2009: so , whats next ??So, what next? Hope for the best, prepare for the worst", goes a famous saying. With the banking crisis and recession fears nowhere nearing an end in the US and threat of higher inflation and slowing growth in India, investors can keep their fingers crossed over the next few months. While specific consumption stories like banking, telecom, retail, hospitality, media and FMCG are expected to maintain their growth momentum in this fiscal as well, there are no signs of easing off for sectors impacted by currency volatility (software, pharma and textiles) and raw material issues (automobiles). Further, considering that this is the last fiscal before the next elections, there might be delays in award and execution of projects in power and non-housing construction sectors. Continued industrial growth (though at a slower pace than what has been seen in the past few quarters) will aid prospects of the engineering and capital goods and cement industries.
Macro expectations for FY09AutomobilesOpportunitiesIndia's low penetration levels and improving road infrastructure will continue to drive volumes. Besides, the country's emergence as a low-cost manufacturing destination can also do its exports a world of good.
ThreatsRising commodity prices will continue to take toll on margins as heightened competition, especially in cars and commercial vehicle has made passing on the cost increase difficult. Availability of credit in some pockets is also a worry.
Banking & financeOpportunitiesReform process expected to be initiated with several banks complying with Basel II guidelines and others gearing up for the same compliance in FY10. While the growth rates and margins will get moderated, the Indian banks are expected to fare superlatively as compared to their counterparts in the developed world.ThreatsDelinquency risks and slowdown of fee income generation on investment banking, third party sales and exotic derivative linked products sold hitherto, are expected to have an impact on asset quality and margins respectively.
//comment.....opportunities and threats para r in seq as above....1st one oppo and 2nd for threats.....hope readers dont mind.....//
CementIndustry is likely to maintain its momentum and grow at around 8% to 10% in FY09. Government initiatives in the infrastructure and housing sectors are likely to be the main drivers of growth for the industry.
With no major capacities coming onstream in the near term, demand-supply mismatch is expected to continue and this will help prices to remain firm. However, capacity additions announced till date will add approximately 75 MT to the existing capacity, the bulk of which will come onstream from FY09 onwards. With the commencement of new projects, all time high realisations might witness downward pressure, thus possibly impacting margins of cement manufacturers.
ConstructionDemand-supply gap for residential housing, rising affordability levels, and availability of easy financing options expected to continue spurring demand for residential construction. Government spending on infrastructure to also aid the overall growth, especially in areas like roads, water supply & sanitation and irrigation.
People problem faced by the construction industry can make it difficult for them to execute large projects on a timely basis. Delay in payments for government projects can have adverse impact on profitability of companies
Engineering & capital goods Increased order flows from power, oil & gas and construction sectors to add to order books. Increased investments in the Middle-East shall also continue to spur growth.
Rising raw material costs might impact profitability. Slowing economic growth could be dampener to demand. Election year issues can delay project approvals and execution. Talent retention issues.
FMCG and foodsGrowth potential in micro marketing, rural marketing and the rising middle-class will be the key. Though most categories will continue their growth, processed foods and personal care segments are likely be the fastest growing.
Rising cost of inputs (crude derivatives, oilseeds, dairy products) is a cause of concern as companies can taken only selective price increases as not to affect volume growth.
HospitalityNew segments like spa, health tourism, budget segments would provide new opportunities. Also the upcoming Commonwealth Games would give a boost to tourist inflows.
Continuation of the high room rates (due to lack of adequate supply) could hamper demand. Poor infrastructure, high levels of taxation, cumbersome paper and legal work and slower execution add to the risks
MediaHigh growth in advertising revenues, emergence of alternate revenue streams and shift from passive mediums to digital interactive mediums are expected to boost growth. Digitalisation is the future for most segments and would aid the growth.
Piracy, government regulations and economic slowdown could hamper growth.
MetalsGreater investments in infrastructure and continuation of capex cycle will ensure that volumes remain robust. Pricing is also likely to remain attractive as no slowdown being seen in China, the key driver of commodity prices worldwide.
Delay in availability of key raw materials (iron ore, coking coal) may deprive some local companies of growth. Reduction in import duties may hurt realisations and consequently, the profitability.
Oil & GasIncreased investment expected in upstream activity, refinery upgradation and new capacities in refining and petrochemicals. Private sector/joint venture investment likely to continue.
Rising cost of crude oil and government intervention in product prices will continue to impact the bottomline of downstream companies through under recovery of cost and upstream companies through subsidy sharing.
PharmaceuticalsPressure on governments across the world from rising healthcare costs, rising aged population and increasing patent expiries to promote faster growth of generics. Ballooning R&D; spends and relatively lesser number of approvals for new drugs to prompt more global innovator companies to outsource manufacturing and research to India given the latter's superior process and chemistry skills. With European regulators having come out with guidelines for the launch of biosimilars in Europe and US likely to follow suit, focus on biotech to increase given the high entry barriers and much lesser competition.
Increased competition and pricing pressure expected in the US generics markets and some of the European markets such as the UK and Germany. Change in regulations with respect to healthcare likely in several countries. Increasing legal costs could likely eat into the profitability of generic companies especially if there is no favourable ruling. If the DPCO's proposal to bring 354 drugs under price control is implemented, it would be detrimental to revenues from the domestic market.
PowerIncreased investment expected in transmission & distribution spaces apart from those proposed in generation. Private sector investment likely to see an increase.
Rising cost of fuel (coal and gas) might impact new capacity expansion and utilisation of existing capacities. Election year issues can delay project approvals and execution. Equipment shortage can also impact new projects.
RetailConsidering the low penetration levels, changing lifestyle, rising disposable income levels and changing consumer mindset regarding credit, retail sector is expected to continue to grow at 35% to 40% YoY. Healthy economic growth, favourable demographics and mall development, fuelled by the government's initiative of releasing real estate space for retail development in prime areas will give the sector a further fillip
Growth prospects are likely to face hurdles owing to factors such as restrictions on foreign direct investment, lack of a uniform tax structure across states and increasing pressure on infrastructure in key consumer markets (logistic issues). New entrants (business houses and international players if foreign participation is further liberalised) are expected to further intensify the competition. With the competition intensifying and the costs scaling up, the players who are able to cater to the needs of the consumers and grow volumes by ensuring footfalls, will be able to withstand a downturn or face competition more effectively.
ShippingContinued demand for crude, petroleum products and dry commodities (iron ore, steel, coal, foodgrains) to help keep freight rates high. Longer haul tonnages also likely to aid stability in freight rates. Government's thrust on oil exploration to aid prospects of domestic offshore players
High order book to put further pressure on tanker freight rates. Such a significant tonnage addition will put further pressure on the tanker rates. Production cuts from OPEC in order to influence oil prices is another negative, as it can create excess capacity. Any sharp slowdown in global trade can act as demand dampener for the industry.
TelecomStrong addition to mobile subscriber base expected to continue unabated, led by declining tariffs and lower handset costs. Higher growth also expected in under-penetrated segments like broadband and enterprise business.
Spectrum constraints may plague growth of existing players, especially in the lesser tapped rural and semi-urban markets. Intensifying competition, and reducing revenues per user likely to impact margins.
TextilesFiscal and interest rate incentives offered to the sector are expected to facilitate the necessary capital expansion and technological upgradation.
As the rupee appreciated against the US dollar by more than 15% in FY08, the small and medium-size firms have been contemplating either laying off workers or closing down. The Clothing Manufacturers Association of India estimates that 500,000 to 600,000 jobs are at risk in the coming year.
It is said that 'Stick with the measurable and discard the immeasurable' and nowhere is this more true than the current scenario. The probability of success in trying to gauge the macro environment and then make investment decisions based upon the same is likely to lead to sub par results in the long-term in view of the greater complexities involved. Instead, if one sticks to better managed companies with strong balance sheets and durable competitive advantages then one is well poised to ride out the bad times with minimum damage as well as reap the benefits during good times.
But please remember, valuation is the key as always and do not pay too much for growth. Always insist on a margin of safety. 
cheers......happy invesitng
