6 MEGA THEMES I'm Betting On that'll shape INDIA's GROWTH STORY over Next 10 Years
Summary
TLDRThe script outlines six mega-trends driving India's economic growth, offering significant investment opportunities. These include urbanization, climate-tech, digitization, healthcare, financialization of savings, and manufacturing. The speaker highlights the potential in sectors like real estate, infrastructure, renewable energy, IT services, healthcare technology, and logistics, emphasizing India's shift towards a skilled, technology-driven economy.
Takeaways
- 🌐 India's economy is experiencing a 'tailwind' with a growing population, increased investment, and various other factors contributing to its growth potential.
- 🏙️ Urbanization is a significant trend, with an expected 40% of India's population living in urban areas by the next decade, driving demand for infrastructure and real estate.
- 💰 Investment opportunities are emerging in sectors such as home loan providers, construction companies, consumer durables, and hospitals due to urbanization.
- 🌿 Climate tech is a promising area with India's commitment to net-zero emissions by 2070, focusing on renewable energy, waste management, and sustainable practices.
- 🔋 Renewable energy, particularly green energy, is gaining momentum with large-scale projects like Adani Green Energy's 30 GigaWatt renewable energy plant.
- 📈 Digitization is a key megatrend, with India's digital infrastructure supporting startups and established companies in fintech and other sectors.
- 🏥 Healthcare is a booming sector with a growing market size and potential for investment in specialty hospitals, medical equipment manufacturing, and health tech.
- 💼 The financialization of household savings is on the rise, with a shift from traditional assets to managed investments expected to double by 2027.
- 🏭 India's manufacturing sector is evolving, with a focus on technology and innovation, and is set to reach a 1 trillion dollar market in the coming years.
- 🚗 Manufacturing sub-sectors to watch include automotive, electronics, and emerging sectors like semiconductors and agri-tech.
- 📊 Long-term investors focusing on these six megatrends can expect significant growth and investment opportunities over the next several years.
Q & A
What is the term used to describe the population movement from rural areas to urban centers in India?
-The term used to describe this population movement is 'urbanisation'.
What percentage of Indians is expected to live in urban centers over the coming decade according to the script?
-It is expected that 40% of Indians, which is about 600 million people, will be living in urban centers over the coming decade.
What are some of the factors contributing to the growth of urbanization in India as mentioned in the script?
-Factors contributing to urbanization in India include higher education, infrastructure development, unremunerative agriculture, and the setting up of multiple Smart City projects.
How does the script suggest that urbanization will impact the demand for real estate and related sectors?
-Urbanization will lead to a massive demand for real estate, including residential, educational, healthcare, commercial, and hospitality sectors, as well as a demand for ancillary industries such as cement, metal, paints, and electrical goods.
What is the term used to describe businesses focused on environmental restoration in the script?
-The term used is 'climate-tech'.
What is India's promise regarding net-zero carbon emissions as per the script?
-India has promised to achieve net-zero carbon emissions by 2070.
What is the term 'India Stack' referring to in the context of the script?
-The 'India Stack' refers to a series of government-backed APIs that offer access to government IDs, payment networks, and secured data to any third party, enabling digital infrastructure for various services.
How is the script suggesting that the healthcare sector in India is a promising investment opportunity?
-The healthcare sector is considered promising due to its massive market size, expected annual growth rate of at least 12%, and various sub-themes such as specialty hospitals, medical equipment manufacturing, and healthcare technology.
What does the script suggest about the financialisation of household savings in India?
-The script suggests that financialisation of household savings is a significant trend, with people moving away from traditional assets like real estate and gold towards managed investment products, expected to double by 2027.
What are some of the sectors that the script identifies as having significant growth potential within India's manufacturing industry?
-Sectors identified include automotive & auto components, electronics, pharmaceuticals, textiles, and emerging sectors like semiconductors, agri-tech, and waste management.
How does the script describe the impact of digitization on India's economy and investment opportunities?
-The script describes digitization as a megatrend that has transformed India into a major digitization hub, offering numerous opportunities across IT services, e-commerce, specialized digital services, and digital infrastructure, with potential for continued growth and investment.
Outlines
🌐 Urbanization and Economic Growth in India
The first paragraph discusses the concept of urbanization in India, where the population is shifting from rural areas to cities, driven by factors such as higher education, infrastructure development, and the diminishing profitability of agriculture. The expected increase in urban population to 600 million over the next decade is anticipated to create a significant demand for real estate and related services, including healthcare, education, and retail. Companies like Max Healthcare are expanding in response to this trend. The paragraph also highlights the potential investment opportunities in home loan providers, construction and infrastructure development companies, electrical consumer durables, and hospitals, which are expected to benefit from the urbanization wave.
🌿 Climate-Tech and India's Green Energy Revolution
The second paragraph delves into the climate-tech sector, focusing on India's commitment to achieving net-zero carbon emissions by 2070. It outlines the various sub-themes within this sector, such as renewable energy, waste management, and sustainable agriculture, which present significant growth opportunities. The announcement by Adani Green Energy Limited to develop the world's largest renewable energy plant exemplifies the progress and potential in this area. The paragraph suggests that investors should consider companies involved in power generation, transmission, electric vehicles, and the manufacturing of solar panels and wind turbines, among others, as these are likely to benefit from the ongoing green energy transition.
📲 Digital India: Opportunities in the Digitization Megatrend
The third paragraph highlights the impact of the Digital India campaign, which has transformed the country into a major digitization hub. It discusses the India Stack, a series of government-backed APIs that facilitate digital services, and the rise of companies like PayTM and PhonePe that have leveraged this infrastructure. The paragraph identifies several sub-themes for investment, including IT services, e-commerce, specialized digital services, and the construction of digital infrastructure such as data centers and fiber optic cables, which are poised for growth as India continues to embrace digital transformation.
🏥 Healthcare Sector: A Lucrative Investment Avenue
The fourth paragraph examines the healthcare sector in India, which is expected to grow at a rate of 12% per annum over the next decade. It identifies various sub-themes within healthcare that offer investment opportunities, such as single specialty hospitals, multi-specialty hospitals, medical equipment manufacturing, healthcare technology, and diagnostics. The paragraph emphasizes the importance of a strong healthcare portfolio for investors, given the sector's growth potential and the increasing demand for quality medical services.
💼 Financialization of Savings: The Shift Towards Investment
The fifth paragraph discusses the trend of financialization of household savings in India, where people are moving away from traditional assets like real estate and gold towards managed investment products. It projects a significant growth in the assets under management (AUM) of the investment industry, driven by factors such as a young and growing population, rising incomes, and increased financial inclusion. The paragraph suggests that investors should pay attention to the banking and NBFC sector, capital markets, asset management companies, and the retirement fund management industry, which are set to benefit from this shift.
🏭 Manufacturing Revival: India's Economic Engine
The final paragraph focuses on the manufacturing sector in India, which is undergoing a transformation towards technology, innovation, and skilled labor. It predicts that the manufacturing market will reach 1 trillion dollars in the near future, with a focus on sectors such as automotive, electronics, and textiles, as well as emerging areas like semiconductors and agri-tech. The paragraph also highlights the importance of logistics as an enabler for the manufacturing industry and suggests that companies in this sector are attractive investment opportunities due to their role in facilitating India's manufacturing growth.
Mindmap
Keywords
💡Urbanisation
💡Tailwind
💡Mega-themes
💡Climate-tech
💡Digitization
💡Healthcare
💡Financialisation of Household Savings
💡Manufacturing
💡Infrastructure
💡Renewable Energy
💡Smart Cities
Highlights
India's economy is experiencing a 'tailwind' due to various factors such as a young population, increased investments, and political stability.
Six mega-trends have been identified for significant growth in India, offering promising investment opportunities.
Urbanization in India is leading to a massive demand for real estate and infrastructure, with 40% of the population expected to live in urban areas in the next decade.
Max Healthcare's acquisition of Sahara Hospital in Lucknow highlights the growing need for medical infrastructure in urbanizing cities.
The demand for construction materials and consumer durables is expected to rise with the expansion of urban areas.
Climate-tech, including renewable energy and sustainable practices, presents a mega-opportunity for Indian businesses to meet climate goals.
Adani Green Energy's development of a 30 GigaWatt renewable energy plant signifies India's progress in climate-related businesses.
Digital India campaign has led to a digitization boom, creating opportunities in IT services, e-commerce, and digital infrastructure.
Healthcare in India is a growing sector with a market size of $180 billion, expected to grow at least 12% annually over the next decade.
Financialization of household savings in India is accelerating, with managed investment industry assets expected to more than double by 2027.
Manufacturing in India is shifting towards technology and innovation, with a target to reach a $1 trillion market in the next few years.
India's focus on 10 key manufacturing sectors and emerging technologies like AI and IoT is driving investment and growth.
Logistics sectors are becoming increasingly important as enablers for the manufacturing industry in India.
Investing in the identified mega-trends can offer substantial returns over the next 5 to 15 years, emphasizing the importance of a long-term investment strategy.
The presentation encourages investors to focus on thematic opportunities through various investment vehicles like mutual funds, ETFs, and AIFs.
A top-down perspective on the economy helps in organizing investment thoughts and capturing thematic opportunities effectively.
Transcripts
Walking against the wind might sound like a lot of fun but it also means you’ll trip,
you’ll fall, you be late to arrive and you might also lose some hair in the process
The exact opposite of this is what is technically called a “tailwind”
and it’s something India and the Indian economy has been presented with, thanks to
a young, growing working age population
a rise in domestic & foreign investment
a growing manufacturing sector
increase in domestic consumption
productivity improvements
the big infrastructure push
political stability
a positive and contributing role in global geo-politics etc.
Now as is always the case some sectors,
some industries do better than others or show a lot more promise
In this context, I’ve identified 6 mega-themes where India and Indian companies are poised
for significant growth and for investors like you and me, these sectors present a promising
investment avenue for capitalizing on the future of India's growth story
Let’s begin
Our first megatrend is “urbanisation” which is the term used when the population of a country starts
moving from its villages to urban areas resulting in the growth and expansion of our cities
It’s something that’s already happening in India as people seek higher education,
as more infrastructure gets developed in our cities and very specific to India when
agriculture turns even more unremunerative as compared to other occupations
To put this in numbers, it’s expected that 40% of Indians or about 600 million
people will be living in urban centres over the coming decade
This understandably translates to a massive demand for real estate
and not just from a residence perspective but also in terms of schools, hospitals,
offices, retail, hotels, movie theatres and much more
And it’s not that companies are not looking at this mega-trend
For example Max Healthcare very recently acquired the 550-bed Sahara Hospital in
Lucknow and notice some of the things they said in their latest earnings call
Firstly, Lucknow is going to be a metro soon with massive infrastructure and connectivity
UP’s population is the size of Europe
And inspite of all this and in the words of Mr. Abhay Soi, the Chairman & Managing Director,
the entire city of Lucknow has just one-and-a-half corporate hospitals right now
So just like Lucknow, we have people migrating to Delhi, Mumbai, Bengaluru, Kochi, Ahmedabad,
Chennai etc. which means more roads, more bridges, the metro, airports, cars, bikes,
water management solution and ofcourse ancillaries like cement, metal, paints,
fans, lights, wires, pipes, ceramics etc. will all be very much in demand
Infact the setting up of multiple Smart City projects is another shot-in-the-arm
and although there is a lot of work to be done here what this means is that urbanization will
not be confined to the mega-cities alone but will move to tier 2 and even tier 3
locations including Coimbatore, Indore, Jaipur, Srinagar, Nagpur, Surat, Visakhapatnam etc.
So urbanization is a huge multi-year, a multi-decade theme and if I have to
pin down a few sub-themes then I’ll certainly want to focus my research
on the big home loan providers as the demand for housing is very likely to
supercede supply and land prices are anyways headed in only one direction
Secondly, the urbanization trend augurs well for construction & infrastructure
development companies like PNC Infratech, KNR Constructions, Ashoka Buildcon etc.
I’ll look at companies in the electrical consumer durables space like Havells,
Crompton, Dixon, Bluestar etc. with much interest as the demand for fans, lights,
air conditioning, refrigeration, geysers continues to move up
And ofcourse hospitals because this is one segment that is always in demand a.k.a. a defensive stock
and unfortunately, our medical infrastructure has not kept pace with our rising population
So these four areas – home loan providers, construction companies,
consumer durables and hospitals is where I would want to participate within the urbanization space
The next big trend is around the climate or might I say climate-related businesses
or climate-tech as it’s commonly called which includes businesses
that are primarily focussed on the restoration of our environment
Now the good thing is that many countries and
governments are formulating policies and supporting domestic industries to meet
their respective climate goals over the next 20, 30, 40 years
Specific to India, we’ve made this promise of achieving net-zero carbon emissions by
2070 .. which is definitely a challenging target but it’s also a mega-opportunity for
Indian businesses with this climate theme being built upon a number of “big” sub-themes such as
renewable energy, waste management, sustainable agriculture, water conservation, energy
efficient construction, clean air technologies, electric vehicles, carbon capture and a lot more
Infact there are themes within sub-themes and in that context, green energy - which is a
subset of renewable energy - is demonstrating significant promise and just a few weeks back,
Adani Green Energy Limited announced the development of a 30 GigaWatt renewable
energy plant in the Kutch area of Gujarat at a cost of 20 billion dollars and over an
area of 538 square kilometers making it the world’s largest power plant
So as a country we are making progress on the climate front and while the renewable energy
sector has attracted major investments in the last 7 to 8 years as the world’s 3rd largest
energy consuming country and with a stated goal of generating 500 GigaWatts of non-fossil
fuel-based energy by 2030, there’s still a long way to go and as of February of 2024,
the country stands at about 190 GigaWatts of installed capacity
So as investors, we can expect more investments to come in from private and government enterprises
together with better economics, stronger policies and it’s not just energy companies;
I expect this climate theme to support the entire ecosystem which includes:
Power generation
It’s transmission and storage
The growing thrust towards electric vehicles
Pipes, cables and wires
Smart grids, batteries and energy-efficient devices
The manufacturing of solar panels, wind turbines
Very importantly the securing of raw materials like lithium, cobalt, nickel etc.
And ofcourse continued research leading up to the
building of scalable, sustainable & efficient green energy infrastructure
The stocks associated with this megatrend so the likes of Waaree Renewables,
Adani Green Energy, Gensol, NHPC, SJVN, IREDA,
Inox Wind etc. had a stellar 2023 with most of these stocks delivering 100% or more in profits
This rally was fueled by the government’s ambitious targets and positive investor
sentiments and honestly, there is little evidence to suggest that
this rally will not continue for a few more years, if not decades
Infact, this reminds me of something Jeff Bezos of Amazon said when he was
asked a question on “what’s going to change in the next 10 years?”
And I’m just paraphrasing here but Mr. Bezos’s response was more on
understanding “what is NOT going to change in the next 10 years?”
For instance, is the customer likely to want a higher price or
a lower price in the future and I’m sure we all know the answer to that
Similarly, is the customer likely to want a faster delivery or a
slower delivery in the future? - and again, we know the answer to that
Mr. Bezos’s point was simple – it’s so much easier to make a strategy when we
think in terms of things that aren’t going to change in the future and in our context,
if you’re an investor who has a vision for the future, then do train your eyes
on climate tech because there is no way our planet is getting cleaner on its own
When the Digital India campaign was launched by Prime Minister Modi in
July of 2015, I’m guessing there were more skeptics than believers
“Jumla” that’s the term I think that was used which means “empty promises”
But that was then and fast-forward to today – me, you, we’re all enjoying the benefits
of high-speed Internet, digital delivery of government services,
Bharat Net, Startup India, biometric identity cards, a 5G network, UMANG, digi-locker,
Bharat Bill Payment System, UPI, e-Sampark, e-Panchayat and many other initiatives that
has made India a major digitization hub and with it comes a world of opportunities
For example and the heart of these efforts is the so-called “India Stack” which is simply
a series of government-backed APIs that offers access to government IDs,
payment networks and secured data to any third party
Startups and companies then build apps on top of this digital infrastructure to provide consumers
with seamless access to everything from welfare payments to loan applications which has helped
create companies like PayTM and PhonePe and even social initiatives like Namma Yatri
which is an open-source ride-sharing app built using the ONDC framework
For investors, there is a lot to keep a track of when it comes to
the digitization theme and a choice of sub-themes is never a bad thing to have
So firstly, there is the IT Services sector with established and steadily growing companies and
what one needs to look out for is their pace of transition from just body-shopping or outsourcing
to a more digital, AI & automation-driven adopter of newer technologies and revenue streams
Then secondly there are the ecommerce players who have picked up pace in the listings market
and although only a few of them are profitable but they are becoming profitable and with more
companies looking to access the capital market, so companies like Swiggy, OYO,
Lenskart, Ola Electric etc. this is one area investors would want to keep an eye on
A third related offshoot of digitization is the range of specialized services that come with it,
so things like data engineering, cloud computing, mobility, tech consulting,
design services, analytics, cybersecurity etc.
And a final lookout is for companies that are building
digital infrastructure in the form of networks, satellite technology,
semiconductors, data centres, fiber optic cables, wifi technology etc.
So these are a few promising sub-themes; I know this is a vast topic but digitization is
definitely a megatrend that isn’t going away anytime in the foreseeable future and as a
country, India and Indian companies are likely to be leaders in this field over the next few years
We’ve all heard of the phrase “health is wealth” and contextually, healthcare is
a massive opportunity in India with a current market size of about 180 billion dollars which
in rupee terms comes to about 15 lakh crores of expenses that we Indians are
incurring every year on hospitals, pharmacies, diagnostics, insurance, medical devices etc.
It’s a sector that’s expected to grow by atleast 12% per annum over the next 10 years and as an
investor and in my opinion, healthcare has to have a decent weightage in your portfolio
It’s something I’m very bullish on and some of the
sub-themes within healthcare that one should definitely consider includes:
The proliferation of single specialty hospitals
and specialty clinics especially in the field of ophthalmology, mother & child,
IVF and also oncology and we’re already seeing the emergence of providers with an asset-light
operating model that offers better EBITDA margins and have a shorter payback period
Then are the multi-specialty hospitals that’ll continue to attract interest as
there will always be a strong fundamental demand for them and do watch out for market
consolidation and a greater spread towards Tier-2 and Tier-3 markets
A third promising sub-theme is around the manufacturing of medical equipment and
consumables with the entire make-in-India thing and a growing focus on quality,
affordable pricing, the availability of R&D workforce and ofcourse exports
Healthcare technology is definitely on the rise thanks to an increased
focus on digitising operations, remote technology and an increasing appetite for
online platforms for consultation, preventive healthcare, diagnosis and nutrition management
And the fifth and final sub-theme I would watch out for is around
diagnostics with many listed and unlisted players looking to merge their expertise,
accelerate patient reach and expand their product portfolios to offer one-stop solutions
So these 5 sub-themes within the larger healthcare framework look really promising
to me for the coming decade and this is where a lot of the action and investment is headed
I would really encourage you to go through the annual reports and the earnings calls
of some of these companies that I’ve listed here to get a better understanding of where
healthcare sector is headed and believe me, you’ll learn a lot from this exercise
The fifth mega-theme is the financialisation of household savings which is a fanciful
way of saying that people are moving away from the traditional assets like real estate and gold
It’s a trend that’s only accelerating in India and as stated in a 2022 report by
CRISIL while the total assets of the managed investment industry in India
stand at 135 lakh crores this number is likely to more than double by 2027 and
if I were to assume a further continuation at an 18% growth then the country’s managed
investment AUM would rise up to 1,000 lakh crores or 12 trillion dollars by 2034
My point is – financialization of household savings is a big theme and while much has
happened in the investment landscape over the last 7,8 years there is a
growing feeling that the industry has barely scratched the surface given the fact that:
The country’s population is still young & growing
The penetration of financial products esp. wealth products is still on the lower side
Incomes are rising
There’s a definite increase in financial inclusion
The economy is getting digitized
And now there is more awareness about capital market products thanks to influencers like us
We’ve already seen a massive jump in demat accounts, in mutual fund AUMs and also NPS
over the years and in that context, the sub-themes one should take a special interest in includes:
The banking and NBFC sector which grew by 130% in the last 10 years as compared to the
previous 65 years .. and it’s widely expected to grow by 14% per annum for the next 10 years
The country’s capital markets are likely to benefit big from the financialization of
savings .. and this includes the two stocks exchanges, the BSE and NSE and also their
proxies in the form of depository institutions, registry agents and credit rating companies
The asset management companies, mutual funds, PMS, wealth advisors etc.
Well, these guys will be the big winners and although there are
some 50 lakh crores of AUM in mutual funds, it’s not hard to believe that
this is just the beginning and there’s a lot more action that’s expected here
And finally as individuals, as we get more aware and the
proportion of people who are above 60 years of age rises in society,
the retirement fund management industry will become all the more relevant in
terms of the number of products, the AUM and ofcourse the number of consumers availing it
Our sixth and final mega-theme is manufacturing and for what it’s worth,
India is definitely witnessing a significant shift in its manufacturing dynamics
Gone are the days when we were known for textiles, handicrafts and agro-based industries
as today’s India shows a growing focus on technology, innovation and skilled labour
In numbers, India's manufacturing market is poised to reach 1 trillion dollars in
the next couple of years with Gujarat becoming India's manufacturing powerhouse,
followed by Maharashtra and then Tamil Nadu
In terms of percentage, while manufacturing today contributes 17% to India’s GDP, it is poised to
rise up to 21% in the next 6, 7 years thanks to growing FDI inflows which reflects global investor
confidence, the government's "Make in India" initiative, policies such as the production-linked
incentive i.e. the PLI scheme for sectors like automobiles, electronics and textiles
and ofcourse, enabling functions like the ease of doing business, logistics, 24x7 electricity etc.
Again as investors,
since we’re talking about tailwinds and sub-themes here so from what I’ve read:
There’s a larger focus around 10,12 sectors so not everything,
just a few industries which includes automotive & auto components, capital goods,
construction equipment, cement, chemicals, fertilisers, pharmaceuticals, electronics,
white goods, machine tools, metal products, textiles and paper
In terms of emerging sectors, one should look at semiconductors,
agri-tech and waste management as these look rather promising
Other technology-enabled areas which are gathering a lot of attention are AI integration,
3D printing, Internet of Things, advanced material sciences and sustainable practices
And very importantly, there are companies in the logistics sectors across road, rail,
ports and waterways that have become super investment-worthy by virtue of
being one of the biggest enablers for the manufacturing industry in India
So this was something new
I normally don’t talk about macro stuff in my videos or the general economy per se but
I must confess that looking at things from a top-down perspective does help
And it really doesn’t matter whether you’re looking at it from individual stock perspective
or maybe from a sector perspective for which there is no dearth of mutual funds, ETFs, smallcases,
AIFs, PMS and even ULIP schemes that can be investing into to capture the thematic opportunity
The point of this exercise and my own belief it that if a long-term
investor focusses on just these 6 areas that we’ve discussed today
then I’m certain there’s a lot of money to be made here over the next 5, 10, 15 years
I sincerely hope you liked this presentation, it helped you organize your thoughts
Do share this video with others, like this video,
signup to the newsletter and I’ll see you very soon
Until then
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