What do you think of the Samvat gone by and what is in store for us? Do you think that this bullish trend is intact and reflecting the ground reality?
In April, there was no hope to be anywhere close to where we are now. I think we were looking at the absolute abyss. So I think we must thank our stars more than any stock picking or foretelling of any kind and, of course, the Federal Reserve for the money. This market has taught us that long-term investing in a general market does not work. You barely get double-digit returns year-on-year.
You could have a fantastic market but a bad portfolio if you did not pick your sectors correctly. If you did not have pharma and IT in your portfolio, imagine what the portfolio looks like. The last lesson is that there will always be a correction and you better have money on the side. Keep your powder dry. You will get chances to get in. Euphoria does not give you returns. Despair in the market gives you return. I think that is the lesson that we learnt this year and I think we need to hold on to that theory, otherwise we may be pretty disappointed with our portfolios even though next Diwali the market could be at another high.
On money-making ideas
I am not allowed to recommend. But we have taken a call on ITC as one of the cheapest good quality stocks available. If the governance system works, they can make Rs 12,000 crore EBITDA on assets of Rs 10,000 crore in a year and on the rest Rs 65,000 crore assets, they make EBITDA of Rs 4,000 crore. So if they give the money back to shareholders, we could be in for a windfall.
Vedanta is the second stock. If the governance overhang goes away, it is a priceless stock in the commodity sector in India. There is no better stock to play the commodities game.
I like HDFC Bank and ICICI Bank. We we continue to keep them.
The last point is to keep your powder dry. You will get correction. If you are buying in this kind of market, you could be disappointed next year. Do not diversify, focus on sectors.
IT, pharma and Reliance has done well so far this year. Anything looking frothy there in the near term? Do you need to ease off your positions there?
I do not think I want to ease off my positions there. The second-tier pharma is going to outperform the top-tier because M&A consolidation will give us a major play, and they are being better with more expansion. So the returns from Sun Pharma and Dr Reddy’s, etc will disappoint you. Shift your portfolio down to tier-II pharma companies. Those on the manufacturing side are going to get a major boost from the PLI scheme. You will get lots of good surprises of takeovers. Buy and keep them. You will get an offer very soon in the mail.
IT produces so much of cash and you will get lots of dividend as well. So people who love dividends should go and buy them. When you are looking at dividend, do not forget that India has a beautiful REIT stock called IndiGrid. Even today it gives a yield of 11 per annum when FDs are getting 7 per cent. So look at REITs as one of the option.