Top trends & themes for 2023

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'Growth is moving towards manufacturing outside of China'

Anand Shah

Head PMS & AIF, ICICI Prudential AMC

Earlier, China had been an exporter of deflation, meaning, China's buoyant export growth created a downward pressure on global prices. Almost everyone was importing, almost every to anything from China. Now that has changed. Companies which benefitted from China exporting deflation are now suffering because of this. However, on the flip side, there is another set of companies that are benefitting from a clampdown on Chinese exports.

We believe growth is moving towards manufacturing outside of China. The changing global trend, along with supportive government reforms, bodes well for manufacturing and manufacturing- allied companies. These companies have been hurt over the past decade and for that reason, they are still not yet richly priced but have a reasonable potential for growth.

We consider railroads as a huge opportunity. Apart from the dedicated freight corridor, there are numerous capex projects underway. Then there is urban infrastructure; metros are being built in every city. Another possibility is renewable energy, including solar and wind energy. Going indigenous has opened up a wide range of opportunities for the defence industry.

The growth in the banking sector may continue to improve. Today, NPAs are no longer a cause of concern as they were during 2016- 2021. Because slippages have decreased and the borrower behaviour is anticipated to improve over the next two to three years, borrowers are less likely to default.

Further, we see opportunities in specific companies within telecom and real estate where earnings support is reasonable and where valuations are not rich. On the IT sector, we are neutral but may turn constructive when the investment perspective improves.