The market turns out to be a tough market on Monday. Guess the market takes into account all the Covid news around us?
Obviously the second wave looks to be worse than the first and I think we will see some weakness in the market. Around the same time last year, Covid was a completely unknown enemy. We saw what happened 12 months later. We saw a record $ 135 billion in foreign flows, of which LPI was $ 23.5 billion, FDI was $ 64.7 billion, and venture capital and private equity reported 47 , 5 billion additional dollars. Foreign money will invariably return to the market as it becomes cheaper. Today, American consumers have $ 2 trillion more in cash than before Covid and that’s money in their bank accounts. This money will find its way into global stock markets, emerging markets and, therefore, India. So yes, what we are seeing this morning is alarming but that doesn’t mean you are going to panic and start selling. I would like to hold on and consider buying more if there is a dip.

You say that foreign money will find India attractive after this drop. Won’t the weakness of the currency be an irritant and a brake on the penetration of foreign currency in India?
I think the rupee having fallen to 75 and a little lower than that may be a temporary phenomenon. Temporary doesn’t mean a week but historically the rupee has depreciated 5-6% per year as foreigners are well aware that they are putting money to work in India. I don’t think it’s really a shock absorber.

Those who bought the panic last time are rewarded. But history may not repeat itself as the circumstances are different, the price points are different, and the forward macros are also very different.
It’s just. Personally, I am of the opinion that history will repeat itself for the following reasons: First of all, look at where interest rates are in the world and a lot of people say that inflation is slowly falling, but the Fed America has clearly stated its role in keeping rates at current levels for the next 18 months. They said that about six months ago, so I’m guessing another 18 months. From a global liquidity perspective, the United States has had one of the most important monetary policy responses to Covid.

The Trump administration has spent $ 3 trillion on fiscal stimulus. The Biden administration released an additional $ 2 trillion, which translates to $ 5 trillion into the economy in about 13 months. It’s enormous. In addition, the United States is forecasting Infra spending of $ 2.3 trillion. China spends on infrastructure, as does India. In our annual budget, expenses are up 35% compared to last year.

Besides the cash flow, a number of governments are considering spending to get out of this recession and as a result, I see that a lot of money is physically available to invest in global stock markets including India. I’m not saying the money will come back in two or three weeks. Foreigners have been selling for a few weeks, but I bet the money will reverse and come back despite what happens in the field and the currency.

Are flows the only reason you’re optimistic because flows can be fickle?
If you look at global equity flows over the past 12 months, these are equity funds aimed at global equity markets – not just the US, emerging markets, or India. Over the past 12 years, the amount was $ 452 billion. But in the last five months we’ve seen $ 569 billion. This tells us how much money there is that obviously needs to find a home.

The other thing to keep in mind is that there is a little TINA factor (there is no alternative). If you look at the interest rates, given that the estate is doing very well in the United States, people think it could be a bubble, but the reality is that there are very few areas to gradually invest in. your money and therefore the stock markets are always going to be motivated by fairly large flows of funds.

Having said that, before the start of the second wave, a lot of people had assumed that there was some kind of shift from an economic stimulus standpoint. I remember receiving over 100 calls after the results of the conference calls after the third trimester. At least 15 of these companies had their best quarter in history. We don’t just look at the numbers year over year. They are talking about the best quarter of their history, which is remarkable. The cyclical recovery had therefore started. This will slow down a bit.

The good news is that unlike last year, we actually have the vaccine. So hopefully if the government acts fast enough and inoculates more people, things will improve. Again, it depends on the government’s response. I’m sure they’re working on it as we speak, but if it gains momentum I’m confident we’ll see a much faster recovery than what the market is telling us today.

We all hope that the magic of vaccines will kick in very soon. Is the sale exaggerated in corporate banks?
In a certain way. Stress seems to be more presently in NBFCs than even in corporate banks and that is why we had a call recently as part of a leadership series from Nepean Capital with an expert on bankruptcy, the NCLT process. and NPLs in general. What he said was interesting. The regular sectors where we have faced tensions over the past five to seven years are tourism, real estate, metals. Metals and steel in particular have now been replaced by NBFCs. We had a position in one of the microfinance companies. We actually suffered a loss and left that position. These are the areas we are skeptical about when it comes to commercial banks. Our preference would always remain private banks.

There has been a huge pipeline of IPOs at the end of 2020 as well as 2021. There is also a huge technological gamble. How do you see the interest in this space – global digitization and Nazara as well as the interest in some of the players listed like InfoEdge, Matrimony, etc.?
That’s a great question because I know a lot of people who over the last three years or so have invested in the United States due to the lack of a number of listed players here. This is going to be a very exciting 12 month period as we have seen more games and tech companies that is, non-software, physically listed in India which is fantastic.

The question to ask is: will listed markets get the same valuation as VCs and PEs? These valuations are astronomical – InfoEdge with a valuation of Rs 65,000-70,000, IndiaMart Intermesh at around Rs 26,000-27,000. Everything after that is under Rs 5,000-6,000. So there is a huge possibility of adding more businesses. Besides Nazara, there is also Onmobile in the space listed in terms of games. The next 12 months are going to be very exciting. Let’s see how the listed market values ​​these companies versus how VCs and PEs value them.

Where will real foam come from on the market? Will it be mainly driven by large caps? How do you see the overall valuation?
Being that we are a mid and small cap fund, we have done quite well. Over the past four years, the Nifty midcap index has significantly underperformed the Nifty50 and therefore, now is the time to invest in midcaps. The Economic Times itself ran an article in which it says that, over time, a lot of money seems to be flowing into mid and small cap funds. We believe this would be the best time to gradually invest in mid and small cap funds.

The Indian stock market is in a certain sense quite unique as around 12 to 13 industries in India are mostly dominated by mid-cap companies. In cement, for example, the top three companies are in the large-cap area, but everything thereafter is in mid-cap and small-cap.

The same goes for chemicals, auto accessories, building materials and contract manufacturing. The biggest is Varun Beverages, which has a market cap of just Rs 28,000 crore. So In the hotel industry, the market capitalization of Indian hotels is Rs 12,000 crore. There are so many sectors that offer very interesting and exciting businesses and I would recommend people to take a gradual look at that. Yes, I don’t agree with that, but in fact, this is where we think we should be gradually investing money.