Any country which goes through structural reforms has to go through the pain; it takes a couple of years for things to unfold, says Sanjay Guglani, CEO, Silverdale Capital. In an interview with ET Now, Guglani shares his views on what lies ahead for the market.

Excerpts:

ET Now: Let us talk about India. We are still grappling with a slowdown in earnings. I must say that the pickup in consumption demand is very slow. Where do you really see meaningful earnings coming in from going forward?

Sanjay Guglani: Any country which goes through structural reforms has to go through the pain-whether it is in terms of the Thatcherism in 1970s or even as recent as the Asian crisis in 1991 with Indonesia.

It takes a couple of years for things to unfold. So, we are not surprised. Rather we are happy in terms of the way the pace of reforms have been going up without causing too much of pain.

On a whole, it looks nice. So if you are talking about the green shoots, we look green shoots more in terms of the government-led capex which we are seeing right now. It is the first time in last nine years that the government expenditure, the capex expenditure, is becoming higher than private sector.

The consumption demand would come later and, in the interim, we would see uptick in the automobile industry. We are already seeing some sort of green shoots in terms of numbers. We are seeing numbers coming in for passenger cars. In terms of LCVs, the most important indicator is the increase in the freight volumes.

ET Now: How should one invest in a market like India right now? There is a lot of hope; there is a lot of scope. But the underlying economic recovery is not that large. Frankly, the turf has not changed for Indian markets despite rate cuts and slump in commodity prices.

Sanjay Guglani: I would certainly be more optimistic on that account. The reason why India has not gone through so much of pain is principally because of the drop in the commodity prices. To the extent, Indian economy has benefitted very significantly at a juncture which was critical for its growth.

In terms of playing out the market, one has to look in terms of medium to long term plays as whenever the structural reforms take place, we will see the industries going through pain. This is because of the fact that incumbents which used to walk in a particular fashion cannot work anymore. So even in the certain industries including most defensives ones such as FMCG, you would see a structural change happening.

We look in terms of bottoms-up strategy. We would look in terms of the companies which would do well in the coming months and years. So if somebody is medium to long-term investor, I am talking something about six months, it is not a bad time to start investing into India. You could look both in terms of a macro plays, something for example linked to the logistic sector.

We know that the budget of the railways for next five years. The capex expenditure would be almost equal to the capex expenditure the Indian Railways has had since independence.

That is massive. Already in the first quarter and a half, we have seen that the railway has made about 138 per cent of the budget allocation. Mind you, this is the same department which used to delay spends till the last quarter of the year.

So we see the multiplier impact happening there. So either we can directly play into those companies which are directly going to benefit from it. We would like to have a more conservative look in terms of its impact on companies like Coal India, which are going to be able to increase their volumeThere is capacity available for them to move their coal or in terms of Concor which is largest players in the container segment.

This articled originally appeared on The Economic Times: “Not a bad time to start investing; we like logistics-linked plays: Sanjay Guglani” written by ET Now.