Even with the recent volatility in the Indian market, the stocks that have stayed resilient are the ones that come from the sectors favoured by government policies focused on making India self-reliant, future-ready and innovative.

Last week we asked you can Atmanirbhar 🇮🇳 India be an investing theme? And the answer was a resounding YES.

The term ‘Atma-Nirbhar’ has evolved from a buzzword to a solid profitable strategy. It has become essential to evaluate the impact of policy reforms and drill down into their impact on the markets.

The 'Atmanirbhar Bharat' or Make in India initiative has transformed from a vision into a game-changing strategy, presenting lucrative opportunities for investors. This mission aims to boost domestic manufacturing, promote innovation, and generate employment across strategic sectors. As India strives for self-sufficiency, certain themes have emerged as potential beneficiaries of this policy. The focus is on new economic sectors, renewables, and areas where India can become a crucial manufacturing hub.

There are 3 government policies that we think are important to spot winners in the current stock market

• Make in India or Atmanirbhar-Bharat

• Profit Linked Incentives and,

• China plus One

Let’s dig a little deeper into each of these themes and determine which sectors will stand out in light of these policies.

Atmanirbhar-Bharat

The central government has started targeted efforts to address reforms and regulations to boost Indian manufacturing and infrastructure and incentivize and ease the functioning of specific key sectors in the economy. In addition, the government has underlined inclusive development, productivity enhancement, energy transition, and climate action as the four pillars of development that will drive the nation’s growth trajectory to new levels.

With this scheme, we can expect reforms in infrastructure and real estate development to boost domestic manufacturing in critical areas like semiconductors, electronic goods, auto components, defence, and white goods. Specialty Chemicals and Metals will also be favoured, and the energy transition and climate action push will select the renewable energy and electric mobility ecosystem. The Indian Pharmaceutical sector will see favourable growth through this initiative. The digitization of various industries, including fintech and e-commerce, and the development of the India stack that favours MSMEs and startups will also be a gainer.

Profit Linked Incentive Schemes

Much of the domestic manufacturing sector faces a lack of a level playing field vis-à-vis competing nations. Indian manufacturers on account of lack of adequate infrastructure, domestic supply chain, and logistics; high cost of finance; inadequate availability of quality power; limited design capabilities and focus on R&D by the industry; and inadequacies in skill development.

With the PLI scheme, the GOI intends to extend an incentive of 4% to 6% on incremental sales (over a base year) of goods manufactured in India and covered under target segments, to eligible companies, for five (5) years.

There would be a direct correlation between stocks selected for PLI incentive and the profitability growth because of the incentives.

China Plus One

China has been the fastest growing nation over the last decade and is the hub of global manufacturing. Still, recently, due to higher labour costs, stringent environment, compliance costs, and other challenges, the share of Chinese manufacturing is shrinking. Various nations like India, Vietnam, Thailand, Bangladesh, and Malaysia compete for a piece of the pie. While the Indian sectors that can be an alternative to China are already booming, the Indian government is also incentivizing these sectors to speed up India’s market share as an alternative to China. The corporate tax cut, PLI, made in India is part of this broader strategy. The government is even putting anti-dumping duty and import licensing schemes to boost domestic manufacturing.

Next let's look at sectors that will benefit directly from the Atmanirbhar Bharat theme.

Digital India: Revolutionizing the Nation's Digital Economy

The Digital India initiative aims to transform India into a digitally empowered society and knowledge economy, targeting a 20% contribution to GDP from the digital economy by FY '25, with a projected $1 trillion digital GDP by 2025-26. This ambitious vision is already bearing fruit across various sectors.

Key Success Stories:

1. Government Services and Citizen Engagement: The UMANG app, with over 50 million users accessing 1700+ government services, exemplifies the integration of digital platforms into everyday governance.
2. Healthcare Access: The e-Hospital initiative has simplified healthcare access for 380 million registered patients, making medical services more accessible.
3. Digital Literacy: PMGDisha has trained and certified over 50 million individuals in digital skills, significantly boosting digital literacy.
4. Welfare Delivery and Financial Inclusion: Aadhaar facilitates 2 billion monthly authentication transactions, streamlining welfare delivery and promoting financial inclusion.
5. Digital Payments: UPI recorded a groundbreaking 118 billion transactions in 2023, revolutionizing the financial landscape and promoting a cashless economy.

Investment Opportunities:

Digital India is a government initiative and a transformative movement towards a digitally empowered future, promising growth, connectivity, and innovation for all citizens.

1. Telecom and IT Infrastructure: Investment in digital infrastructure, including 5G and broadband expansion, is set to boost the telecom sector and IT services. Companies involved in building and maintaining this infrastructure will experience substantial growth, enhancing connectivity and technological advancements across India.
2. E-Governance and Digital Payments: The push for e-governance and digital payments benefits fintech companies and startups offering digital payment solutions. Enhanced transparency and efficiency in financial transactions will drive growth in digital payment platforms, online banking solutions, and financial technologies, reshaping the financial ecosystem.
3. Tech Startups and Innovation: Digital India fosters a vibrant ecosystem for tech startups. With incentives and support structures, innovation will thrive, leading to new business models and job creation. Startups focusing on AI, blockchain, and IoT are expected to lead this digital revolution. Given these developments, it's clear why many are optimistic about India's future.

For a deeper understanding of the opportunities and potential growth, you can read more in our article, Why we are bullish on India .

Green Energy and Sustainability: Powering India's Future

India's commitment to renewable energy and sustainability aligns with global climate goals, driving substantial growth in the renewable energy sector. The government's focus on transitioning to cleaner energy sources aims to catalyze various industries, fostering an eco-friendly and sustainable economy.

Key Targets and Achievements:

1. Carbon Intensity: Aiming to reduce carbon intensity by less than 45% by 2030, India is taking significant steps toward minimizing its carbon footprint.
2. Renewable Energy: The goal is to achieve 50% of cumulative electric power installed capacity from renewables by 2030 and reach net-zero carbon emissions by 2070.
3. Installed Capacity: As of April 2024, renewable energy sources, including large hydropower, have a combined installed capacity of 191.67 GW, with a target of 500 GW by 2030.
4. Green Hydrogen: The production of 5 million tonnes of green hydrogen by 2030 is supported by 125 GW of renewable energy capacity.
5. Solar Parks: 50 solar parks with a total capacity of 37.49 GW have been approved, facilitating substantial solar energy generation.
6. Wind Energy: An offshore wind energy target of 30 GW by 2030 has been set, with potential sites already identified

Investment Opportunities:

India's robust renewable energy targets and sustainability initiatives are paving the way for a greener future. These efforts not only align with global climate goals but also promise economic growth, job creation, and a sustainable environment.

1. Renewable Energy: Significant investments are directed towards solar, wind, and biomass energy projects. Companies involved in the production, installation, and maintenance of these renewable energy sources will experience substantial growth, reducing dependency on fossil fuels and creating numerous job opportunities.
2. Electric Vehicles (EVs): The government's push for electric mobility benefits manufacturers of electric vehicles and their components, including batteries. Incentives and subsidies for EV production and the development of charging infrastructure will accelerate EV adoption. Companies focusing on EV technology, battery production, and related components will see increased demand and growth.
3. Sustainable Practices: Adopting eco-friendly and sustainable practices is crucial. Companies implementing green technologies and sustainable processes will gain favor, aligning with government policies and global environmental standards. This includes businesses across various sectors, from manufacturing to services, prioritizing sustainability in their operations.

Given the robust investment landscape in renewable energy, many investors are looking towards green energy stocks to capitalize on this growth. For insights into the top investment opportunities in this sector, you can read our article on the Top Green Energy Stock .

Financial Inclusion and Fintech: Catalyzing Inclusive Growth in India

Improving access to financial services is crucial for achieving inclusive growth in India. The government's promotion of financial inclusion and fintech innovation aims to reach underserved populations, driving significant opportunities across various sectors. India is one of the fastest-growing fintech markets globally, with the industry projected to grow from $50 billion in 2021 to an estimated $150 billion by 2025.

Key Growth Metrics:

1. Payments Landscape: Expected to reach $100 trillion in transaction volume and $50 billion in revenue by 2030, the digital payments sector is booming.
2. Digital Lending: The market was valued at $270 billion in 2022, projected to reach $350 billion by 2023, showcasing rapid growth in digital credit solutions.
3. Insurtech: Poised to grow 15X to $88.4 billion by 2030, making India the second-largest insurtech market in the Asia-Pacific region.
4. WealthTech: Expected to grow to $237 billion by 2030, driven by an increasing base of retail investors.
5. Fintech Funding: Indian fintech startups accounted for 14% of global funding, ranking second in deal volume, with $5.65 billion raised in 2022.

Investment Opportunities:

India's commitment to financial inclusion and fintech innovation is driving a transformative impact on its economy. By fostering growth across banking, fintech, insurance, and microfinance, the country is paving the way for inclusive and sustainable economic development.

1. Banking and Financial Services : Expansion into rural areas is a primary focus, driving growth for financial institutions. Extending banking infrastructure to unbanked and underbanked populations will help banks tap into new customer bases, fostering economic development and financial stability. For investors interested in this sector, exploring Top Small Finance Bank Stocks in India could provide insights into potential investment opportunities.
2. Fintech Innovation: Support for fintech startups will foster innovative financial solutions. With initiatives promoting digital payments, mobile banking, and blockchain technology, fintech companies will thrive, offering efficient, accessible, and secure financial services. This will encourage competition, leading to better products and services for consumers.
3. Insurance and Microfinance: Encouraging insurance penetration and microfinance initiatives will benefit companies in these sectors. Making insurance products more accessible and affordable, and providing microloans to small businesses and individuals, will enhance financial security and economic resilience. Microfinance institutions will play a crucial role in empowering entrepreneurs and supporting small-scale enterprises.

Defense and Aerospace

Self-reliance in defense production is crucial for national security. The Indian government is promoting the indigenization of defense manufacturing and investing in aerospace technologies to enhance the country's defense capabilities and drive technological advancements. In the Union Budget 2023-24, capital allocations for modernization and infrastructure development of the Defense Services increased to INR 1,62,600 crore, representing a rise of 6.7% over FY 2022-23. The overall defense budget saw a 13% increase to INR 5.94 lakh crore. The Aerospace and Defense (A&D) market in India is estimated to reach around $70 billion by 2030, driven by improving infrastructure and government initiatives.

Key Targets and Growth Areas:

Defense

1. Indigenization of Defense Production: The government supports domestic manufacturing of defense equipment and technologies to reduce dependency on foreign suppliers and ensure a secure, self-sufficient defense sector.
2. Military Hardware: Substantial investment in the production of weapons, ammunition, and military vehicles.
3. Advanced Technologies: Prioritizing development of drones, cybersecurity systems, and missile defense systems.
4. Defense Electronics: Enhancing local manufacturing of defense electronics, including communication systems and radars.

Aerospace

1. Aerospace Sector: Investments in space research and satellite technology are driving growth in the aerospace sector, aiming to bolster India's position in the global space industry.
2. Satellite Technology: Support for the development and launch of satellites for communication, weather forecasting, and navigation.
3. Space Missions: Investments in ambitious space missions, including lunar and Mars exploration, are driving technological advancements.
4. Commercial Space Ventures: Encouraging private sector participation in space ventures to foster innovation and economic growth.

Investment Opportunities:

With the government's emphasis on self-reliance in defense production and the growth of the aerospace sector, investment opportunities in these areas are becoming increasingly attractive. For those interested in investing in the defense and aerospace industries, you may want to explore Best Defence Stocks to Buy in India Today for insights into potential investment options.

1. Military Hardware: Increased production of weapons, ammunition, and military vehicles will attract substantial investments, enhancing India's defense capabilities.
2. Advanced Technologies: Development of cutting-edge technologies such as drones, cybersecurity systems, and missile defense systems will be a priority, driving growth and innovation in the defense sector.
3. Defense Electronics: Local manufacturing of defense electronics, including communication systems and radars, will be enhanced, ensuring technological self-reliance.
4. Space Exploration: Investments in space research and satellite technology will drive growth in the aerospace sector. Key investment areas include satellite technology, space missions, and commercial space ventures.

Strategic Goals:

The Ministry of Defence aims to achieve a turnover of INR 1.75 lakh crore in aerospace and defense manufacturing by 2025, including exports worth INR 35,000 crore. By focusing on self-reliance in defense production and advancing aerospace technologies, India is set to enhance its defense capabilities and establish itself as a significant player in the global defense and space industries.

Defense and aerospace investments not only strengthen national security but also drive technological advancements and economic growth, positioning India as a leader in these critical sectors.

India's Electronics and Consumer Goods Manufacturing: A Global Hub in the Making

India's ambition to become a global hub for electronics manufacturing underscores its commitment to reducing reliance on imports and bolstering domestic production. Government initiatives, particularly under the Production Linked Incentive (PLI) scheme, are driving significant growth in key sectors.

Mobile Phones and Consumer Electronics

The government's push for local manufacturing, especially under the PLI scheme, incentivizes companies to produce mobile phones, laptops, and other consumer electronics domestically. Electronic exports have become the 6th largest export commodity group as of March 2023. With rising per capita disposable income and private consumption, India has emerged as one of the largest markets for electronic products in the world.

Key benefits include:

1. Job Creation: Increased domestic manufacturing creates employment opportunities across the value chain, from assembly to research and development.
2. Technological Advancement: Encouraging local production spurs innovation and technology transfer, leading to advanced manufacturing capabilities.
3. Economic Growth: Growth in mobile phone and consumer electronics manufacturing sectors contributes to overall economic development and strengthens India's global market position.

Domestic Production and Segmentation:

Domestic production of electronics is valued at $101 billion in FY23. Segmentation based on FY22 data includes:

Government Initiatives:

To position India as a global hub for Electronics Systems Design and Manufacturing (ESDM), several schemes have been launched:

1. Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing: This scheme incentivizes companies to produce mobile phones, laptops, and other consumer electronics domestically, leading to substantial growth in local manufacturing.
2. PLI for IT Hardware: Encourages the production of IT hardware within the country, reducing dependency on imports and fostering technological advancements.
3. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): Supports the manufacturing of critical electronic components and semiconductors, strengthening the domestic supply chain.
4. Modified Electronics Manufacturing Clusters Scheme (EMC 2.0): Facilitates the creation of world-class infrastructure for electronics manufacturing clusters, boosting local production capabilities.
5. Semicon India Program: The Semicon India Program, with an incentive outlay of $10 billion, aims to develop a sustainable semiconductor and display ecosystem in the country

Key benefits:

1. Reduce Imports: Boosting local manufacturing reduces reliance on imported home appliances, improving trade balance and enhancing self-sufficiency.
2. Support Domestic Industry: Incentives strengthen the competitiveness of the domestic home appliance industry, fostering growth and development.
3. Quality and Innovation: Encouraging local production pushes manufacturers to focus on product quality and innovation, meeting the evolving needs and preferences of Indian consumers.

India's commitment to electronics and consumer goods manufacturing is not only reducing dependency on imports but also fostering job creation, technological advancement, and economic growth. This strategic focus positions India as a significant player in the global electronics and consumer goods market.

India's Automobile Sector: Driving Towards a Sustainable Future

India's automotive sector , especially in the context of electric vehicles (EVs), is poised for significant growth under the Atmanirbhar Bharat initiative. The Indian electric vehicle market is projected to grow from $23.38 billion in 2024 to $117.78 billion by 2032, at a CAGR of 22.4% over the forecast period, according to Fortune Business Insights. This substantial growth underscores the rapidly increasing adoption of electric vehicles in the country and the expanding market opportunities. Read more in our detailedarticle on Indian Electric Vehicle Sector Booming: EVs Tipping Point.

Key Growth Projections:

1. Electric Vehicle Market: Expected to grow at a CAGR of 22.4% between 2022-2030, with the market reaching $117billion by 2032.
2. Automobile Market: India's auto market is projected to reach USD 300 billion by 2026.
3. EV Market Milestone: India is projected to become the third-largest EV market by 2025, with 2.5 million EVs on the roads.

EV Adoption Goals for 2030

• Private Cars: 30% of sales
• Commercial Vehicles: 70% of sales
• Buses: 40% of sales
• Two-Wheelers and Three-Wheelers: 80% of sales

Investment Opportunities:

India's drive towards electric vehicles presents a massive investment opportunity of over USD 200 billion over the next 8-10 years. Key areas of investment include:

1. EV Manufacturing: Incentives for manufacturing electric vehicles and their components, including batteries and charging infrastructure, will boost this sector. The focus on local manufacturing reduces dependency on imports and fosters technological advancements.
2. Auto Components: Encouraging local manufacturing of auto parts will reduce reliance on imports and foster growth for domestic suppliers. This initiative supports the entire automotive value chain, enhancing self-sufficiency and economic resilience.
3. Electric Two-Wheelers and Passenger Vehicles: According to a Bain & Co. report, electric two-wheelers could make up about 40 to 45 percent of all EVs sold in India by 2030, while electric passenger vehicles could account for 15 to 20 percent. This shift is driven by government incentives and growing consumer demand for sustainable transportation options.

Strategic Goals:

India's ambition to become a global hub for electric vehicle manufacturing aligns with its broader goals of achieving sustainability and reducing carbon emissions. The government’s target to significantly increase the share of EV sales by 2030 reflects its commitment to fostering a greener, more self-reliant automotive industry.

India's automotive sector, particularly the electric vehicle market, is set for transformative growth. With strong government support, substantial investment opportunities, and ambitious adoption targets, India is well on its way to becoming a leader in the global EV market.

To capitalize on these emerging trends, consider exploring our curated Smallcase, Wright New India Manufacturing , is designed to help you invest in companies benefiting from these strategic initiatives.

Conclusion

The 'Atmanirbhar Bharat' initiative has transcended its initial vision, evolving into a robust and profitable strategy that promises to reshape India's economic landscape. By focusing on self-reliance across strategic sectors such as digital infrastructure, green energy, financial inclusion, defense, aerospace, electronics manufacturing, and the burgeoning electric vehicle market, India is positioning itself as a global powerhouse. Each of these themes offers substantial investment opportunities, driven by government policies, technological advancements, and increasing domestic capabilities. As India continues to embrace self-sufficiency and innovation, investors stand to benefit from the country's dynamic growth trajectory. The ongoing transformation under the 'Atmanirbhar Bharat' mission not only promotes sustainable economic development but also reinforces India's role as a pivotal player on the global stage.To capitalize on these emerging trends, consider exploring our curated Smallcase, Wright New India Manufacturing is designed to help you invest in companies benefiting from these strategic initiatives.

Wright New India Smallcase

We are launching a new portfolio to invest in the Atmanirbhar theme! In the chosen sectors and industries based on the announcements in the Atmanirbhar initiatives, we invest tactically based on announcements, projections and trends.

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We are bullish on the India Growth Story. We have been doing this for you for over 4 years, with 25,000+ investors and Rs. 650cr+ AUA (Assets Under Advisory). Our New India portfolio has been doing well. Here's the return performance (in % terms) of the New India Portfolio against its benchmark, Smallcap Index is -

Over a 3 year horizon, ₹1 Lac invested would have become -

Here are the key performance metrics of the New India Portfolio against its benchmark, the Smallcap Index -