Happy New Year 2011

We at Concept believe that 2011 would be a year of different themes:

1)    Corporate Governance seems to have taken front seat after a series of scams which hit the country last year like the Adarsh society, 2G, CWG, LIC Housing scams and also the SEBI report on few companies indulging in insider trading. Investors will give premium to companies following highest ethical practices along with transparency. Infosys is a clear example of this. At Concept PMS we focus on quality of stocks that maintain highest corporate governance standards.

2)    Infrastructure sector has been a laggard in 2010. After Lok Sabha election in 2009, UPA got a thumping majority without any support from the Left parties. This gave confidence to investors that Government would give thrust to reforms with Infrastructure sector being one of the major beneficiaries. Mr. Kamalnath, the Highway Minister proposed a plan to built 20km road a day. But nothing concrete has happened till date as a result of problems with land acquisition & also environmental clearances not coming trough. Despite these problems the sector presents immense opportunities with India’s infrastructure being woefully inadequate. Last year the growth was consumption driven & as a result many companies are short on capacities and as a result there should be a pick up in the investment cycle and as result we are bullish on EPC companies which are reasonably valued. Our Concept Marvel scheme (Mid-cap) has under-performed in last 3 months on the back of higher weightage to the sector.

3)    Banking Sector is a play on both the consumption & infrastructure story. In December credit growth was healthy at 23% while deposits grew by 15%. This indicates that consumption theme is still in tact. The infrastructure space also needs huge investments which would also spur credit growth. Thus the banking sector we feel would be an outperformer in 2011 and as result have allocated highest weightage in both our PMS schemes to the sector.

4)    Strong Rural demand as a result of good monsoons and rural economy continuing to be largely agrarian coupled with the NREGA (National Rural Employment Guarantee Act) bearing fruit rural incomes are on the rise which should spur demand for FMCG products, autos, tractors & consumer durables. We at Concept have positions in all these sectors that are a play on increased rural demand.

5)    Unknown and Unknowable (UU) are things that are not visible but there are chances to make a lot of money. While the risk is high (three out of four calls may go wrong) the returns could be highly lucrative. Investors need to keep in mind three things namely: business outlook, management caliber & valuations. To identify the next Infosys one will have to continuously think about the opportunities the market is not able to visualize. So the investing strategy of UU is to invest money in Company’s not in favor, but after due diligence.