Current market cycle similar to 2003-2007 phase; consumer discretionary, industrials to do well, says Morgan Stanley's Ridham Desai

Ridham Desai of Morgan Stanley India on Wednesday said that the current market cycle is very similar to the 2003-2007 phase and believes that consumer discretionary and industrial sectors are poised to do well.

“Measured from the bottom of 2003 to the top of 2008, the best performing sector in India was industrials and I dare say industrials may again turn out to be a very strong performing sector. But the best performing sector I think this time around could be consumer discretionary. So, industrials will be a close second or right up there, but discretionary consumption will do extremely well because India’s income has changed. There is a very big transformation happening in the consumption basket,” he said in an interview to CNBC-TV18.

He advised buying decent scalable businesses run by good managements for good price.

“There are only three things that you look for when you buy a stock. You look to bag good people – people with character and people who are honest because if you get into a business that is managed by bad actors, then the result is always bad."

"You want to buy decent business; not something that doesn’t have much traction, something that is scalable, and the third thing is the price you pay for it. So these are three things you are looking for – good people, scalability of a good business, and a proper price,” he said.

According to Desai, India is a country with excess labour and supply shortages. However, he believes that the government is committed to reward the entrepreneur and create an investment cycle which will then create jobs and will create prosperity for the working class.

“In 2019 September there was a mark shift in government policy. Through the massive corporate tax cut, the government basically said we are going to go back to trying to boost the share of profits in GDP."

“We have seen several moves over the past 12 months whether it is production linked incentives, whether it is the new labour laws, the corporate tax cut, and several other things in this Budget which basically point in the direction that the government is committed to reward the entrepreneur, to get profit share in GDP back up and rising and therefore create an investment cycle which will then create jobs and will create prosperity for the working class. I think this is the right model for India to approach and will result in, like we saw in 2003-2007, a pretty strong performance of share prices,” he said.