- Krishnan VR of Marcellus stays bullish on 8% real GDP growth for FY24.
- Premiumisation post-Covid emerges as a successful trend, catering to affluent consumers.
- Marcellus adopts a sector-agnostic, bottom-up investment strategy.
- Market corrections viewed as healthy adjustments; emphasis on individual company performance.
- Small and mid-cap corrections seen as necessary for market balance.
- FMCG sector benefits from premiumisation amidst economic uncertainties.
- Untapped opportunities in underperforming sectors like IT and BFSI.
- Focus on high-quality companies with strong fundamentals and reasonable valuations.
In an exclusive conversation with Moneycontrol, Krishnan VR, director of Marcellus’ quantitative research team, discusses his bullish outlook on India’s economic growth trajectory and investment potential.
Economic Outlook: No Signs of Recession :
Krishnan rejects concerns about an approaching economic slowdown, stating that a consensus predicts a healthy real GDP growth of over 8% in FY24. He cites recent increases in GDP growth estimates, citing favourable macroeconomic conditions and low inflation risks. Despite potential external supply shocks like the Russia-Ukraine conflict, Krishnan is optimistic about India’s resilience, citing previous examples of successful navigation through comparable obstacles.
Premiumisation: A Winning Theme :
Krishnan identifies premiumisation as a post-Covid trend and emphasises its effectiveness in the face of a growing imbalance in purchasing power between socioeconomic groups. He emphasises the success of premiumization methods, particularly in catering to affluent clients, drawing on his decade-long experience in equity and fixed income research.
Investment Strategy: Sector-Agnostic Approach :
Krishnan outlines Marcellus’ investment philosophy, emphasising a bottom-up approach that focuses on companies that generate higher returns on capital than the cost of capital. While appreciating the potential in the green energy and infrastructure sectors, he notes a lack of prospects that meet their investment criteria.
Market Corrections and Investment Opportunities :
In response to questions about recent market declines, Krishnan downplays fears, citing necessary adjustments rather than symptoms of a larger economic collapse. He emphasises the importance of individual firm performance in keeping market valuations stable and driving future re-rating.
Evaluation of Small and Mid-Cap Space :
Krishnan shows the cyclical nature of small and mid-cap sectors, with recurrent peaks followed by corrective phases. He sees the recent declines as a beneficial market adjustment, particularly in restoring equilibrium after record-high market capitalizations.
FMCG Sector Dynamics: Premiumization Prevails :
Krishnan addresses views about slow development in the FMCG business, highlighting the effectiveness of premiumisation methods in the face of economic uncertainty. He mentions Nestle as an example of a company that has persisted despite food inflation by continuously innovating and increasing its market reach.
Exploring Untapped Sectors :
Krishnan discovers underperforming areas such as IT and BFSI that provide undiscovered investment opportunities. Despite their underperformance in contrast to broader benchmarks, Marcellus reiterates his commitment to investing in high-quality companies with excellent fundamentals and appropriate values, regardless of sector biases.
In conclusion, Krishnan’s observations provide a comprehensive view of India’s economic landscape and investment climate, emphasising resilience, adaptation, and a disciplined approach to investing in the face of market changes.