China curbs help make Indian industrial firms world beaters

Indian companies are dominating the ranks of the world’s best-performing industrial firms as they benefit from neighbouring China’s pollution crackdown and billions in domestic infrastructure spending.

Of the 15 best-performing stocks over five years, eight are from Asia’s No. 3 economy and range from graphite electrode makers to equipment providers. Companies such as HEG, Graphite India and Finolex Cables have benefited from China’s pollution control measures as well as India’s pledge to electrify even the remotest village, said Gopal Agrawal, portfolio manager at Tata Asset Management, which oversees $3 billion in equity funds.

Prime Minister Narendra Modi’s focus on electrification has buoyed demand for cables and wires used in the power sector. India added 100,000 circuit kilometres of interstate transmission capacity in the last four years, according to a June 5 statement from India’s power ministry. The nation has also pledged to spend $88 billion this fiscal year on roads, railways and other infrastructure.

Its neighbour to the north meanwhile has tightened emission norms that spurred steel production from electric arc furnaces, which use graphite electrodes to process steel from scrap. With supplies also constrained, graphite electrode producer HEG’s stock surged 1,457 per cent last year, outpacing Bitcoin’s gains, and has climbed 45 per cent so far in 2018.

“Graphite is a godsend opportunity from China,” said Agrawal, whose firm has the third-largest equity exposure to the industrials sector. “If China relaxes its environment pollution norms, that could negatively impact the party for India’s industrial firms.”