3 sectors staring in the face with mouth-watering opportunities

By Jiten Parmar

I always look to invest in a company when I find it much below its intrinsic value. You call it contrarian investing, or whatever, the fact is it works most of the time, especially when there is an overall pessimism in a sector.

Even managements are pessimistic in such times. That’s when you can buy a dollar worth of assets for, let’s say 40-50 cents or lower. And sell, when I get, let’s say for a couple of dollars.


For 2019, the sectors that look interesting are capital goods, infrastructure (road construction mainly) and cement.

After a long time, we are seeing greenshoots in private capex. As capacity utilisation levels have increased, we are seeing new private capex coming in at a faster pace.

Capital goods and engineering as a theme looks promising at this point. This is evident from the increase in order flow of many of the companies. There is good demand from railways, metro, water and construction sectors. Order books showed this trend at end of September quarter.

Automation as a theme has been doing well and will pick up more. I expect demand from power sector to ramp up. I am increasing allocation to this sector.

Cement has had a very bad time, as it has been weighed down by high petcoke prices, loading norms, fuel cost for transportation and so on. And there has hardly been any price rise.

During this lean period, many players acquired stressed assets or ramped up capacity utilisation, which did not allow selling prices to rise despite an increase in input costs.

Demonetisation and GST also pushed demand lower. Real estate, which is one of the users of cement, has had a rough time. Basically, we have seen many things going wrong at the same time for the sector. Some of them are easing now. Modified loading norms, cooling crude oil prices and the resultant fall in transportation cost and a drop in petcoke prices are big positives for the sector. Also, most players have ramped up capacity utilisation levels of the stressed assets they acquired. New capacity addition is lesser than demand, which augurs well. Another positive can be if GST rates are reduced from 28 per cent to 18 per cent. Thus, this sector looks good for next 2-3 years. One has to be region-specific, as some regions might have a lot of capacity.

I have been adding these stocks for last few months and plan to increase weight in this sector.

The infrastructure sector remains beaten down. Many road construction players have halved, despite bagging good orders and getting financial closures for their projects.

Look for players, which have been able to get financial closure despite challenging conditions in disbursements. Another point to track is whether any of the individual projects have land acquisition issues. There are a few players which have been able to mitigate these challenging conditions. These should do well going forward. Valuations are attractive. Be selective, though. I have been buying into this sector in last few months.

Look, what 2019 might hold for you!
(Jiten Parmar is a partner at investment advisory firm Aurum Capital. This should not be considered an investment advice. The author just responded to a request to name his preferred sectoral bets for the New Year. Please consult your financial adviser before taking any investment decisions.)