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Indian Infrastructure Sector Companies review by Keynote Capitals 3 April 2008 Source: www.keynoteindia.net
While the growth momentum is likely to taper off over the next few years, GDP growth is still likely to be in the region of 7-7.5% over the next few years. We however expect huge investment flows to continue entering some sectors, which will likely outperform the GDP growth trend. We believe Infrastructure would be among the key sectors in terms of contribution to the economy as a whole, going forward. The primitive nature of the infrastructure in India is regarded as one of the major hindrances to economic growth. It underscores the need for a huge infrastructure build-up if the Indian economy is to move fast. We believe that there is a huge underlying opportunity in the high growth Indian infrastructure sector. As per Planning Commission estimates, a sum of $250-260bn would be spent on overall infrastructure in the XIth plan period (FY08-12) primarily on power, ports and airports and urban infrastructure. The Government has given permission for large projects such as mega power projects, major road projects, new SEZs, and construction projects. We believe the infrastructure sector would be an important growth driver of the Indian economy over the next 7-10 years. We constructed a model infrastructure sector portfolio comprising of our best picks from the cement, power, capital goods, infrastructure, construction, shipping (incl. ports & logistics) sectors. Our model portfolio consists of securities from sectors which we believe will deliver strong growth (power, infrastructure, construction) and strong to moderate growth (cement, capital goods and shipping) going forward. The benchmark BSE Sensex gave returns of 23.2% during the last one year. Between October 10, 2007 and January 10, 2008, (when the Sensex peaked at 21,207) the returns on BSE Sensex and our model infrastructure portfolio were 10.3% and 25.6% respectively. However, post January 10, 2008 till date, the Sensex has corrected by 23.1%, and our model portfolio by 34.8%, which clearly shows the volatile nature of our portfolio. However, all companies in our model portfolio are strong companies with professional managements and robust business models. Post-correction, their respective valuations have become more attractive. We remain bullish on these with a medium term perspective of 12-18 months. To read more download full version of Indian Infrastructure Sector Companies portfolio |
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