Is there any pocket that you would be a little wary of purely because of the news flow coming in from the UK? Maybe globally linked sectors like metals?
You always need to be cautious. The biggest caution that we can exercise is if there is a significant fear of inflation, which is not the case today. One thing that could be a problem is if the US Fed decides to tighten this easy money policy any time soon. The other thing that is benefitting India is that people are moving money from developed markets to emerging markets. So whether it is the DM to EM diversion in capital flows or the other macros that we talked about, right now, there is nothing on the horizon which indicates that you need to get scared other than a run which has caught people completely off guard. The size and the extent of the run has been breathtaking. There will be pauses on the way, there will be corrections but with a two-year view I have no reasons why people should not be in equities as the asset class to make the most amount of money.
Kotak, HDFC Bank, Bajaj Finance are at all-time highs. SBI, Axis Bank are not at record highs. I am not even getting into IndusInd Bank, RBL and other banks. What are markets telling you?
Typically we do not talk stocks but just to make a disclosure, sometimes we need to mention a name or two and some of these will be there in my personal portfolio. From a Prime Securities portfolio, we do not hold stocks. It is purely advisory. So there is no conflict there. But something like SBI will be bought literally on every dip and there is no reason that the market cap is where it is today.
It can easily go 2x from here over the next 24 to 36 months. Similarly, I think there will be, mark my words, a mad scramble for Tata Group stocks. Today we have seen a big surge and big rerating in Reliance as a stock. We will see a similar thing in Adani Group of stocks and people have not participated that much in the Adani Group.
From an industrial house perspective, the Tatas other than all their qualities of governance, all their qualities in terms of transparency etc in the last few years have added a very sharp commercial focus to a lot of decision making. Tata Motors could become debt free in two, two-and-a- half years. Capital allocation is going to be extremely critical. Free cash flow is going to be the metric and there is going to be a mad scramble for Tata stocks.
And they are increasing their holdings in whether it is Tata Motors DVR, Tata Chemicals etc. There are insiders buying Tata Power, all this is disclosed. And if you take the global theme including the fact that the new president in the US is geared towards alternative fuels, a lot of thermal portfolios of big energy companies will now remain broadly constant and they will move into solar, hydro, wind etc. That means companies like Tata Power could be huge beneficiaries of this both in terms of capital flows and valuation.
So Tata Power, Tata Consumer, Tata Motors, Tata Steel could take big investors’ fancy in terms of structural movement of interest in that space. Instead of talking about industries or stocks, I am talking about a group which could be a slight variant from the themes that normally has. The Tata Group stocks would be led by TCS which has been the best in the pack and the largest in the business.
There is an alternative theme I want to talk about. People have been talking about why there are so many retail and HNI investors in the market. A number of HNI and retail investors were in small businesses that have actually become either obsolete or have been bludgeoned out of business or to shut shop because economies do not work and consolidation is on.
Many of these people have started making money through investments and have realised that at the end of the day, individual investment is all about investing in businesses that you could start on your own. When I invest in a Tata Power or an SBI or a Tata Steel, I am investing in three sectors that I would have liked to be in. So a lot more whole-time investors in the market have been created through the pandemic when people sitting at home had to develop other skills.
I think it is an important aspect and we cannot just rubbish them or wish them away by calling them Robinhood traders or day traders or weak hands. Some of this may well represent a big undercurrent of a movement of more and more people realising that the bigger stocks are getting bigger and more invincible, the smaller stocks are getting bludgeoned out.
In terms of employment or otherwise, we can say people may have lost jobs but there are alternative things that people are doing — whether it is support services for e-commerce, logistics, delivery boys or becoming investors. As a rule, that itself may be an employment which is not being captured in job numbers. It is important to make this differentiation and numbers may become more visible as these demat accounts keep increasing much to everybody’s surprise.