This is, of course, the aggregate growth. Several industries are performing far better and will more than compensate for the slow or even negative growth of some sectors like the IT sector. This sector, which is largely dependent on the economies of the countries it services, is facing a lot of headwinds and is not growing as much as others. The manufacturing sector is currently revving up. The China-plus policy favours the Indian manufacturing sector. Some industries are doing far better than others. While it is not possible to detail all the industries doing well, some that stand out more than others are discussed below.

Automobiles in top gear

Within the manufacturing sector, it is the automobile segment that best reflects growth. The production-linked incentive schemes for automobiles and auto ancillaries, along with the Champion Incentive scheme for sales-linked advanced vehicles, have helped the industry grow, encompassing both the battery-operated space and other advanced vehicles for defence, etc. The automobile sector, including auto components, accounts for nearly 20 per cent of the manufacturing sector’s contribution to GDP.

The pent-up demand from consumers, along with rising demand from urban and rural sectors, is fuelling growth. FY23 saw production at a five-year high of 45.78 lakh cars, the highest in the last 5 years. During the Covid period of 2020-21, production had dipped to 30.62 lakh. In the first half, April-September, it has gone up another 4.7 per cent and is expected to top the record high of FY23 during the full year. Just to give some perspective, in the late 80s, the total production of cars in the country was around 50,000.

Maruti Udyog Limited, India’s largest car manufacturer, sold 5.5 lakh cars in the quarter ended September, the highest among several quarters. Given the rising preference for SUVs, the company has also introduced several new models in this segment and currently holds a 23 per cent market share in SUVs. In the first half year, it sold more than a million vehicles. While total income for the first half of FY24 has gone up by 23 per cent, its PAT has seen a rise of over 101 per cent.

Besides the pent-up demand, there was a healthy rise in festive demand, with rural demand being marginally higher than urban demand. With the company on a capacity-raising spree, volume growth will be present. Currently, shares have appreciated by 25 per cent since 1 April and enjoy a market cap of Rs3.17 lakh crore.

Tata Motors, which has had the foresight to grow its electric car portfolio, has also seen its share prices go up by 47 per cent since April. The company, which has a broad portfolio of passenger cars and trucks besides catering to global markets through its Jaguar and Land Rover brands, has come out of the red. Speaking at the analysts’ meet, post the declaration of the quarterly results for September, the management was brimming with optimism. It said it foresaw stronger demand, thanks to an improved order book for JLR and higher demand for commercial vehicles.

M&M shares have seen a rise of 37 per cent since April, with the company in the first half having earned just a little less than the previous year. M&M is also coming out with new models. Ashok Leyland’s shares have risen by nearly 25 per cent during the same period. The point is that while the entire industry has benefitted, some are doing much better than others. This is also true of producers of two-wheelers, including Bajaj Auto and Hero Motors. Bajaj Auto has reached its highest point in around a decade.

The growth in the OEM sector is also benefiting ancillary companies whose fortunes are linked to this sector. Bosch Ltd recently reached a 52-week high in mid-October at Rs20,920, almost R4,500 more than its price a year ago. Sundram Fasteners, which was hovering around R800 a year ago, is 50 per cent higher, Rane Madras is 100 per cent up over the year. Mahindra and Mahindra CIE, and Bharat Forge also made significant gains. Tyre companies are also riding the boom in automobiles. MRF reached a new high of Rs1,13,379 in mid-October, 40 per cent above its low in March 2023. Apollo Tyres is hovering around its 52-week high of Rs440.

Three interesting trends in automobiles are that rural demand is marginally higher than urban demand. Consumers now prefer SUVs, with demand for electric-operated and natural gas-operated ones rising fast. Companies are using the additional cash generated from profits to deleverage their balance sheets further. Lower interest costs, coupled with the introduction of more high-end models, are helping the bottom line of many companies. Two of Tata Motors’ divisions, domestic auto and JLR, are collaborating on the technical front to bring out more premium electric cars. Lastly, with rising income, demand for entry-level cars is marginally muted, with consumers preferring to go for premium cars.

However, even on a macro basis, the rise in PAT in both quarters is partly due to a better product mix as well as the volume increases in several industries. The rise in expenses is 2.9 per cent for the quarter ended September and was almost zero per cent for June.

Other sectors

Besides automobiles, other sectors that are performing well include the defence sector, railways, housing and construction, heavy engineering, mining, and petroleum. In the defence sector, among privately owned companies, Solar Industries, engaged in manufacturing industrial explosives also used in defence, has seen its share prices double to over Rs7,000. More than past earnings, it is the guidance given at the time of declaring annual and quarterly results that has caused the prices of many companies to move up sharply.

In the case of Solar Industries, the PAT for the first half has shown an 11 per cent rise, thanks largely to lower material costs. But its foray into defence holds more promise. In the defence sector, PSU companies are on a roll. Hindustan Aeronautics, developing a fifth-generation advanced medium combat aircraft, is particularly promising for investors. This would make it the only company developing a stealth aircraft in the country. The company, which forms JVs with foreign collaborators, will also be entering the lucrative MRO business.

Shares of other defence companies are also on a roll. These include BEML, which is also into railways and mining, Bharat Dynamics, BEL, L&T, Reliance Naval & Engineering (recently under distress and changing ownership, with Swan Energy taking the place of Anil Ambani). Even Mazagon Docks & Ship Holders and Cochin Shipyards are in the fast track. The former is ruling at nearly four times its 52-week lows in April, and the latter made a 52-week high in September and is ruling 3x over its 52-week low of Rs340.

The only challenges facing defence companies are the overt delays in getting orders from the government. But with the ‘Atma Nirbhar Bharat’ initiative, investors are hoping this will change and companies will start receiving larger orders. Many banks have also become world-class and are in a position to bankroll projects, either on their own or in a consortium. The finance sector, a harbinger of change, is also in good shape. Besides banks, even NBFCs are growing in stature.

Bajaj Finserv, along with its subsidiary Bajaj Finance, is involved in housing, consumer lending, mutual funds, and insurance. Jio Financial Services, another holding company from one of India’s biggest houses, will soon be moving in a similar fashion, building assets across industries. It already has an NBFC and a small bank. All large industrial houses have finance companies, be it Cholamandalam or Sundaram, Mahindras, Birla, Ambani, or Bajaj. These will be the flag bearers of their respective houses

There is no dearth of good industries, and within those industries, specific companies will thrive within the India narrative. Choosing to invest in top-tier companies, mid-tier entities, or promising ventures in the small and tiny sector is a matter of personal preference, influenced by the individual investor’s risk appetite. The India story has just started to take off, and over the next few years, it will continue to do well.

Geopolitical risks or fluctuations in crude oil prices are a given, at least until the time new energy usage starts picking up in a big way. The writing on the wall is clear, and even the oil-producing nations know it. Perhaps, within a decade, the compression in demand for fossil fuels could become more apparent as the automobile industry shifts towards a greater adoption of electric batteries. The optimal time to monetise underground assets is now, and substantial production cuts may only jeopardise their long-term prospects.

This time around, the panic over the Middle East war escalating, with other countries joining hands to curb Israel’s war on Hamas, has abated, at least for now.

Instead of looking at events, whether domestic and overseas, it is time Indian investors start focusing on Indian companies. Elections come once in every 5 years on average. Forget the pre-election and post-election rallies. Think ahead. Let short-term vision not eclipse the fundamental changes taking place in the leading companies. The best is yet to come.