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Equity Investors Must Be Cautious Despite Growth Optimism, Says Ajay Srivastava

Shun the lower end of the market and go for luxury, says Srivastava.

<div class="paragraphs"><p>Ajay Srivastava (Source: BQ Prime)</p></div>
Ajay Srivastava (Source: BQ Prime)

Equity investors should be cautious despite the growth in India's gross domestic product surpassing estimates and strong flows of foreign institutional investors, according to Ajay Srivastava of Dimensions Corporate Finance Services Pvt.

Manufacturing has slowed down significantly, while the infrastructure sector continues to remain robust, especially due to the nature of government spending, the managing director the financial consulting firm, told BQ Prime's Niraj Shah in an interview.

The consumption basket's upper end, comprising hotels and services, is doing well, he said. Private consumption and consumer discretionary, which are at the lower end of the basket, are comparatively weak, according to Srivastava.

He suggests investing in companies that favour the capital expenditure domain.

Shun the lower end of the market and go for the luxury end.
Ajay Srivastava

Will China Slowdown Benefit India?

Srivastava said when a large economy like China starts to slow down, consumption also declines. "This shrinks the global GDP and compels China to export much more at a cheaper price," he said. "This, in turn, scrunches the commodity market globally."

If China slows down, they will export more chemicals to the US and the European market. Therefore, no country is perhaps going to benefit if China slows down, he said.

This can be seen in the poor results of chemical companies this quarter after a significant confidence was bestowed upon India's economy during the China Plus One policy, according to Srivastava.

He suggested waiting out the June quarter to invest in shares of chemical firms.

Buying at highs won't give you returns; keep your powder dry.
Ajay Srivastava

Real Estate

The real-estate sector is undergoing a consolidation with subsequent decrease in the number of major players in the market. This has reduced competition and given these players the leeway to hold their prices in the market.

Investors make money based on the link between strong demand and return on the stock and the next five years could make better returns for investors, according to Srivastava.

However, it cannot be a large part of the portfolio as it's an old industry and will not make superlative returns, he said.

Real estate can make money over four–five years.
Ajay Srivastava

Srivastava is optimistic about the information technology space as well. "ChatGPT will further accelerate IT growth," he said.

Watch the full interview here: