Figuring out ‘vaccine’ portfolios

The pandemic has thrown the world out of whack and what emerges on the other side is likely to be very different for many sectors

Published: 21st September 2020 10:34 AM  |   Last Updated: 21st September 2020 10:34 AM   |  A+A-

From a personal finance standpoint, you can invest in mutual funds that target these sectors or themes. (Express Illustration | Tapas Ranjan)

Express News Service

The widespread pandemic is both a threat and an opportunity. Financial markets are edgy as central bankers, financial and business experts flag risks in the next few months due to a slower economic recovery. Last week, this column talked about ‘Robinhood’ investing. This week, we talk about another term doing the rounds in the financial markets—a ‘vaccine’ portfolio. It is a name given to companies that could do well after the pandemic. The quest now is to identify them. More than individual businesses, it is essential for you to understand the philosophy behind such a portfolio.

tapas ranjan

The pandemic, and the lockdown that followed, has affected businesses in different sectors in different ways. According to analysts, companies that are market leaders in their respective segments have done well during the lockdown. Companies with a strong brand presence and services have managed to retain customers and get new ones too. Then, there are those companies that can go to the market and get the money they need to do the business. The lockdown has nudged the unorganised sector to get more organised. That is likely to benefit existing organised players in those respective sectors.

Shaktikanta Das, the Reserve Bank of India Governor, made a speech recently and argued about potential forces that could drive India’s economic recovery. You may want to align your long-term savings into businesses that contribute to these forces. He puts the education sector on top of the list. If you are a parent, you could have witnessed an upheaval in your child’s schooling and learning. There is likely to be a disruption in the way education is imparted in the post-Covid world. Amidst that, the government has announced a new education policy recently.

For every one rupee spent on education, an additional income of up to Rs15 can be generated, according to the data published by UNESCO, a United Nations body. Every additional year of schooling increases income by another 10 per cent every year. Higher education is even better. With the new education policy, India’s government proposes to spend 6 per cent of the gross domestic product on education. The government is encouraging public-private partnerships. Businesses that develop the relevant education infrastructure or support education in the post-Covid world would do well.

The other area the RBI Governor highlights are healthcare services. He argues that the pandemic has brought to the fore the importance of easy access to health services. Companies that make healthcare simple for users are another area to add to the vaccine portfolio. There is a good chance that the government may enhance the spending on healthcare infrastructure. Businesses that run hospitals, testing labs, online medical consulting and training could benefit from an investment in a healthcare eco-system.

The government is pushing India as a manufacturing destination in light of the disruption due to trade wars. In the post-COVID period, exports of drugs and pharmaceuticals are one area where there could be a boost. The RBI Governor argues in the speech that the Indian government has approved an investment package for promotion of bulk drug parks and production-linked incentive schemes to push the domestic production of drug intermediates and active pharma ingredients.

Food processing is another area the RBI Governor explained in the speech that could see significant activity. With successive years of record production of food grains and horticulture crops, India has become a food surplus economy. India is all set to witness a second straight above normal monsoon. All of it is likely to lead to a bumper harvest again. To avoid wastage of food and other items, businesses into the food processing sector could see a focus from investors.

What you can do
Being aware of these potential sunrise sectors is good for your finances. You can watch institutional investors like private equity entering into space. For example, online learning app Byju’s has generated a lot of personal equity interest. At some stage, these companies would get listed. Similarly, you may want to follow developments in healthcare, pharmaceuticals and food processing sectors to get a sense of the potential. From a personal finance standpoint, you can invest in mutual funds that target these sectors or themes. To identify specific stocks, you must get professional help.


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