ETMarkets Smart Talk: How PLI schemes could churn out new breed of billionaires: Marc Despallieres

“There’s no doubt that India’s manufacturing prowess has gathered pace in recent years. A decade ago, there were 55 billionaires in India. Today, that number has grown to 140," says Marc Despallieres, Chief Strategy & Trading Officer at Vantage.

In an interview with ETMarkets, Despallieres has 30 years of experience in the financial services industry, said: “Many of the new names on the list are entrepreneurs in the manufacturing and technology sectors, and the list will only increase with schemes like the PLI” Edited excerpts:

September turned out to be a volatile month for equities where 60,000 on Sensex acted as resistance; while for Nifty50, 18,000 proved to be a big hurdle. How do you see markets moving in the festival month – October?
It’s practically impossible to predict markets with any degree of accuracy in the short term. Having said that, several factors could indicate a downward trend in the immediate future.

A recession in the US is a strong possibility. So, the heavyweights like TCS and Infosys could be affected if American firms cut back on expenses.

Additionally, the Ukraine war shows no sign of ending. This will continue to be a drag on international markets, especially Europe.

On the other hand, the Indian manufacturing sector continues its robust growth. PMI data is positive, inflation seems to be broadly in control, and the domestic economy is chugging along quite nicely.

So, there are things pushing the market down and pulling it up, but the India story is very much intact. While market sentiment is likely to stay volatile owing to macroeconomic conditions, we retain a bullish outlook for the medium- to long-term.

What are your expectations from India Inc for the September quarter?
We expect companies to turn in good to stellar results. But there are some dark clouds on the horizon. Companies with high imports could take a hit because of the falling rupee.

According to the RBI’s financial stability report for June, about 44% of the overseas funds raised by corporates are unhedged. Nevertheless, a weaker rupee is good news for exporters, especially IT companies.

At this point, I think we should remember that some sectors are doing exceptionally well. FMCG companies have returned to double-digit growth this year.

The auto sector is booming, with demand for new vehicles going through the roof. Maruti Suzuki has a reported 377,000 pending bookings. We do expect some pleasant surprises when the September numbers are announced.

How are you viewing gold in the festival season?
Gold prices have been on the downswing for the last few months. But with the marriage season around the corner, this could change.

Indeed, there was a pent-up demand for gold and many people had to defer their marriages because of COVID-19. But now, the pendulum has swung the other way.

While we’re optimistic about gold prices in the near future, you shouldn’t lose track of the fact that gold is a defensive investment, and should remain a small percentage of any investment portfolio.

Cabinet approved the Production Linked Incentive (PLI) Scheme on the ‘national programme on High-Efficiency Solar PV Modules. The government is stepping efforts to boost manufacturing. Do you see Industrials picking traction in the near future?
The PLI scheme could be a game-changer for many industries. We expect to see its positive impact in solar, electronics, pharma, special steel, and auto, among others, and this will have an impact on the stock prices.

Note that the Indian stock market has been consistently performing for decades. Over the last 32 years, stocks have generated a 12 percent annual return in dollar terms.

That’s an excellent record by any standards. And we see this trend continuing. The PLI scheme will only help to accelerate it.

There’s no doubt that India’s manufacturing prowess has gathered pace in recent years. A decade ago, there were 55 billionaires in India. Today, that number has grown to 140.

Many of the new names on the list are entrepreneurs in the manufacturing and technology sectors, and the list will only increase with schemes like the PLI.

How do you see the hotel and travel industry sector doing? Do you see traction building up in this space? Any top stocks that are on your list?
“Revenge tourism” has supercharged hotel stock prices. Indian Hotels, a Tata group company, is up by 78% this year. EIH is up by 60%. Lemon Tree Hotels is up by almost 80%.

The aviation sector is another growth area. Domestic traffic increased by more than 50% in August year on year. However, investing in airline stocks is complicated. Over the years, there have been some spectacular failures in this industry. So, it’s best to tread with caution.

As the interest rate is likely to rise – what should be the right portfolio mix for investors who are looking to remain invested for say 5 years?
Banks and financial stocks are a good bet when interest rates are rising. So, HDFC, HDFC Bank, SBI, and Sundaram Finance could be good picks.

Your portfolio mix depends on your risk appetite. A fund that tracks the Nifty 50 could be a good option if you’re conservative. But if you’re more adventurous, a mix of a Nifty 50 fund, a small-cap fund, and a mid-cap fund may give you better returns.

In fact, buying individual small- or mid-cap stocks can provide you with higher returns. However, this is considered a higher-risk approach.

What is your take on the small- and mid-cap space that has managed to buck the trend? What should be the ideal portfolio mix for small- and mid-cap space?
As I mentioned earlier in this interview, there’s no ideal portfolio mix. It depends on your risk appetite. Small-cap funds make sense for investors with high tolerance for volatility.

Some may opt for mid-caps that could become large caps. But if you’re risk-averse, stick to large-cap mutual funds.

One big reason for investing in a small-cap stock is that most investors are on the lookout for the next great growth company. Small-cap stocks can give better returns compared with large-cap stocks.

Investors must not lose sight of the risks involved. Do your research and be extra careful about the claims the company (or “people in the know”) are making. Be especially watchful about pump and dump frauds.

Any stocks that are a play on the CAPEX cycle for long-term investors who plan to hold the stocks for about 5 years?
L&T, Tata Steel, JSW Steel, Hindalco, and ACC are good options. We’re bullish on financial stocks too as they benefit when Capex picks up.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)