The New Year will kick in 4 weeks and is expected to start with uncertainty. We have seen crude oil prices recently jump up 12% in a weeks’ time on the news that OPEC countries will cut down its production. Canada and Australia are officially in the housing bubble, if it bursts in 2017 then both the countries will see deep depression in their economy. Will the EU will exist in 5 years’ time? Many European and global investors are asking this question today.

Domestically, the major events that investors will have to keep in mind are as follows:

  • Demonetisation of currency: It will take 7 months to replace the currency, and the dream of digital India to penetrate meaningfully in the economy requires digital infrastructure, knowledge and bank accounts. Half of the population in the nation still do not have access to internet. From the remaining half majority of them do not trust in the E-money concept and still a big part of population do not have bank accounts.
  • It will be interesting to see the budget and the forecast of deficit by the government and their views on crude oil prices. Imports of crude oil and Gold accounts more than 80% of India’s expenditure.
  • Interest rates movement: With so much of surplus money deposited in the banks, RBI will be in lot of pressure to cut the interest rates. Even if they don’t, banks will do that without the nod from RBI to keep themselves profitable. We already had seen big cuts in the deposit rates during the demonetisation of currency event recently.
  • We are expecting a cold war of trades to start once Donald Trump starts its presidency tenure in USA. Businesses that export their products and services to USA will be challenged for their business model and there is possibility of losing competitive edge that they hold today.
  • GST: India will start its new era of one tax (GST) in 2017 financial year. So far looking from outside, it already looks complicated. Will there be a positive impact on the economy is questionable like Demonetisation of currency, on the economy.

We think the next 5 quarters are crucial and important for investors to understand new trends and to ascertain what direction the country is heading.

But our framework hasn’t changed. We are still looking for quality business with bright prospects and is available to accumulate at our price. Here are the 10 businesses that you can investigate to invest with in the 2017 financial year.

  1. Dr Reddys Lab

dr reddys logoDr Reddys are in the business of manufacturing medicines and exporting them to the developed and developing nations. USA is one of the biggest nation from where they generate their revenues. So far Donald Trump’s policies do not reflect threat to its business model but we will get more clear ideas in 1 -2 quarters.

  1. Eros International Media

erosThe biggest entertainment medium of the nation is watching movies. Secondly, government is working hard to change India into digital nation, will help Eros International business model. Netflix is popular digital platform to access all the soaps and dramas and is threatening worldwide television industry. Eros International Media stands out for us a good investment idea for the next decade and converge with our idea to invest for the long term.

  1. Axis Bank

axis bank logoWe do know that banks are going through lot of NPA pain at the moment and looks like this is never ending story. Axis Bank had also seen this issue creeping into their business, but we have confidence in the management, and we will see this issue resolved in 2 -3 quarters. Axis Bank had come out with few new products that will help Indian small businesses turning into digital economy.

 

4. Eicher Motors

eicherEicher Motors product mix stands out from all its competitors. If Royal Enfield holds the moat for this business then its trucks are not far from it. With the development of new roads and highways, the company will see a big demand for its trucks in all the segments.

 

 

5. Indiabulls Housing Finance

indiabulls housingThere is a big synergy we see in the growth of NBFC’s and the economy. Demonetisation of currency will bring down the apartment or house prices. It will also make loans cheaper as interest rates are expected to fall down and there is a big number of rural population migrating to the city. So there is a big demand of housing in the urban India. Other than banks, the most who will get benefited will be the NBFC’s who operate in the housing loans of up to 10 million rupees (1 crore) and Indiabulls Housing operates in that sector.

  1. Shree Cement

shree cement logoWe like Shree cement for its capacity to deliver. The past performance had been not that great but when we look at its future prospects, we believe this business to come out in flying colours.

  1. Mahindra & Mahindra Financial Services

We haven’t looked at this business closely, but other than housing sector NBFC’s, MMFS is the other attractive NBFC to hold in the portfolio.

  1. Yes Bank

Yes Bank is another star bank that we believe will grow its earnings fastest in the private sector banks.

  1. Alembic Pharma

This is another pharmaceutical company that manufactures medicine and operates mostly in USA. We have written about this business on our blog few times. Will cover this business again in the future and see if anything has changed within it.

  1. Cadila Healthcare

Cadila Healthcare is another pharmaceutical company from Gujrat and manufactures medicines and export them overseas including USA.

We think 2017 should be focused on investing back on to Pharmaceutical and finance sector (not only banks but more focus should be on NBFC) and avoid at this stage all the export oriented IT businesses.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we tell you to take professional advice before going ahead with our views.