Viksit Bharat Budget 2024: From Pharma To Telecom - Top 8 Sectors To Watch For Long-Term Investors

The market seems to be getting overheated and picking up good quality stocks in this scenario continues to become difficult by the day. With the Budget Day looming around, there can be paralysis of analysis as well as speculations which will start gripping over the ones who are unfortunately a part of the FOMO troop. Identification of the right theme at the right time with investments in quality stocks can generate the much-required alpha by the investors. We, at Progressive Shares, continue to believe in some niche stories or several themes (with absolutely biased views) which have made money in the past and can make money for long-term investors in the long run.

Some of the very basic requirements needed in a fast-moving metro life include wearing good clothes, ample use of internet/network/wi-fi, commuting via fast rail or metro, having clean water, sustaining the concept of circular economy and ample use of chemicals/speciality or pharma products in various walks of life.

The theme related to water or wastewater management has recently been picked up. With the rain-gods not being so kind so far, this basic requirement of water across the country can be a cause of concern. To tackle the same, the GOI has been looking at developing or repairing the water infrastructure or laying down new pipes across many cities and towns. We continue to remain biased toward stocks like Indian Hume Pipe (land development story in addition to the regular business of water management services), Thermax (water treatment) and our recent addition EMS Ltd.

If the country has to be connected via a very strong network, then how can one forget the railways? With the focus of GOI on developing the rail infrastructure with many incentives provided for further development or anticipation of PLI for the sector, the commissioning of the DFC, PM Gati Shakti and transfer of goods for domestic/Exims, we continue to remain biased on Container Corporation of India. GOI appears to be contemplating introducing new initiatives offering performance-based incentives to manufacturers of critical train components, such as wheels, brakes, and transmission systems, which are currently largely imported. With an aim to promote domestic production, reduce import dependence and attract foreign investment, these initiatives if materialized can help revitalize India's railway rolling stock sector, as well as the signalling sector, where import dependence is quite high.

In addition to this, the focus on safety via Bharat Kavach can gain more momentum and we continue to like HBL Power in this domain. When one talks about the introduction of new wagons, we have continued to stick to Texmaco Rail. Vande Bharat trains have been one of the recent introductions in the medium-distance superfast express services operated by Indian Railways where we are looking at players who provide gears/switch-gears including Timken India, Shanthi Gears, Salzer Electronics and Hind Rectifiers.

We have been consistently biased toward the entire sector of specialty chemicals and agrochems where we have a number of players which have shown some green shoots in the PnL including Sudarshan Chemical, Bharat Rasayan, Jubilant Ingrevia, Aether Industries, Alkyl Amines, Paushak Ltd, Punjab Chemicals, Sumitomo Chemical, Sadhana Nitrochem, Tatva Chintan Pharma, Ultramarine Pigments etc. On the Pharma side, we continue to stick to FDC, Cipla, Gufic Biosciences and Gland Pharma to name a few. If these companies enter the capex mode (while already having some work-in-progress) or replacement of reactor/equipment, then players like GMM Pfaudler will benefit from the same.

The constant interest in the circular economy brings lead recycling, plastic recycling, EPR norms, aluminium recycling, city waste management, and municipal solid waste management into the limelight where we are biased towards POCL and AWHCL.

While not being directly linked to the telecom sector but rather serving as a proxy to the same, in the fibre optic and other network-related requirements with GOI focus on BharatNet, we continue to like Sterlite Technologies and HFCL. The rising demand for massive deployment of OFCs, strong order book position, 5G penetration, immense opportunities from the defence segment, data centres and impetus from the BharatNet tender's augurs well for these companies.

Lastly, if the Indian government focuses on increasing food testing labs or introducing stringent food safety norms, then we will look at Vimta Labs. While the issue related to the textile sector also seems to be fading out owing to favourable prices, flushing out of old inventory and the possibility of good upcoming demand from the export market, some multipliers can be witnessed in these sectors as well. In a nutshell, these views depend a lot on the current market conditions and the direction of the Budget. The ideas mentioned above are meant purely for long-term investors.

Disclaimer:

Please note, many of the stocks mentioned above have already given multi-fold returns to the clients of Progressive Shares and many clients continue to hold some of these stocks.