Copper, aluminium, crude oil and silver have all witnessed sharp declines over the previous few classes, dragging commodity shares decrease. Nevertheless, Kant believes such corrections are a traditional a part of long-term commodity cycles.
“Commodity as an asset class is at all times like this. Every time the upside is there, it continues for one or two years. Now we have already seen a significant a part of the upcycle, and usually it corrects and consolidates for a significant interval,” he mentioned.
In response to Kant, demand fundamentals remain beneficial. He expects industrial demand for metals equivalent to aluminium, copper and zinc to strengthen as international financial exercise improves. Silver, too, continues to take pleasure in structural help attributable to its widespread use in electrical autos, electronics and renewable power.
“Silver demand has an industrial connotation. Electrical autos, electronics and photo voltaic panels all use silver, and demand is prone to compound at 15-17% CAGR going ahead,” he mentioned.
Given this backdrop, Kant believes high quality commodity firms deserve recent consideration.
“This can be a good alternative to build up good-quality commodity shares. One can have a look at Hindalco, Vedanta and JSW Metal. We nonetheless imagine there may be a minimum of one to one-and-a-half years of the upcycle left,” he added.Decrease Crude Costs to Assist Company Margins
Kant additionally expects the sharp decline in crude oil costs to offer a significant enhance to company profitability over the approaching quarters.
He famous that whereas firms may even see some influence within the June quarter, the advantages of decrease enter prices ought to change into rather more seen in the course of the second half of the monetary 12 months.
“Q2 and Q3 will get pleasure from decrease enter prices, however value rollbacks by no means occur. That can help higher profitability within the second half of the 12 months,” he mentioned.
He additionally believes easing tariff considerations and resilient home demand have strengthened India’s macroeconomic outlook.
“Our floor checks counsel there was no let-up in consumption, credit score demand or collections. Credit score progress itself will likely be round 17-18%, and these indicators counsel that is the time to be daring with cherry-picking,” Kant mentioned.
Defence Story Stays Intact
Regardless of current volatility in defence shares, Kant stays optimistic in regards to the sector’s long-term prospects. Whereas he’s much less constructive on Bharat Dynamics, he continues to favour Bharat Electronics (BEL), Hindustan Aeronautics (HAL) and Mazagon Dock Shipbuilders.
Latest promoting stress, he mentioned, has largely been pushed by buying and selling positions and information circulate fairly than any deterioration in fundamentals.
“It’s a no-brainer in case you are trying from a three-year perspective. HAL, BEL and Mazagon Dock remain robust long-term performs,” he mentioned.
Kant additionally highlighted the potential of the long-awaited P-75 submarine venture, which might considerably broaden Mazagon Dock’s order e book and remodel its progress trajectory.
Cautious on AI-Themed Shares
On India’s synthetic intelligence funding theme, Kant suggested buyers to separate real long-term alternatives from market narratives.
Discussing Sterlite Applied sciences, he acknowledged the corporate’s robust order e book however questioned the sustainability of its enterprise mannequin.
“There isn’t any IP or moat within the enterprise. It has largely remained a buying and selling play over the past 10-15 years, so we’re staying away from the basic name,” he mentioned.
Banking Most well-liked Over Auto and Ancillaries
Amongst sectors that might profit from decrease crude costs, Kant prefers banking and monetary companies over cars and auto element producers.
Whereas paint firms have already recovered considerably from current lows, he believes costly valuations and intense competitors restrict their upside. Auto and ancillary firms, in the meantime, might battle due to a excessive base impact within the second half of the 12 months.
“In case you are a one- or two-year perspective, they could discover it troublesome to ship 20-25% profitability progress. It’s a tactical name to remain away for now,” he mentioned.
As an alternative, he believes banking stays the strongest oblique beneficiary of bettering macroeconomic circumstances and decrease power costs, making it one of many most popular sectors for buyers over the approaching quarters.
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