Daily Voice: This investment analyst places wagers on finished metal items, specialty chemicals, and pharmaceuticals

 Daily Voice: This investment analyst places wagers on finished metal items, specialty chemicals, and pharmaceuticals

When it comes to industries with more operational leverage and the potential to swiftly boost their return on installed capacity, Abhishek Banerjee is quite optimistic.

According to Abhishek Banerjee, the founder and CEO of Lotusdew, in an interview with Moneycontrol, India is handling its macro and geopolitical risks effectively, and the country's economy does not now perceive a significant reason for worry.

He believes that in order to continue honing this theory, it's critical to continue monitoring indications like the volatility of the oil price, the treasury curve, US rates, and FX movements.

Having worked in asset allocation, portfolio creation, and quantitative investments for more than ten years, the licensed alternative investment analyst is optimistic about industries with better operational leverage and rapid growth potential for return on installed capacity. In other words, he places his chances on industries like specialty chemicals, pharmaceuticals, and finished metal items. Takeaways from the conversation:

Modern businesses are releasing more impressive data than in the past. Are you exposing them to more of them now?

New-age businesses provide a fascinating introduction to new-age company concepts. They have fantastic management, a strong ability to draw in top personnel, and a strong desire to expand.

Their track record in the public market, controlling analyst expectations, and—above all—maintaining expansion while proving profitability are lacking, however. For these reasons, we favor more established businesses over newer ones that have a longer history in the public market.

There are plenty of chances in what are known as micro monopolies, which are smaller, well-established businesses that dominate a particular market. Our preference is for tiny businesses that, because of whatever barrier to entry they have put up, have little competitors.

Do you believe that the Fed has completed raising interest rates?

Hard to say, really. There seems to be sufficient economic activity for more raises, as seen by the most recent US GDP report of over 4.9 percent, which was among the strongest in recent memory. However, current employment data is weak and the rate of unemployment is growing. Higher productivity often results from simultaneous increases in the GDP and unemployment rate. The same staff is producing more work.

This, in my opinion, applies to the majority of nations today. In terms of personnel, plant, and equipment, the installed asset base's return is rising. Therefore, businesses that effectively manage their return on assets, or ROA, may succeed in such a setting. This connects once again to the earlier discussion of new age businesses, where their expansion ambitions may be hampered by the need to further decrease expenses in order to enhance ROA.

In light of the economic statistics, do you see a slowdown in the US?

Right now, it's difficult to find any evidence of a slowdown except than increasing unemployment. We do see the conversion of financial savings into actual assets and consumption in the US. In turn, this generates economic activity and GDP growth.

The yield curve has inverted, and this inversion is the strongest in the recent odd number of decades. Usually, this is a story about a recession. Macroeconomic asset allocators are faced with the challenge of weighing these two divergent viewpoints and devising an asset allocation strategy that optimizes returns for each.

Are you satisfied with the corporate earnings season thus far?

Indeed, I believe that this time's corporate results presentation was respectable. The majority of businesses prioritize productivity. The recent remarks made by Mr. Narayan Murthy also serve as an example of how managers of various businesses aspire to increased efficiency.

After the first half (FY24) of results, do you anticipate any changes to the full year earnings predictions for FY24 and FY25?

Typically, when new data points become available during the year, full year results are revised downward. As a result, although early projections at the beginning of the year are optimistic, more information is utilized as the year goes on to drive profits upward or downward. They are often led down together.

Given the worries in the US, China, and Europe, do you think developing countries like India would be significantly impacted?

Tariffs and currency have connections to India. This indicates that India is impacted by the dollar as a currency as we buy oil, which has a dollar price. Additionally, the majority of the Nifty50's earnings comes from exports, thus how the Nifty performs affects us.

Nevertheless, we believe that India is doing a great job of handling macro and geopolitical risks, so we are not worried just yet. To continue honing this theory, it's critical to continue monitoring indications like the volatility of the oil price, the treasury curve, US rates, FX movements, etc.

Which sectors, if they prove to be Phatakas, ought to be included in the portfolio for this Diwali in 2023?

Sectors with stronger operational leverage and fast increases in return on installed capacity are ones in which we have a strong positive bias. This implies that, to mention a few, we enjoy the pharmaceutical, specialty chemical, and finished metal products industries.