Pre Covid-19, India’s last decade of growth was Debt financed household spending. This created winners in the market for companies who were part of this value chain from financiers who were funding tis growth to the companies who were recipient of this spending by the household.
As a result few companies have delivered outsized returns at the expense of everybody else due to it being a consumer debt financed growth.
As Debt levels peak the previous trends will reverse moving money elsewhere and create new winners
Covid will accelerate three trends
- Onshoring of supply chains aided by subsidies, incentives and cheap cost of funds. Overruling of the WTO consensus worldwide will resurrect industries that were on the verge of extinction due to imports.
- As countries like Japan, Europe and US look to diversify supply chains , the suppliers to the industries shifting to india will win huge.
- The current QE in coordination with government spending is aimed at the real economy and as velocity of money picks up it will lead to inflationary outcomes. The governments will however exercise Yield control on bonds, making Resource , Argo commodities , gold and silver miners extremely bullish bets .
- As a result of impending inflation, fixed income investments in duration of higher than 3 years is ill advised.
In a low growth world countries like Vietnam , Bangladesh among others will capture some part of the supply chains moving out of china. They will thus be poised for a outsized rally in their markets due to their growth prospects being similar to India 10 years ago.
The investments in global equities , precious metals miners and emerging trends like 3D printing or betting on nascent recovery in Europe is possible for Indian investors who can invest through LRS ( Liberalized Remittance Scheme) of RBI.