“PROXY INVESTING” ~ Selling Picks & shovels to gold miners🪙
How to take advantage of Emerging opportunities via proxy investing📈⚒️
Key Trends in the Indian Market🇮🇳
A thread🧵
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📌In 1848, gold was discovered in California, leading to a sudden influx of 300,000 people digging for gold
⚒️During the California Gold Rush, investing in supplies like picks, shovels, & denims was more profitable than mining for gold
💡One company that stood out ~ Levi Strauss & Co (Popular denim brand we know today)
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📌Proxy Investing:
🔸Investing in supporting sectors that benefit from a primary market trend rather than the trend itself
📌How to benefit from Proxy Investing:
🔸Recognize the main trend ~ like "Financialisation" (Gold Rush)
🔸Target Beneficiary Businesses: Look for companies that benefit from the trend (such as Exchanges, Brokers, Wealth management firms)
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📌Proxy To Financialisation
🔸Rising middle class & increasing financial inclusion has led to shifting household savings into investment products and financial markets
🔸Data for FY24 reveals that 70% of household savings lie in physical assets this underlines the vast untapped potential for capital formation
💡Total Demat Accounts in India grew from 3.59 Cr in FY19 to ~16.2 Cr in Jun'24
💡India NSE Active Clients ~ 4.4 Cr ( 3.1 % of total population)
⚡The Under penetration presents a huge opportunity
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📌Investing in companies that provides financial services serves as a proxy to play the financialisation trend
🔸Exchanges: NSE, BSE, MCX
🔸Brokers: AngelOne, Motilal Oswal, 5 Paisa
🔸Depositories: NSDL, CDSL
🔸Registrar and Transfer Agents (RTA): CAMS, Kfintech
🔸Wealth Management: Nuvama, Anand Rathi, 360 One
🔸Asset Management Companies (AMC): HDFC AMC, NAM India
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📌Proxy to CAPEX
🔸Capex refers to Government spending on long-term assets, supporting infrastructure development
🔸It leads to a multiplier effect on the economy
🔸Capex Outlay of ~ 11.1 Lakh Cr, contributing 3.4% of GDP in FY25 Union Budget
💡Capex increases as the country invests in building and upgrading physical assets, in sectors such as urban infra, railways, highways, and manufacturing
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📌Investing in companies that are involved in infrastructure and industrial development projects serves as a capex proxy
🔸Cranes: Action Construction, Sanghvi Movers
🔸Wire & Cables: Polcab, KEI Industries
🔸Power: Voltamp, TRIL, Elecon
🔸Construction: Ultratech, Ambuja, Jindal Stainless, Tata Steel
🔸Capital Goods: Siemens, Cummins, RHI Magnesita
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📌Proxy To Consumption
🔸India is moving beyond 'roti, kapda, makaan' phase, where consumption skyrockets and shifts from basic needs to indulging in desires & wants
🔸As per capita GDP has exceeded $2,500, consumption is at its inflection point
A similar trend was observed in the
🔸United States in 1950/60s
🔸Japan in the 1970s
🔸South Korea in 1980s
🔸China in 2000s
💡Domestic consumption, contributing over 60% of GDP is expected to surpass $4 trillion by 2030, and will be driven by India’s youthful 1.4 billion population
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📌Investing in companies related to the consumption theme will benefit from the growing consumer market in India
🔸FMCG: VBL, Tata Consumer, Nestle
🔸Retail: Phoenix Mills, Trent, Ethos, Dmart, Vedant Fashions
🔸QSR: Jubilant Foodworks, Westlife Foodworld, Devyani International
🔸Jewellery Retailer: Titan, Kalyan, Senco Gold
🔸Alcoholic beverage: United Spirits, United Breweries, Sula Vineyards
🔸Travel & Tourism: Indigo, Indian Hotels, EIH
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Sources used for the thread:
- World Economic Forum, CMS Consumption Report, Blume Ventures Indus Valley Report, Wikipedia, AngelOne Investor ppt
Let us know which proxy sectors are you tracking in comments below? 👇
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