Trent’s SSG skid explains the stock crash
Trent’s SSG was in the high teens six to seven quarters ago, but has now cooled to the high single digits. “That slowdown alone explains why the shares have halved,” Mukherjea said, adding that Trent remains structurally stronger than other apparel players such as ABFRL and Reliance Retail.
He believes the company is well positioned to bounce back if Indian policies revive consumption next year.
The Labor Code will not boost revenues; employers see costs increase by 12%
Contrary to market optimism, Mukherjea says the new labor laws will not immediately boost business sentiment or profits.
Most of the promoters he spoke to reported:
- Up to 12% increase in labor costs
- Minimum operational lighting
- Easier compliance with layoffs (up to 300 employees)
He does not see the labor law as an important economic trigger.
The automation wave makes wage inflation less relevant
Mukherjea warned that the real long-term risk is not wage inflation, but the rapid replacement of workers by machines and AI.
Key insights:
- The labor requirement in road construction has fallen by 80% in ten years
- Factories are heavily mechanized
- AI adoption now threatens office jobs (technology, legal, media, financial services)
“This is India’s biggest structural challenge. The middle class jobs engine is at risk,” he said.
AI can hurt jobs but increase IT companies’ margins
While AI threatens employment, Mukherjea believes IT companies will benefit in the short term.According to Mukherjea:
- HCL Tech plans to work twice with half of its employees
- Microsoft and Google say a third of the code has already been generated by AI
- Indian IT companies’ margins could expand as they “do more with fewer people.”
India risks a middle-income trap, but not because of its labor laws
Mukherjea believes the danger lies in India’s shrinking pipeline of white-collar jobs, not wage rules.
“Since 1991, our economy has depended on 40 million educated workers who earned, consumed and paid taxes. That engine is now threatened by automation and AI,” he warned.
Why Mukherjea avoids defense stocks
Despite the sector’s massive outperformance, Mukherjea has never invested in defense stocks:
“Any company with just one customer is virtually impossible to predict or value,” he said, referring to its dependence on government.
Top stocks Marcellus has collected
Mukherjea says the market correction provided opportunities to add high-persuasive names:
Large capitalization:
Trent: Increased allocation
Asian paints: More added as sentiment weakened
Healthcare theme:
Vijaya diagnostics: Meaningful increase
Narayana Hrudayalaya: Added in the last 12 months
Eris Life Sciences: New position in the small/midcap fund
Healthcare remains a key theme, driven by Ayushman Bharat and the shift towards insurance-driven healthcare demand.
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