Despite the matte trade that we have seen today, we have still succeeded in ending the week in a high tone. Where do you see the market going next week, and what indications do we have to look out? Apart from GST rationalization reforms – where a clarity is still expected – do you think the Jackson Hole symposium in the US, which world markets keep a close eye on, also have some impact on India?
Mayuresh Joshi: Two things. Firstly, from a global perspective, the minutes of Jackson Hole will be crucial in determining the expectations surrounding the US monetary policy – in particular how interest rates are likely to move and how upcoming macro data points can form their decisions. Tarifes are also an important factor. As soon as the Jackson Hole Summit is closed, the attention will shift to next week, especially with the deadline of 27 August for the extra 25% rates for India. Whether that deadline will be expanded or there will be negotiations earlier, are very sharply monitored by the street. So these global macro events will be extremely important.
Secondly, within this global background, on the micro -side, business profits remained soft, which was largely on expected lines. With announcements that have already been made and the expectations of further reports about GST rationalization, you could see a positive momentum in consumption and business profits in the second half. So yes, it will be very interesting and pretty fluent. The street will look at these global developments, especially what happens around 27 August, very close.We were just talking about GST rationalization reforms. Of course we wait for the implementation date and whether the impact will be visible in the festive season. Looking at how the week ended, the car package clearly noticed as the leader. What is your opinion about the wider consumption space? And within consumption, there are specific bags where you see more value, especially with GST rationalization in mind?
Mayuresh Joshi: It is more a bottom-up approach for consumption. Within FMCG, our feeling is that volumes must show a steady increase. Input costs have remained very benign in recent months and are expected to stay that way. This allows the use of leverage to take place via better volumes and prices about SKUs. With moderate input costs, companies can achieve better EBITDA margins, a stronger bottom-line growth and improved return ratios. According to that logic, FMCG should do well as a sector. Marico, for example, remains one of our top choices and is part of both our domestic and global portfolios.
On the clothing side, especially for players aimed at rural and semi-urban markets, history shows that as soon as it absorbs consumption, these areas float a considerable part of growth. Players such as Vishal Mega Mart and Vmart Retail could see meaningful profits in their clothing and FMCG companies, with strong sales growth from the same store in the coming quarters.
In sustainable consumption of consumers, urban consumption is expected to make a strong comeback, and you have already seen a sentiment-driven increase in most Whit goods shares. But in terms of volumes, I think the growth will be selective. For example, footwear has recently disadvantaged, but we now see encouraging price action. With GST rationalization, the affordability of footwear in national and semi-urban areas will considerably improve. Stocks such as Relaxo, and on the semi-urban/urban side, can do well with its integrated activities.
In our opinion, select FMCG leaders, a few Alcobevere names such as Radico (which we keep holding) and footwear companies are the spaces where consumption could use it in the coming months.
Apart from GST rationalization, another development this week was the online gaming account, which has now been adopted by Parliament. What is your opinion about this space? Do you see possibly opportunities to rotate in stocks here?
Mayuresh Joshi: No. Our thesis on Marketsmith has always been clear – where there is a significant regulatory risk, we would rather stay away. The online game sector has had an overhang of the regulatory hand for some time. Now, with this account, the risks have only increased. Many players are still in the non -listed space, and this movement ensures harmful effects on income flows and the general business model.
There is also the risk of equity dilution, because these companies may need continuous monetary infusions to adjust platforms, to make skills based or to meet new regulations. Even then there is no guarantee to reach break-even. So we consciously stayed away from this space. There are many other strong opportunities on the market where we prefer to concentrate.
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