Agencies Related Recovering growth at reasonable valuation will see outperformance this year: Rajat Rajgarhia Time to be overweight on domestic cyclicals: Mahesh Nandurkar, Jefferies Ravi Dharamshi on 3 mega trends in market now & how to play them Budget 2022: Highlights “The only rule I have is there are no rules.Therefore we examine company by company, situation by situation.We do not reserve our mind that it is a public company or a private company,” says Rakesh Jhunjhunwala , Owner, Rare Enterprises.
There is a chatter amongst a lot of global brokerages that Indian markets are trading at a premium to other emerging markets…
So they sold off Rs 1,37,000 crore and it has been absorbed.They are not God.They sold and what happened?
You have been telling me always that domestic investors will come back and they have come back.
Are they here to stay? Is that asset allocation changing?
People said eight crore demat accounts are opened.What about 80 crore? In times to come, India will have $2-2.5 trillion of savings.Where is it going to go?
Is this just the beginning of what could be called a shift in asset allocation by Indian investors, according to you?
There are four ways of saving – real estate, jewellery, our own business or financial assets.The percentage of investment coming into financial assets will go up dramatically, savings will go up dramatically and the portion of financial assets coming to equity markets will go up dramatically.So it is going to be a big whammy.
The Indian market is trading at a premium to other markets.
Is that justified?
But we were always trading at a premium.Japan at the bottom also had a higher PE than America.So we are always trading at a premium.
Also Read: Along with IT, I am bullish on metals, infra & hospitality
There is a reason to believe that it will only stay like this because of earnings, corporate governance, government policy?
The day we reach corporate profits of say 8% of GDP, they will contract.
Rakesh Jhunjhunwala at the beginning of the Covid said:” I am very, very, very happy investor in Tata Group of companies.” Some of those companies have seen remarkable turnaround – be it Tata Motors, Tata Consumer and even Tata Communication.Is it one time depressed re-rating over for Tata Group of companies?
I cannot answer that question whether it is behind us or ahead of us, I am very bullish on the price just.
I still think there is a long journey.
Tatas are trying something very interesting; they are going very big in the EV chain through Tata Motors, Tata Power and Tata Chemicals.Are you excited about that?
I am very excited about the vehicle space.
They will become the biggest player in India and also in the developing world on electrical vehicles.Where in the world can you get an electric car for $10,000?
The last time when we met, you said Tata Motors – with a disclosure that you have invested in it –is at the verge of a transformational change.Which is the next Tata Company at the verge of transformation?
I am searching.When I find one, I will call you.
The thesis of why you like Tata Group of stocks is because you said Chandra is cash flow oriented, he understands technology, he understands skill and he talks about size.
And he is a sensible risk taker, an aggressive but sensible risk taker.
So your thesis and belief in the Tata Group and what Chandra is doing remain intact?
Absolutely.
You mentioned about PSU banks but in the last one year, private banks have not participated.HDFC Bank, Kotak Bank have.
That is exactly my call.The public sector banks are going to outperform the private sector banks by far in price performance over the next three years.
But if the credit cycle starts, private banks will also do corporate lending.
No they will do corporate lending but they were already doing it and their cost to income ratios are low.Their debts, their NPAs were low.We have seen the best of the private sector and what is the difference of valuation.
After doubling, the market cap of Canara Bank is Rs 45,000 crore and it has a book as large as ICICI Bank.I am not saying the banks or the other banks will not outperform.I think the PSU banks will outperform.
Three of your private companies have gone public in the last two years – Nazara, Metro and Star.Where do you see more value as an investor – private space or public space?
The only rule I have is there are no rules.Therefore we examine company by company, situation by situation.We do not reserve our mind ki public hai, private hai.
Right now, you are saying that you have enough opportunity in the market?
Yes, if I have money, I can see a lot of opportunities.
I can assume you are fully invested ?
Yes, in debt.
There is one Quote: of yours which you have always expressed on various forums which is that I have made my money by trading, but an average investor should not trade.
Why should one not trade?
Just because there is empirical evidence that if 100 come to trade, 99 lose money but trading is very exciting and so people want to do it.
If you have to divide the market into two or three parts, that is what you always do.India has a market cap of $3 trillion.
How much of the market to your mind is overpriced? How much of your market is underpriced?
I am looking at my stocks.Titan has been overpriced for life.I would have sold Titan at a value of Rs 2,500 and today it is at Rs 50,000.
Why does that happen? Why do stocks sustain such high PE multiples?
Because there is corporate governance, growth prospects, transparency and cash flow and there is market leadership.
There are two types of expensive stocks.
One consists of companies which were made on imagination and valuations and second are companies like Titan or Asian Paints or Pidilite, which are great companies but expensive.
What is the future of the good companies but where PE multiples are out of whack?
In the case of the PE multiples, you may have discounted next two years earnings.I have sold 5 crore shares of Titan and whenever I have sold, the price has gone down.
In 2010, we were at Oberoi at an event and you said if Titan does not become a billion dollar investment for me.I will take that investment to my grave.Would you like to extend that list now with some more names?
I have two investments which are individually a billion dollars.
For Titan, it is $1.75 billion and there is Star Health.
Is the worst behind in the health insurance sector now?
Hopefully.Hopefully.
This is an amazing sector is not it because the need of health insurance has increased and numbers are not there?
But ultimately if the claim ratios do not come down, we will have to increase the premiums.There are two views why we may have to do it.One is of course Covid.The second is an aggressive increase in hospital costs.
There is an inflation of 40-50% in hospitals in the last two years and this is not going to go away.
But you own hospital stocks and healthcare stocks like Star Health.Can they coexist because one has to lose for the other to gain?
No, no, not necessarily, both can gain.
Are you disappointed as an investor in pharma?
I am not disappointed.I did not choose the right companies.
I am disappointed with my judgment.Why should I blame anybody?
But something keeps on periodically going wrong for pharma.Sometimes it is pricing power, sometimes it is USFDA, there are multiple challenges.All of us thought a couple of years ago that pharma will go the IT way.The bent of the curve has been very different?
Yes, it has been different.The US generic market has not been very healthy partly because of the Covid.
Everybody is talking about the risk which is associated if there is a crypto meltdown.
Could that impact other asset classes in a risk off environment?
Yes, it could but see the class of investors investing in equity and crypto are totally different.I think crypto will collapse one day.
Where will they invest then?
You are a very quick decision maker, some of our common friends tell me that you take a decision to invest millions in 10 minutes.You do not take hours, you take minutes.How does it work?
You got to catch the vital points and second thing is I do not want analysis paralysis.You are investing in an uncertain future.
You cannot predict it beyond a point.
Some of our common friends are telling me that you have decided to go easy on trading.Are the rumours right?
I have felt that for the last 25 years but not yet.
Once a trader, always a trader.Since you have technology investments, I am sure you are abreast with the meta avatars which everybody is talking about, the meta world.
I do not know what it is.
For an SIP investor, in the next two, three years, is there a probability and a possibility of a double digit return?
It is always difficult to predict.The return will be more than that I think.
The view on the Street is that we had a good 2021, double digit return for indices, more than 40-50% for small and midcap indices.This could be a flat year with low returns, Do you agree?
No, I do not think it will be a flat year.
I think it will be a positive year.
What do you think is in store for this year?
I can predict the direction, I cannot predict the depth.
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