Indian economy after years of sluggish growth has found its leadership position in the prominent economies as it is set to generate the fastest growth rate amongst some of the world's most prominent economies. In an almost Goldilocks like situation, the Indian economy has found a sweet spot in a target bound low inflation, an accommodative interest rate regime (and reformist governance environment)  and stable GDP growth.

Typically, falling interest rates result in lower input cost for companies eventually leading to improved profitability which is then a basis for rerating of equities and strong returns in periods to follow. Similar pattern seems to be emerging from the fresh rate cut cycle. Over the past 15 years the Indian markets have seen 3 such instances, with the 4th one seemingly in progress.

Following are the instances where when the rates easing cycle & reforms cycle came together at the same time and markets delivered superlative returns in the range of 15%-30% for a 3 year period.

Presenting Birla Sun Life Resurgent India Fund – Series 1, a 3.5 years closed ended equity scheme. The fund seeks to invest in a focused portfolio of around 35-45 stocks, spread across 5-8 sectors. While largely the portfolio would invest across all the market cap spectrum, it would be relatively more aggressively positioned with 40-60% allocation to Mid & Small caps.

The fund is largely bottom up stock picking driven fund that seeks to invest in companies who have demonstrated an ability to achieve market-beating results along with changing business cycles. The focus sectors of the fund are those that are most likely to be benefitted by the resurgence of growth in the economy. Some of the key sectors that are at the confluence of positive operating metrics and a conducive business environment through the Growth drivers and could generate benefit from this economic resurgence to generate strong returns for investors are:

·         Consumer Durables & Consumer Discretionary

·         Banking & Financial Services

·         Infrastructure, Capital Goods & Cement

·         Auto & Auto Ancillaries