linear manner, due to a combination of industry/segment tailwinds and strong execution skills to make the most of the growth wave.
Historical PE numbers may not be the best way in such cases to value such businesses. Growth delta influences stock behaviour more than historical valuations in these instances.
Cheenu finds large caps reasonably valued now. Midcap valuations are relatively high, but earnings growth prospects for many of them can still support these valuations. The same cannot be said about small caps, where earnings growth numbers are coming off in many cases.
Cheenu is adding IT stocks which she believes can start a cyclical recovery with positive growth trends coming in from US.
Her dark horse pick is cement – a sector which is seeing lot of consolidation – which can be a precursor to stabilizing and improving prices.