Capital-intensive, cyclical and value stocks to continue their outperformance

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When talking about the era that was before the Industrial Revolution, almost 90% of the employed workforce was in agriculture. There are adequate new projects in the pipeline; and new ones keep getting proposed as enthusiastic governments try to attract investments to their states. Governments, in general, have not been blamed by entrepreneurs for delays in clearances. At least till before the recent rate hikes, the availability and cost of finance were not impediments.

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For capital-intensive sectors such as capital goods, engineering, and manufacturing, the outlook is fairly robust in the near term on the back of rising capital expenditure leading to higher order backlogs and improved visibility of growth, experts said. According to American investment bank JPMorgan Chase, the launch of 5G network services will be an area of focus for Jio as it launches in the top 5-10 cities, and a key marketing battle ground for premium users versus Bharti Airtel and Vodafone Idea. ​In terms of the working capital, it is a slightly working capital intensive business. Our inventory is about 120 days of sales and receivables is about 75 and payables about 50, that is the working capital cycle. “We attribute the paradigm shift in factor performance to the robust demand outlook in sectors such as construction, manufacturing, electricity, telecom, commodities, etc which are related to the investment cycle,” the report said.

They don’t feel the pressure to build capacities in preparation for a boom in demand. Similarly, there are 182 cement projects on hand envisaging setting up 425 million tonnes of additional capacity over the current about 600 million. Projects to set up 79 million tonnes of cement capacity are overdue for completion. Delayed petroleum refining projects could raise the refining capacity by 58 per cent, from the current 249 million tonnes to 394 million tonnes per annum. And, just the delayed power projects could add over 155 GW of capacity over the current 290 GW of conventional energy capacity. Cos preferring to employ more capital instead of labour, lending credence to the belief that India’s growth in the has failed to create more jobs.

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The produce from such kinds of agriculture serves as the raw material for several industries. Most of the work in this kind of farming is done by the machines so this is capital intensive. From a labour perspective, wage rates are reflective of the market demand for different skills and the institutional structures. Also, wage rate is a better measure of the well-being of workers solely dependent on wage income. This paper notes persistent regularity in industry-level wage rates confirming the absence of a convergence behaviour.

POWELL INDUSTRIES INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) – Marketscreener.com

POWELL INDUSTRIES INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q).

Posted: Wed, 03 May 2023 19:44:04 GMT [source]

The basic necessities of food, clothes and shelter are seeing a spike in prices and becoming difficult for the economically weaker section of the society to afford. “Extremely expensive low-volatility stocks with sub-par growth prospects unlikely to outperform,” the report said, adding this is a defensive strategy that worked well during the investment downcycle since FY11. Capital-intensive stocks are those companies which require heavy capital investments in order to produce goods. UltraTech Cement, JK Cement and other cement companies are some examples of capital-intensive stocks. Please read the scheme information and other related documents carefully before investing.

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This situation tends to be a common one as low Income generally means that the business or Economy is unable to afford to invest in exclusive capital. Distinguish between labour-intensive and capital-intensive technology of production. Given this availability of slack capacity, it is unlikely that the private sector will heed the Prime Minister’s advice that they should significantly increase investments. Foreign Direct Investment acts as a major catalyst of economic development in a country. It stimulates business, increases production, creates jobs, boosts income, and brings a churn in the economy.

We consider four capital intensive industries in which the private sector is a substantial investor. These are conventional power generation, petroleum refining, steel and cement. These four industries accounted for nearly 30 per cent of the total net fixed assets of all non-finance companies in CMIE’s Prowess database.

The second, more sustained leg is usually driven by loan growth acceleration that sets an earnings upgrade cycle, and we believe catalysts for this are falling into place,” the report said. According to analysts at Morgan Stanley, this could trigger another ratings upgrade for the banking sector which has been amongst the outperformers since FY21. The research firm added that Indian banks are in a transition phase right now. According to the analysis by ICICI Securities, stocks with either of these three factors have seen a reversal of fortunes in FY21, the year which was marred by the Covid-19 pandemic. These stocks reversed the trend observed between FY12 to FY20, when stocks which were either expensive or less volatile had outperformed others in the market.

Consequently, more business leaders wanted to invest in India to access the domestic market rather than create an export hub. To accelerate climate finance, it is necessary to scale up various multilateral development banks like the World Bank, including the International Finance Corporation , as well as various development finance institutions. PepsiCo and Reliance Industries are among those said to have been sounded out by Goldman Sachs, the investment bank mandated to run the auction process. However, according to executives close to the developments, Reliance is not keen on pursuing the potential offer, given the steep valuations.

Labor-Intensive

Investors are advised to consider riding the trend in the capital goods space, says Dipan Mehta, Director, Elixir Equities. He cites a good order inflow and favourable margin management making the sector attractive. Within the pharma sector, Mehta suggests investors examine companies with a strong domestic presence and one with large revenues earned through sales within India. While the capex revival spells boon for banks as well as investors over the longer term, returns will be determined by how well banks can deal with the problem of tightening liquidity.

  • On the other hand capital-intensive technology uses more capital per unit of output.
  • India remains on course to be the fastest growing major economy in this fiscal year that started April 1.
  • According to our study, India will require at least $8 trillion of cumulative gross capital formation, assuming we are on the fastest growth track.
  • “Its fate is therefore not only decisive for Switzerland, for our companies, for private clients, for its own employees, but also for the stability of the entire financial system,” Swiss President Alain Berset said in unveiling the deal.
  • “I have to create opportunities for myself, right?” It was the thought Jordan Erskine had after years of working for other manufacturing companies, first for a cosmetics and skincare contract manufacturer, then for a large dental care manufacturer.

Importantly, these are potentially high employment generating sectors especially in Tier-2 and 3 cities as well as in the rural areas. Similarly, the automotive industry can become a $600 billion industry in the next five years and the capital goods industry can touch $100 billion in the next four years. According to our study, India will require at least $8 trillion of cumulative gross capital formation, assuming we are on the fastest growth track. The leaders initially lacked knowledge about the recent reforms such as the digitisation of customs clearance and production-linked incentives for manufacturers. Advice to entrepreneurs who want to modernize their manufacturing operations, and how working with marketing and advertising teams may be the key to new customers. Not only has Dynamic Blending adopted a number of technologies to improve operations, but they look at how they can enhance the customer experience as well — not just deliver a product.

“I have to create opportunities for myself, right?” It was the thought Jordan Erskine had after years of working for other manufacturing companies, first for a cosmetics and skincare contract manufacturer, then for a large dental care manufacturer. But after 15 years in the industry and armed with an MBA, Jordan reached out to his co-founder Gavin Collier and proposed starting a business. With a space and some angel investments, they launched Dynamic Blending in 2015 as a small lab creating formulas for brands, with an outside manufacturer. India remains on course to be the fastest growing major economy in this fiscal year that started April 1. However, the widening chasm in demand for luxury items and other basic consumer goods amid elevated inflation and high unemployment rate indicate the surge in inequality.

capital intensive industriesing and financial services stocks, however, are expected to fare well, as indicated by their fourth quarter performance. More than half of the incremental earnings growth was steered by banking, financial services, and insurance , driven by a modest revival in credit growth and improvement in asset quality trends according to Motilal Oswal Financial Services. ITC has become the 7th largest company in India by market capitalisation, as share prices hit all-time highs. Analysts are bullish on ITC’s outlook, citing steady growth across business verticals and strong progress in the main cigarette business. In three sessions, ITC investors turned wealthier by more than Rs 11,400 crore. And then, Economic Growth and technological development increased Labor Productivity, allowed workers to move into different services and decreased labor-intensity.

Episode 3: Digitizing Manufacturing for Better Products and Future Growth

Recent measures such as the PLI scheme, lower corporate tax rates, and dedicated infrastructure (such as MITRA-integrated textile parks) amongst others are a few bold measures that the government has taken to attract investment. For an economy to prosper, FDI must be channelled towards projects that result in capital formation. The survey, which was conducted at the peak of the second wave indicated that 44% of respondents across the UK, US, Japan, and Singapore are planning to make additional and first-time investments in India. As of FY22-end, defence, infrastructure, and capital goods companies saw a two-year compound annual growth rate of 12% in the order book according to Emkay Global Financial Services. “The focus is more on the fundamental factors, which help us identify the right investment opportunities,” Padiyar said.

  • We don’t put too much emphasis on market cap,” said Chandraprakash Padiyar, senior fund manager, Tata Mutual Fund.
  • He suggests investing in financial services platforms such as Prudent Corporate, as well as companies with high revenue growth, such as Divi’s Labs and Dr Lal PathLabs, which have distinctive capabilities in their respective sectors.
  • It stimulates business, increases production, creates jobs, boosts income, and brings a churn in the economy.
  • Given this availability of slack capacity, it is unlikely that the private sector will heed the Prime Minister’s advice that they should significantly increase investments.
  • We are more focused on earnings, cash flows and the management team of businesses.

‘Capital Intensive’ industries require a greater amount of machinery to produce the product. Telecommunications, airlines, automobile manufacturing, oil production to name a few. Regulatory compliance requires an insurance company to arrange first a proper risk transfer mechanism which is known as reinsurance facility for shedding off the additional exposure beyond its limit of retention on any one risk. This is known as ‘Off-Balance Sheet Capital’ as this is a kind of capital that is not visible on the balance sheet but remains obscured that provides financial strength to the company to assume more risks to augment its business.

The growing pains Jordan experienced breaking into a capital-intensive industry, and what strategies Dynamic Blending puts in place to hedge low margins, materials wait time, and cash flow. According to the analysts at ICICI Direct, the stocks and sectors in its report have outperformed despite risk factors like high leverage and relatively low return on equity due to a favourable change in risk factors. Capital-intensive, cyclical and value stocks have outperformed since FY21, according to a report by ICICI Securities. Driving the relative outperformance of these stocks in the BSE 200 universe were factors like high capital intensity, high financial leverage and low return on equity.

Cyclical stocks are those companies whose prices are influenced by the macroeconomic changes in the overall economy of the country. Some examples of industries include the banking, financial services and insurance , and auto industry. Prime Minister Narendra Modi appealed to the private sector on March 7 to increase their investments just like the government so that the country benefits. The appeal is pertinent because a strong pick-up in private sector investments is perhaps the greatest need of the Indian economy today.

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Everstone Capital, through its investment vehicle QSR Asia Pte Ltd, holds a 40.9% stake in Restaurant Brands, which holds the licence to operate Burger King restaurants in India. We are raising about Rs 320 crores as primary capital through this IPO and as said in the RHP about Rs 145 crores of that will be used for debt reduction. Earlier, a report by the Reserve Bank of India said that India Inc. is on the verge of a revival of the capital expenditure cycle. The questions posted on the site are solely user generated, Doubtnut has no ownership or control over the nature and content of those questions. Doubtnut is not responsible for any discrepancies concerning the duplicity of content over those questions. • Subsistence agriculture- In such type of agriculture, the produce is primarily for the consumption of farmers.

By submitting this form I authorize Fincash.com to call/SMS/email me about its products and I accept the terms of Privacy Policy and Terms & Conditions. Thus, the higher the required labor cost proportion, the more will be the labor-intensiveness in the business or the industry. In times of high inflation, laborers are more likely to reveal their unwillingness to work at the same level of wage, because inflation lowers the value of their earnings. With the right incentives, measures, and technology adoption, these sectors could thrive.

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It accepts no liability for any damages or losses, however caused, in connection with the use of, or on the reliance of its product or related services. Labor-Intensive is either a process or an entire Industry that needs a massive amount of labor to manufacture products or services. Typically, the degree of intensity is measured in proportion to the Capital amount needed to manufacture products or services. An Insurance company derives its revenue from domestic as well as overseas operations against which part of the money is paid to reinsurers towards cost of protection against catastrophe losses or routine claims during the period under review.

By default, insurance transaction relates to assumption of risk—that is reflected in collection of premium—and later paying off claims as and when arise and set aside some money as a residual for future servicing to policyholders. Its quality depends on a visible assurance of the ability to redeem this pledge, as much as on the intrinsic worth of the protection provided. Equity funds are expected to deploy cash holdings worth INR 63,000 crore ($8.4bn) into the Indian equity market as they await stability amid positive news on the macro front, says Pawan Bharadia, managing director at Equitree Capital. With the risk-reward scenario becoming favorable, Bharadia sees enough capital on the sidelines to be deployed that will find its way into the market as volatility stabilizes. Bharadia said Equitree was “optimistic” about equities in the mid-to-long term period with corporates expected to post better results due to the recent price corrections and continued business visibility. But with low wages and low income, a business can still remain competitive, and that is by employing more workers.

3 Oil & Gas Equipment Stocks to Gain From the Promising Industry – Nasdaq

3 Oil & Gas Equipment Stocks to Gain From the Promising Industry.

Posted: Fri, 05 May 2023 12:00:00 GMT [source]

This book assesses the attractiveness of Brazil as a location for automobile and steel production in the future. It evaluates the export performance of Brazil’s motor-vehicle and steel industries in different markets and identifies the determinants of the country’s current position in world markets. There are many instances around the world where insurance companies have failed following inadequacy of capital and inefficient management. The purpose of insurance operation is to service the capital adequately and appropriately. If the adequacy of servicing relates to the probability of increase in shareholder’s value, its appropriateness concerns claims paying ability for which the capital is deployed.

Enterprises seem to be going slow in implementation of projects because of the low capacity utilisation described earlier. Gurmeet Chadha, managing partner and CIO of Complete Circle Consultants, believes China’s housing market and cycle will continue to be strong despite the current correction. Additionally, he suggested the capital goods and industrials sectors will see relative strength with the Indian government’s expansionary budget and focus on affordable housing.

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