“The currency going towards 100, the free trade agreements, the Western economy suspicion of China will over the next decade make India a manufacturing powerhouse,” Mukherjea said.
He added that the investment strategy has become clearer, with a focus on identifying strong manufacturing companies in cities such as Coimbatore, Surat, Baroda and Chennai, especially those available at reasonable valuations of around 15–20 times earnings.
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With markets correcting, valuations are no longer as stretched as they were a few months ago. He believes India is entering a phase of transition from a consumption-led to a manufacturing-led economy, and investors should position themselves to benefit from this structural shift over the next decade.
He said India is unlikely to see strong growth in both IT services and manufacturing simultaneously, as currency dynamics do not support both trends at the same time. He expects IT services growth to slow down, and potentially decline, which would then create room for manufacturing-led growth to pick up.
He said the investment implications of this shift are significant, especially as consumption—long the backbone of India’s equity story—comes under pressure. Sectors such as FMCG and building materials, which performed strongly between 2010 and 2020 on the back of robust job creation and rising consumption, are now likely to see slower growth.
As white-collar job creation weakens, valuations in consumption-focused sectors could continue to moderate.
In contrast, he sees better opportunities in manufacturing export-oriented companies, where valuations remain reasonable at around 15–20 times earnings and could see re-rating over the next decade.
He also indicated that the impact is likely to extend to financials, particularly banks and NBFCs with high exposure to middle-class lending. As white-collar job growth slows, there could be rising pressure on retail NPAs across the financial system.
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