Stocks based out of Andhra Pradesh, where the ruling TDP is a key ally in the Centre, saw heightened investor interest after Finance Minister Nirmala Sitharaman announced a Rs 15,000 crore state package in the first Budget of the Modi 3.0 government.
Beyond the budget announcements, the bet was also that Andhra CM Chandra Babu Naidu, who is widely credited for turning Hyderabad into a tech hub, would do something similar to the capital city of Amravati. Some of the stocks, like Heritage Foods and Amararaja Energy, are also promoted by people connected to the TDP.
While it would be too early to judge the performance of Naidu and the development projects taken up by the state government, investors who bought into the euphoria last year for short-term tailwinds around some of these companies are licking their wounds.
Heritage Foods, Amararaja Energy, Aurobindo Pharma, Avanti Feeds, Sagar Cement, Godavari Drugs, Godrej Agrovet, Heritage Foods, KNR Construction, Likhita Infra, KCP, and a few other names garnered a lot of traction post the election victory and post Budget last year.
None of these stocks have even gained in double-digits in the last six months, with the highest return being just 4% by Godavari Drugs. Of these 11 stocks, as many as 9 are trading in the negative since the Budget.
Chandra Babu Naidu has a strong reputation as a growth-oriented politician, and the fact that he holds significant bargaining power at the Centre to mobilize funds got the market excited.
Heritage Foods, in which Naidu’s son Nara Lokesh is a promoter, is down as much as 25%, while Amara Raja Energy, whose promoter is a former TDP MP, slumped 30%.
Avanti Feeds, apart from Andhra related euphoria, also received an additional promise from Sitharaman around improving finances for shrimp farming and marketing. The stock, however, didn’t live up to the expectations, with a mere 1% return since then.
Strategies For Investors
In light of these developments, investors should consider several strategies to navigate potential market volatility:
- Diversification: Investors may want to diversify their portfolios across different sectors and asset classes to mitigate risks associated with specific industries that could be adversely affected by Trump’s policies.
- Focus on Domestic Companies: Companies with a strong domestic focus may be less vulnerable to international trade disruptions. Investing in firms that are less reliant on imports or exports can provide a buffer against tariff-related risks.
- Monitor Inflation Indicators: Keeping an eye on inflation data will be crucial. If inflation rises significantly, it may prompt the Federal Reserve to increase interest rates, which could adversely impact stock valuations.
- Stay Informed: Following news related to Trump’s policy announcements and their implications will help investors make timely decisions. Understanding how these policies affect different sectors can guide investment choices.