Executive Summary
My two-week research trip across India covered key economic hubs and on-the-ground visits to companies, factories, and construction sites. Although geopolitical headwinds are weighing on investor sentiment, the triple rate cuts (interest rate, tax rate and GST) will serve as tailwinds for corporate earnings. Moreover, it only takes one event (US trade deal) to reverse the sentiment and hence I am constructive on the market.
Powering progress
Over the past decade, the central government has ramped up investment in core infrastructure such as highways, rail, airports, inland waterways, and digital networks — setting a new direction for long-term development across parts of India.
A key highlight of my trip was a visit to the Subansiri Lower Hydroelectric Project in Assam — one of India’s most ambitious infrastructure projects in the Northeast. Assam has long faced challenges such as poor connectivity, difficult terrain, and limited infrastructure.
Situated near the borders of Assam, the Subansiri Lower Dam is one of the largest infrastructure projects in Northeast India, transforming the entire region’s socio-economic activities
Turbine units under construction
Visiting a primary school sponsored by the dam’s state-owned operator
Early look on GST cut beneficiaries
India’s recent GST rate cut marks a significant policy move aimed at stimulating consumption and supporting key sectors. Some sectors that stand out are:
Autos: 4-wheelers are likely the biggest beneficiary given that the cycle is in favour (coming out of two years of muted growth). Early observations following the GST cut suggest that optimism is on track. Across original equipment manufacturers, dealer checks suggest that customers are buying higher variants with the same budget, supporting the premiumisation trend. Besides volume growth, we think a potential source of upside surprise could be margins as the street typically underestimates the power of operating leverage in an upcycle.
Retail: The festive season appears to have a good start with robust online sales particularly for small ticket electronics and fashion. However, the near-term earnings outlook could be clouded by inventory destocking. In our view, quick commerce (10-minute delivery) is the best proxy as it enjoys both near-term tailwinds from consumption boost and structural market shares gains against traditional e-commerce (1-5 days delivery) and modern trade.
Cement: The biggest debate is on cement as demand appears to be inelastic to pricing. Every cement producer has fully passed on the GST cut, with limited volume benefit amidst the weak season. The industry will face regulatory scrutiny over anti-profiteering in the coming months. However, we believe that, over the medium term, the GST cut has strengthened cement producers’ ability to raise prices, given the industry’s oligopolistic structure.
Interesting reads
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