Introduction
A recent interview with Nomura’s global investment banking head Masahiro Goto highlighted Japan’s bullish outlook on India as a vital strategic market. Japan sees India as an integral partner for future manufacturing needs and consumer spending growth over the coming decades. This has wide-ranging implications across industries and public companies in India.
Analysis for Layman
Japan Considers India an Essential Manufacturing Hub and Consumer Growth Engine
Japan considers India an essential manufacturing hub and consumer growth engine for the future as incomes rise.
Keen Interest from Japanese Automakers, Consumer Brands, and Financial Giants
Japanese automakers, consumer brands, and financial giants are keen to tap into India’s huge population.
Investment Opportunities and Competitive Risks
While this brings investment, it also poses competitive risks for incumbent Indian companies.
Original Analysis
Impacts on Retail Investors
Potential for Strong Stock Price Appreciation
Potential for strong stock price appreciation in Indian companies gaining Japanese investments.
Attractive Long-term Upside in Key Sectors
Attractive long-term upside in sectors like automotives, consumer goods, and healthcare.
Portfolio Considerations for Retail Investors
Retail investors should identify and research stocks in these industries for portfolio returns.
Impact on Key Sectors
Automotive Sector
Automotive: Maruti Suzuki, Mahindra&Mahindra set to see boosted revenues as more production and sales likely from Japanese automakers expanding capacities. However, risks for Tata Motors, Bajaj Auto competing directly with efficient Japanese mass market cars and two-wheelers.
Consumer Goods Sector
Consumer Goods: Higher growth forecast for Titan and Asian Paints as Japanese lifestyle brands enter India. But Patanjali, HUL may face pressure.
Financial Services Sector
Financial Services: Major opportunities for leading private banks like HDFC and ICICI to enable rising Japanese investments. NBFCs also stand to gain. Public sector banking still needs reforms to attract foreign capital.
Healthcare Sector
Healthcare: Rising demand seen for Parkway, Apollo Hospitals etc. as Japan expands affordable diagnostic access and holistic treatment for ageing population.
Long Term Benefits
Alignment with Make in India Goals
Attracting Japanese investments aligned with Make in India goals.
Employment Generation
Employment generation for over 10 million jobs across logistics, retail, and associated sectors.
Knowledge and Tech Transfers
Knowledge and tech transfers across automation and smart manufacturing.
Short Term Benefits
Gains for Consumer Stocks
Consumer stocks to see gains from launch of Japanese brands.
Expansion Opportunities for Export-oriented Manufacturers
Export-oriented manufacturers can expand sales into Japan.
Negatives
Short Term Disruption
Disruption short term from supply chain adjustments.
Margin Pressures
Margin pressures for two-wheeler makers and small car companies.
Gainers and At-Risk Companies
Gainers from investments: Maruti, Mahindra&Mahindra, HDFC Bank, ICICI Bank, Titan, Apollo Hospitals
At Risk: Tata Motors, Bajaj Auto, Hero MotoCorp, TVS Motors, Dabur, Patanjali
Conclusion
Japan’s strategic embrace to make India manufacturing and innovation hub aligned with priorities.
Over $30 billion investments expected over 5 years as geopolitical equations change.
Opens up new possibilities for investors and corporates chasing growth.
Citation: Dhanjal, Swaraj. “Japan Big on India’s Consumer Market and Manufacturing: Masahiro Goto, Global Head of Investment Banking, Nomura.” The Economic Times, 7 Dec. 2022.