Sectors which did well decades ago, may see resurgence now: Kenneth Andrade

Kenneth Andrade, founder and chief investment officer at Old Bridge Capital Management, believes that the next big theme for the market may well be segments that benefit from certain tailwinds that are playing themselves out even as the Coronavirus (Covid-19) pandemic continues.

Previously a star fund manager at IDFC Asset Management Company, where he was between 2005 and 2015, he has been known for his mid-cap bets.  With over 27 years of experience, he believes that the current market cycle may well mirror trends that first played out in the initial days of his career.

Indian companies serving markets abroad rather than the domestic one are likely to gain disproportionately even as other tailwinds help with costs, according to him.  Those with a global footprint already, such as chemicals and pharmaceutical companies, would garner the bulk of this opportunity in terms of the absolute value of the opportunity. The potential for incremental growth may be higher in manufacturing which has a smaller presence currently in the global marketplace, according to him.

“I think where the opportunity stands for us, is closer to where we were in the nineties,” he said.

Labour cost is likely to be under pressure and finance cost is expected to moderate given the interest rate and inflation environment globally. Expenses on power are likely to collapse towards the second half of the year because of increased use of renewable energy which will replace high-cost thermal power. These three heads account for around 23 per cent of total revenue. This would make Indian companies more competitive, he said.  

The government is likely to face challenges with regard to its deficits. This would limit its ability to provide growth capital to stimulate the domestic economy, he added.  There is likely to be a focus on social sector spending in light of the Covid-19 pandemic. Defence spending remains an unknown, he said.