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Profit pools more than valuations are the driver for this themeShridatta Bhandwaldar, Canara Robeco MF, Mumbai

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Canara Robeco’s new Manufacturing Fund aims to harness the decadal investment opportunity from India’s manufacturing renaissance which Shridatta says is powered by 4 drivers: (1) growing aspirational middle class that is creating unprecedented demand (2) Government policies that favour import substitution and export promotion (3) Massive infrastructure build-out to support competitive manufacturing activity and (4) geo-political developments that have spurred China+1.

Mega trends create mega profit pools – getting in early is what matters most. We have seen examples in India with tech and consumption –now it is the turn for manufacturing to see vast profit pools getting created in the coming years.

Valuations in some pockets of the manufacturing space do look optically expensive – but may not be so, if you consider how large some of the better players can grow to over the next 5-10 years. Choosing your stocks wisely is what will matter from hereon.

From a broad market earnings growth perspective, Shridatta cautions us to expect muted earnings growth in the banking space as margin compression plays out and credit growth continues to be a bit muted.

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