This is not going to be a market where one can simply bet on the index. It is going to be about finding individual stocks that have the potential of moving. It is going to be a market which will be very narrow and limited to those few stocks. Do you think that is going to be the case? What will the market look out for when picking those individual stocks?
Basically, it is a relief rally. The market was holding on to what is going to happen at Jackson Hole and after that when the Fed Chairman Powell said that they are not looking at tapering immediately and did not even set up a date for that, the market was relieved and we once again saw the risk on the table
My view is that there are definitely dark clouds on the horizon and one of them is basically that growth is something which people have to look out for because the pandemic and the vaccination is a heterogeneous event across the world. There are pockets which will be doing well and that will be the advanced economies. But the emerging markets across the world do not have enough vaccines and that is going to cause problems.
Again, even in the advanced economies, we have seen that even after two vaccination doses, still the problems of pandemics are coming back in the US. In Europe also, as it opens up, we have to see how it happens. This pandemic is much longer and much more serious than what people are expecting and it is going to cause problems as far as growth is concerned. In that kind of a scenario, we should be very selective.
What I am proposing in my strategy to investors is that one should be with the good quality largecaps and largish midcaps. One should get out of smallcaps and midcaps wherever there is an issue of quality and there has been a huge run up. Midcaps have outperformed largecaps and are at a higher valuations and it has happened in the 10-year average. So it is a good time to take away some profit from the small and midcaps and focus on the largecaps and largish midcaps.
What do you make of at Rs 620 levels? How do you see the game playing in telecom from here?
It seems in a year or two, India will be a duopoly in telecom. Voda is losing it out slowly and it is going to happen eventually. I was very hopeful that there would be an increase in tariffs but somehow that has not happened. But I very clearly see that once it becomes a duopoly, tariffs will start going up to much more manageable levels where both Reliance and Bharti make a decent ROE on their investments so that it is a long-term sustainable story.
Beyond that I see Bharti getting into the digital platform more. There are talks of some investments by Google and so I definitely see a positive outlook for Bharti. Anyway they are building up a war chest also with the rights issue of close to a billion dollars.
Bharti is headed higher because the fundamental terrain has changed, but the stock has also moved from Rs 500 to Rs 620 now and the market is already pricing that in?
So yes, maybe in the short term, the market is pricing it in, but if it comes to a Google investment, they are building up a war chest and they are doing all this basically to acquire something. I definitely believe Bharti is moving towards a digital platform where they will be offering much more than telecom services because that is what is going to be at the end of the day. Most of these telecom services have to convert themselves into something more than just telephone and communication.
One stock which I am sure has surprised even Sanjiv Bajaj is . Why are markets excited about it?
I have always thought of Bajaj Finance as a digital company. It was never just a finance company. It is truly a fintech company which has got the scale and he has been able to execute it. If you look at it, ‘buy now pay later’ (BNPL) is not a new thing. It has been happening across the world for the last 8 or 10 years. Bajaj implemented it so successfully that nobody else has been able to actually copy that scale and make a profitable business out of that, especially in consumable goods. That is why people are betting on him. Everybody still continues to believe that he will be the leader and it is very difficult for others to catch up now.
