Thread by @Equitymaster

As per Richa Agarwal, editor of our smallcap recommendation service Hidden Treasure, a huge structural shift is unfolding in the Indian economy that could create significant wealth for companies in India, and for the investors in them. Here's more from Richa:

India is undergoing structural shift that could benefit many Indian companies across sectors. I’m referring to the shifting supply chains in the post-pandemic era. These shifts were always happening but at a much gradual place. They have picked up the pace for three key reasons.

First- During and post Covid, the global companies with over-reliance on one supplier, specifically China, saw their supply chains breaking, and their prospects dwindling. With this shake up, the corporates are consciously deciding to diversify and broaden outsourcing.

Even the global economies are coming up with regulations that discourage dumping from China. #China plus one trend has benefitted the textile industry (players like Trident and Arvind). India’s share of exports to the US in apparels has increased from 28% to 36% YTD CY 2022.

Second - the thrust on #MakeInIndia . This includes anti-dumping duties on metal products,  chemicals, silicone sealant , APOs, and so on. Companies such as Nocil, NALCO, Aarti Drugs benefit from these developments.

Then there is a thrust on higher domestic share in the manufacturing sector. PLI Schemes that offer support for capital investments and subsidies are a way to achieve this. Companies in the electronics industry will benefit from the same.

A key beneficiary has been #Defense Sector. Of more than 10,000 items that were earlier imported have been laid on a portal for indigenisation. This is positive for companies such as HAL, Garden Reach Shipbuilders, Avantel, Data Patterns, and Bharat Electronics.

Third - Factors intrinsic to China. Stringent norms related to the environment, hike in wages, cut down in subsidies etc have increased production costs in China. This is positive for India in the long term.

To know the names of the more companies in the smallcap space benefitting from this shift, watch this video :

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Please note that this tweet is for educational purposes only, and does not reflect stock-specific view on any of the companies mentioned.