What are your takeaways from the earnings? What are you picking?
Luckily, I don’t look at broad macros like GDP, inflation etc. which impact earnings; I look at my stocks bottom-up, and I generally have a mixed bag. Some have reported very good earnings, or some have reported disappointing earnings, for whatever reason, may be because of rupee depreciation, or because of the US slowdown. But overall, the market seems okay. Liquidity is good; visibility is decent. So, on the whole, my advice to most people is to remain invested. There’s obviously a lot of fear going on that the US markets are likely to fall, but that’s been there for three years. I mean, we can’t live our lives in fear all the time. We buy good companies, good businesses, and remain invested in them, which is what we’re doing, right?
You said there were some laggards and some outperformers. What’s worked for you?
I don’t have any commodity-based companies, but some of the defence stocks did pretty well. I was happy with the numbers that came out. A couple of auto ancillary and engineering companies also did well. Some of the media stocks didn’t do very well. I don’t have as much exposure to IT stocks anymore.
But overall, I expect good and bad numbers. I don’t expect uniformly good numbers or bad numbers, because I’m putting more money through, you know. So, I’m willing to take a longer view than most people, and unlike most people, I don’t sell when a bad quarter (earnings) comes.
So, you’re there for the long haul?
Everything is for the long haul only. So, we don’t really care. I mean, it’s just three bad quarters, and then, as long as structural stories are intact, we are okay.
From the macro point of view, do you feel interest rates and inflation are under control?
Inflation is under control. Interest rates will probably come down. We worry about the global macro, you know, but that’s all we worry about. I mean, I don’t plan my life based on these fears.
Inflation is under control. Interest rates will probably come down.
Some of the initial analyses suggested that we are not that bad off. Even after the US trade tariffs went to 50%, it hasn’t pinched so far. Maybe down the line, we may feel the pain?
Yes, it has largely impacted sectors such as jewellery and shrimp exports, many of which are absent from the listed space.
So, what would your advice be for a retail investor—go through mutual funds or stock-pick?
It’s a bit more complicated than that. If you don’t have time, invest in an index fund. You’re busy running your own business, you’re busy taking care of the kids, whatever, then that’s what I suggest, for most people, go into passive funds. That’s the best thing. If you don’t have time and still want to be exposed to the markets, go into passive funds. But if you want to get rich, you’d better start picking stocks. That makes a huge difference between picking stocks and index funds over time. So, my job is to pick stocks. So, that’s what—I won’t tell anyone not to pick stocks, but if they don’t have time, and they’re busy running their own business or taking care of their family, at least be exposed to the market.
How do you see the opportunities available in the primary market and the IPOs that come with the high valuations?
I think there’s enough liquidity. What happens is that anytime something goes up sharply, people talk about bubbles. It’s not that easy to spot a bubble. When you’re living in a bubble, you don’t understand. It’s only afterwards that you expect it. So it’s fine. The market is absorbing. Some gain, and some lose. So, the primary market, the secondary market and the global markets are all okay. Am I worried? Yeah, I’m always worried. That’s true in three years, even during covid, I was worried. But just because you’re going to die doesn’t mean you don’t want to live. I mean, you still have to live every day. So, the same thing applies to the markets. We know all bull markets will end. And so will this one. So will the Dow at some point. But that doesn’t mean you don’t participate in it. I see no reasons or no signals that the markets have topped out. The market will give you signals that it has topped. I don’t see that yet.
There is concern that IPOs of new-age companies are issued at high multiples, and that some mutual funds are subscribing at those levels.
People who say this are looking at the market in one dimension. Yes, it’s a high P/E ratio. These are digital businesses. They can scale up very easily. Three years down the road, I guarantee they won’t be that expensive as cash flows pick up. I won’t look at the market in one dimension of a P/E ratio. That’s one ratio. Look at the many other ratios, cash flow, opportunity, size… So, they’re making that mistake. Mutual funds are basically smart money. I mean, they are answerable to the shareholders; if they perform poorly, they lose the money. So, we should stop being in a nanny state in India, saying we control everyone. It should be a free market, and that’s the way it should prosper.
What worries you at this stage?
Everything worries me. Does the Dow worry me? Is AI in a bubble? Will it burst? Yeah, of course, it worries me. But is it going to burst imminently? It’s not going to burst any time soon. So, the difference between 2002 and 2025, when you had the dotcom bubble, is that they were laying the optic fibre cables like there was no tomorrow. Those deploying the fibre knew that at that time, only 3-5% of the pipes would be lit. The rest will be dark fibre, which means overcapacity. We’re nowhere near that level of overcapacity at this point, and the utilization of AI by almost everyone is increasing exponentially across business, education, and professional settings. So, they’re nowhere near utilizing the full capacity of data centres, which is where the big capex is going. So, the party will continue. Obviously, I worry about all these things. As the adage goes, the ship is always safe in the harbour, but it’s designed for the high seas. The same way, your money is always safe in a bank FD, and you won’t lose any money. You’ll make 8%, but inflation is 8% and what are you going to do? Do you want to get killed in life? You need to go out and put your money in good businesses. Like always. I’m not a great advocate of putting it in passive funds, because that’s my job, capital allocation. But if you can find good stocks, I mean good businesses, you should put it in those.
Is AI in a bubble? Will it burst? Yeah, of course, it worries me. But is it going to burst imminently? It’s not going to burst any time soon.
Are you worried about the currency weakening?
Three and a half per cent annually is par for the course. We will always have it. They want that depreciation. Should we have a stronger currency? We should. But the tech boys will be up in arms, and the export boys will be up in arms. So, I don’t believe we’ve reached that stage, that we will have an appreciating currency.
Do you expect a rate cut?
A 25 basis point cut this year. Inflation has gone down and GST is helping this.
The impact of GST rationalization will also be felt in the December quarter, right? Are there any sectors that you’re looking at which you don’t have in your stocks, which are interesting to you at this point?
If I knew, I would be buying them, but I don’t know too many of them. I’m a bit underexposed in the new-age economy stocks, but they seem to have just run away. Sometimes, it doesn’t work, but I would like to build some position into new-age stocks.
Since you meet many FPIs sitting on a very large portion of equity assets, and you know that they are selling, what is the sense you get after speaking to them?
Yeah, but it really doesn’t bother me anymore. It used to be earlier. They used to be the most important number in the market, and now I barely look at it. Domestic liquidity is so strong, and I always tell people that for any volume of shares, there is a buyer and a seller. So they (FPIs) might be selling, but there is always a buyer. So, that’s fine. So, if they come back into the Indian market at some point and the domestics are buying, there’s going to be a melt-up. So, you know, it’s because of the domestic liquidity. We’ve actually been well-buffered.
