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All sectors will go up in rising tide of India but first get on a boat, Kotak’s Nilesh Shah says

Nilesh Shah told FinancialExpress.com in the recent edition of Manage Your Money instead of a sector one should invest in good management, good promoters and good businessmen.

Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Co.

The rising tide of the Indian economy will lift all sectors, but to gain from it, it’s imperative for investors to first get on a boat into the sea, said Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Co. “Now India is on a rising tide, every company in every sector will get lifted by it, some may get lifted more, some may get lifted less,” Nilesh Shah told FinancialExpress.com in the recent edition of Manage Your Money, while responding to a query on the best sectors to invest.

“If you look at a sector, there will be someone who is a great entrepreneur and someone who will be a bad entrepreneur,” Nilesh Shah said. “So as much as sector selection, it is also important to back right management. In the IT industry, not everyone is Narayana Murthy or Azim Premji or Shiv Nadar. In the banking industry not everyone is a good banker, there are many not so good bankers around. So you have to invest in good management, good promoters and good businessmen, that is imperative,” Shah added.

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‘Manufacturing, financial services and real estate may be winners in next decade or so’

Shah explained how it is important to look at underlying themes before investing in a sector, giving examples of sectors such as manufacturing. Shah said he believes India will benefit from the ‘China +1′ strategy that is being followed by companies around the world, and the government-backed PLI scheme, which has the potential to create wealth in the next decade or so. He also said financialisation of savings and real estate are also the other key sectors where there will be opportunity in the coming ten years.

“China + 1 strategy is being followed by many companies around the world as they want to diversify their risks away from China. Now, there are many countries chasing this China +1, India is also one of them, and we believe there will be a golden period ahead for India’s manufacturing industry in the next five, ten, fifteen years, thanks to this China + 1 (strategy). We have a large domestic market and now we are going to get access to the global market,” Shah said.

“Any company which is capturing this trend will be a winner over the next ten years. Now this could be companies in auto space, auto components, solar panel manufacturing, mobile handsets, electrical, or electrical components. All these sectors are supported by the government under the production-linked manufacturing scheme (PLI). So the manufacturing plus PLI combination will lead you to companies where there could be tremendous wealth creation in the next decade,” Shah added.

Shah said there has been an increase in financialisation of savings where people are shifting to forms of savings such as mutual funds, bank deposits or insurances. He believes this trend will likely accelerate in days to come and thus the financial services sector, ie, banks, health, life and general insurance companies, asset management companies and NBFCs are part of the segment where opportunities for investors lie in the next decade or so.

Shah said earlier, real estate contributed 12 per cent to the GDP, and now it contributes 8 per cent to the GDP. This trend, he believes, will change as the real estate sector is changing. There has been a rise in affordability and at the same time income levels have gone up for certain set of people. Alongside this there has been availability of cheaper housing loans. So companies associated with the real estate sector such as the housing companies, building material suppliers, etc will likely benefit.

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