Where is the market headed?
The FOMO (fear of missing out) is dead. There were people who were fearing that they will never get to buy stocks. The correction, whether it is in commodity stocks or steel stocks, is giving an opportunity to investors who got left out.
So to us, the predominant theme is to never feel sad that you left the market and share prices have rocketed. Some sectors are getting rerated downwards in the interim for whatever reasons, but you are getting a chance to buy. The most important thing is to understand that when you feel left out, the market gets you a chance to get back in. The second point is that keep your powder dry. There are so many IPOs like Zomato and LIC. New kind of companies are going to change the dynamics. I think you got to start allocating capital there. Investors need to keep some money in the bank for these IPOs. FOMO is dead and IPOs ahoy!
Are you hinting at buying Zomato? In a sense, Zomato dismisses all the basic and historical parameters of valuations?
The bottom-line is that how do you value these companies. There is no paradigm in corporate finance textbook which which explains this phenomenon. Companies like Amazon, which were negative for a decade or so, gave phenomenal returns. We know that the future belongs to some of these companies, whether we are valuing them correctly or not. I do not think any genius can say that. We profess that the market has never been a genius in doing that. But you cannot not have a portfolio of gig stocks in India. Look at the way IT companies have performed. Infosys struggled at Rs 10-20 for almost than a decade and then it shot up.
It is not about EBITDA, but about being in a sector that has a great future. I don’t know whether you will get a chance to buy Zomato again at Rs 50 or Rs 40. But I certainly believe that not being in the gig economy is worse than staying out of it.
Let us get back to traditional sectors like auto. Do you think fresh lockdowns could spell more trouble for two-wheeler stocks?
I think two-wheeler stocks are good stocks. They have done remarkably well in the last 1-2 years. They will take a breather and pick up again after October. So if you are a buyer in these stocks, you got to be patient. These companies have a lot cash for you. The dividends of Bajaj Auto, Hero or TVS are very good. They do not go and delve into other businesses like other companies. Two-wheelers are not a short-term story. Focus on the fact that 4-5 companies in India will control this market for the next decade or so. There is no doubt about it that 70% of India is still deprived of basic products like a scooter, motorcycle, etc. So it is a little longer term story, but you got to stick to it. If you are going to play a speculative story, the returns are going to be mediocre till the next six months.
