How to profit from India’s high-tech recovery

Professional investor David Cornell of the India Capital Growth Fund, selects three of his favourite Indian stocks to buy now.

Consumption patterns and corporate strategy in India have changed significantly in response to the pandemic, and keen-eyed investors have noticed. Widespread smartphone usage, combined with lockdowns, have accelerated the advent of e-commerce and digital banking. India’s young population are early digital adopters, and the country’s advanced tech ecosystem is first-class. Data is cheaper than anywhere, and per-capita usage is the highest globally; 99% of all online activity happens on smartphones. 

Similarly, India’s next generation of vehicle buyers will not be wedded to the merits of combustion engines and will willingly “go electric”, since most will be first-timers. An open-minded society combined with a vast population of consumers (50% of which are under 25) suggests that vehicle manufacturers will see India, not Europe or China, as the real market of the future. 

Another side-effect of the pandemic has been the urgency with which multinational corporations are diversifying supply-chain risk away from China owing to mounting political tensions with Western countries. This bodes well for India, a winner in sectors such as electrical equipment, speciality chemicals and pharmaceutical production. This is largely due to an English-speaking workforce, lower labour costs (now one third of China’s) and ongoing deregulation fostering enterprise.

Affle: the boom in digital advertising

Affle (Mumbai: AFFLE) is a digital-advertising technology agency that operates only via smartphone. It stands to profit from an increase in post-Covid-19 digital spending. It adopts a targeted advertising approach, and is rewarded only when customers are converted to a service or product. It uses artificial-intelligence (AI) algorithms to create a virtuous circle whereby the more data is applied the more conversions occur, which in turn encourages more advertising through its platform. Affle is expected to grow sales by an annual 47% over the next three years. Profits should grow at a similar pace.

Sona Blw: exporting Tesla parts to China

Equally affected by consumers’ changing habits is Sona Blw (Mumbai: SONACOMS), an automotive-component manufacturer; specialisms include starter motors. It is a direct beneficiary of electric-vehicle (EV) adoption globally, as its precision-engineered parts are critical to an EV’s high-torque requirements. As the sole supplier to Tesla’s China plant (as well as to other car manufacturers globally), Sona is a recent example of Indian companies exporting to China. Profits are set to grow handsomely as EV sales ramp up globally. 

Dixon Technologies: a leader in outsourcing

A low-cost producer of electrical equipment such as LED lighting, washing machines, TVs and smartphones, Dixon Technologies (Mumbai: DIXON) benefits from the government’s policies aimed at reducing Chinese imports. 

As well as being an outsourcing solution for the global branded manufacturers needing to reduce manufacturing costs, it also provides a supply-side alternative to China, and enables these companies to penetrate India’s huge consumer market. We expect Dixon to generate annual sales growth of more than 45% over the next three years while maintaining its industry-leading return on capital of over 30%.

Recommended

How to keep your dividends safe from the taxman
Personal finance

How to keep your dividends safe from the taxman

We look at ways to keep your dividends safe ahead of the decrease in tax allowances.
28 Mar 2023
Shoppers feel the pain as food inflation hits a record
Personal finance

Shoppers feel the pain as food inflation hits a record

Data from the analytics group Kantar showed food inflation hit a fresh peak in March 2023
28 Mar 2023
11 investment trusts for inflationary times
Investments

11 investment trusts for inflationary times

Inflation eats away at the value of your money, but these investment trusts can help you grow your wealth.
28 Mar 2023
Best junior stocks and shares ISA platforms
Isas

Best junior stocks and shares ISA platforms

A junior stocks and shares ISA is a great way to save for your child tax-efficiently. But it can be confusing deciding which investment platform to ch…
28 Mar 2023

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023