**[investwise]** Ajit Dayal: Buy Stocks That Run Operations Based On Imported Commodities

 

It does not look like a very good time to be an equity investor or for that matter, investor in risk assets like commodities. There is far too much pessimism around these days, most of it coming from some pretty respectable macro observers. But what we heard today really takes the cake.   Strategists at RBS, one of the world's largest banks too have joined in the pessimism. However, they are not just pessimists but ultra pessimists. They believe that the current downturn has the potential to destroy the equity cult. In other words, equities could fall so much that they will lose much of their relevance. Hmm, very strong words indeed. However let us not talk equities here. Sure, the Indian equities will also feel the heat. But the correction we believe will have to do more with sentiments than pure fundamentals. For the latter remain as strong in India as ever. If anything, the near term weakness will present a very good opportunity for investors to profit from the long term story.   Furthermore, one section of the Indian economy could benefit immensely from developed market meltdown. One where commodities form a key part of input costs and where revenues come predominantly from the domestic markets. It is quite likely that a deflationary environment prevails in the developed world for quite some time. In other words, their economies could continue to remain weak. And this in turn could mean lower prices of a lot of key commodities. Thus, operating margins of companies in India which use a lot of these commodities may not fall as sharply as a lot of market analysts seem to be predicting.   And this in turn could give a big boost to their earnings as well as stock prices. So, while the rest of the world around us goes into a deep correction mode, these companies could well end up flourishing more than ever. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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