Approach to Cyclical

Clycical Impact on Basamati Sector:-
1. Lack of Margin of Safety: Even though the business was quite strong, the run up in 2017 was not justified and the stock would need to fall to be a good investment.

2. Increase in Basmati Production: Last year was a dream year for basmati rice producers with paddy prices toughing life time highs.

This was due to the reduction in the area under cultivation for basmati by the Government of India. Lower production led to high prices.

However, this year, the government has again increased the area under cultivation for basmati rice.

This would normalise the paddy and basmati rice prices. That would bring an end to the euphoria.




Cyclical Impact on Shrimp Sector:-

1. Run up in 2017 was not very convincing which command a very high valuation.
2. Shut down and deases outbreak in other shrimp producing region help this growth along with bottom out raw material cost for shrimp feed.

Cyclical Impact on Shrimp Sector:-
1. Factory Shut down in china due to pollution issue.
2. High import duty impose by India for the products.

Conclusion:-
 Check for the things before investing in cyclical
  1. Check the raw material price level like for shrimp feed or reduction in area under cultivation.
  2. Check the value migration condition like Chemical factory shut down, Deases out break, low base growth etc.
  3. Check the Election year where the populist policy is expected also the political condition and govt policy outlook towards the farmer.
 4. Check Oil price impact to this industry like Airlines , Chemical sector has direct impact on it while logistic and FMCG has indirect impact.
 5. Also check the life cycle for some capital goods, battery/auto ancillary industry products.