Consumption led growth in 2008

For most long term investors the year 2007 would have brought a lot of profits as markets globally reached all time highs and investors made loads of money. The investor confidence seems to be high and most investors are looking forward to another year of good growths and good profits. 

At the year end I glanced at my portfolio to see which are the stocks that gave me maximum profits and which were the ones that bled the portfolio while only Arvind Mills stand as a stock which bled the portfolio, there were a couple of stagnant stocks like Infosys and CREW BOS. Both these were making their earnings from exports and the rupee decline hurt them. The stellar performers were Dewan Housing Finance, Tata Steel, Tata Telecom and a few others which are all gaining from the consumption led gains in the Indian economy. 

That is where the growth seems to be for the coming year as well, with the rupee not likely to gain any time soon and the consumption cycle within the economy not likely to be reversed any time soon the growth would be in stocks which gain from the spending of rupees within the economy and not with the spending of dollars outside the country stated in very crude terms. For example a hotel in Coorg has a much better chance of doing well than a BPO unit, given that both are being managed equally well. 

So if one has to bet on stocks then one is safer with consumption led stocks and not stocks that are driven by export earnings. 

While the focus for me would be on consumption led stocks for the year going forward the stocks that are already there in the portfolio and which are export driven like Infosys would continue to hold their places there. This is because these are sound companies with strong management and a great history behind them. And such are the companies that do well in the long run. 

The best bet are companies with strong management which are in industries which benefit from the consumption led growth. Wish all of you a profitable 2008! 

Manshu Verma 

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