You Need To Focus on Winners In This Market | Ajay Srivastava, Dimensions Corporate Finance

Speaking to ET NOW, Ajay Srivastava of Dimensions Corporate Finance Services, discussed why it is important to focus on winners in this market, and the strategy of expecting that share price crash laggards will catch up could be flawed. He also spoke about Midcaps and commented on the three best picks from the I.T. pack. Find more in the video only on ET NOW.

Could you show us some joins us now on the day when markets are up and they are running ajay is supporting the bulls with a green taija looks like diwali has come one week early it’s like today follow the rules for the bulls today no i think it’s relief more than anything if you ask me i don’t think anybody believes in the rally what happened and if i don’t think

Anybody is an answer what transpired yesterday from the you know two percent down to two percent up or actually five percent gap so let’s be honest you know to be fact is we don’t know why it happened and it’s a good market to open up to but i don’t know whether the now opportunities for people who want to get in to be at this point of time but one thing has become

Very clear is that you need to focus on the winners in the market you know very clearly enforces after yesterday result has become the key winner in the it space so there is no point rejoicing the rally if you’re a wipro shareholder for instance or you know holding another mid cap i.t company barring mind fee so the point remains i think this is a kind of scenario

Which tells us that you’ve got to stick with the big ticket winners in the market to expect that the share price crash records will catch up i think it’s going to be a very flawed strategy in this market because typically the concept is is falling 48 so i’ll get a 20 return i think that strategy is now getting clearly out of the market to say there’s a reason why

Stocks are fallen you need to stay out of it it’s long periods of time and focus on the winners even though potential returns are lower and i think that’s where if people are you know listening today is to look at their portfolio and say do i have laggards and i need to get out of the laggards it doesn’t matter if today the market is about two percent in the laguard

Because today you have liquidity particular in mid cap space tomorrow you may not have so the model is enjoy the ride but get out of the slow coaches because they’re going to absolutely railroad your portfolio so where are you which is a slow coach got mishap so don’t please that may happen that may happen every time but the fact that it is back on the track is

Important so any good stock may flip flop for next couple of days as i said you know the largest of all india is a beautiful country in the market because the largest stocks have lower risk and higher return so you look at across any industry look at commodities the number one player is holding firm look at steel number one player holding firm so you know if you

Look at the automobile space you got the you know top guy in india domestic he’s doing the best among the all so you know like when our bias is still in favor of the larger names compared to the small cap name at this point of time and the mishaps are going to come in i think is going to come in the small cap consumer space that is going to be a matter small cap

Engineering space that’s going to be a serious problem in the market small cap exporters to the us i think those will have a series of problems uh and in much cash space i think the laggards people like you know reliance which are into very low ebitda margin businesses like garments and retail etc eight percent ebitda i think there you can seriously see a problem

Coming up in terms of their ability to continue to give value to shareholders high value added companies will gain i think in this market and will continue to move forward yeah and you know but everything can fall but the fact is the guy who can come out of it is the big guy the better guy than the guy who’s lag out so i think cotton spinning is again the same

Story a lot of cotton companies are fallen by the wayside only one or two will survive so i think the concentration of economic power in the country is now very clearly getting dominated by the bigger players and you need to be with them for your portfolio hi good morning this is anish also joining in the conversation i wanted your take regarding itc the stock

Has already rallied what 50 this year you still believe it is undervalued and if yes what’s the target you have in mind see i have any targets in mind i simply look at the company and say that once thankfully you guys have woken it up so hopefully they will follow through with some of the actions they’ve been talking about like i.t company like it being you know

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Disinvested or at least sold or demered all the hotel company being demaged now should those actions happen i think it’s not even halfway down where it should be today if you ask me i’m not recommending please anybody i’m not recommending but i’m just saying in my view fundamentally how can you have a company which generates so much of cash in a high interest rate

Environment do badly it won’t do badly i can tell you but the fact is it needs to follow through it’s a demerger of hotel indus business has to come through the merger of it company has to come through that perhaps the de merger of consumer may come a little later but if that comes through well it’s way off compared to the cash flow look at the cash flow versus

Evaluation it’s we knew it is way off at 200 rupees we know it is way off at 300 rupees and i think there is no better company in this space if you ask me the pure astro generation it matches what people like you know infosys are doing is spewing out free cash flow quarter to quarter how many other companies do we see in indian market which can give out free cash

Flows quarter to quarter on a short basis not even 10 perhaps so this falls in those top 10 categories talk of free cash flow generators who will distribute to the investors and hopefully if they follow through i think there is a long way to go it’s still a long way so yeah just to take that point forward since you’re talking about the cash generating companies and

I know you just hinted at the i.t stocks but given the um under performance we have seen this year does it make for a good bet for a long term or do you think there’ll be better entry opportunities and where would you park your money if you had to take a bet see i have said that the day i stopped active investing i will park quite a bit of my money like already

I’m on the way i’ve parked a lot of my money in things like uh reits and power you know things like transmission reefs i’ve already done that the day i do it i’ll put a lot of our money in it stocks because at the end of the day you know over a period of five to ten years you’ll kind of return they’re giving back to the shareholders in terms of money back in the

Bank at the end of the day on top of that they have a running franchise of a business which is not going anywhere in a decade or two technology may change but these are the change agents you have a short market and it’s still america is not gone to the rest of the world which will happen eventually it will come to india as well how many and the three players in

The market you know accenture enforces and tcs so if you put together three large global players in the market two of them are indian players what better setup you want if you’re a more active investor perhaps you can get better bang for your buck from other stocks but i think if you’re a passive investor and you got to retire to good life with you know or go to

Sleep this is the best place to be if the stock falls yes of course things may fall things go bad that’s the time you add up to good names you don’t get out of the goodness it’s like you know it’s like india’s walmart story it’ll keep giving you returns year on year and you can you know sleep peacefully go for your holidays peacefully i would rarely say to anybody

Who wants passive investing this place you must park your money yeah what is this i will the day i will stop investing anisha’s nudging me and saying that will not come on tv warren buffett made this big investment in apple after i turned 80. late rocket took a large leverage in this portfolio when he was 60 plus what is this i will not invest by retirement okay

Listen my friend you know i i don’t know about warren buffett’s wife or what she did to him but i have a little more active wife who says i need more of your time now at least but having said that i think the moral of the story is really speaking that you want peace of mind it’s a right place to be you want to be actively go for the mid camp go for the small caps

Take some hits on your chin and you know wake up every morning looking at the newspaper your two choices of investment she says at this point of time is that the reason why are you mentioning retirement well it’s okay so i’m telling you you should be a mind reader you guys should be mind readers you should not be on the screen man and can you believe it i’m not

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In the studio imagine what you will read up if i’m in the studio yeah exactly we should be here i have another question and i think i can read your mind that since this is we are interacting to you and then we’ll interact with you after diwali ajay shavastha before the interview ends will give his best multibagger idea and this time we will not give one he will

Give three multibagger ideas am i reading your mind correctly see you told me on the day of the diwali yes if i compliance can allow me to do it i will certainly do it and he’ll buy his wife also a lovely gift now today man that’s over that’s yesterday i can’t have it again now okay so what is there on your shopping list for diwali okay uh what is my shopping

List if you look at me my shopping list is at this point of time is really focused at this point of time on the large capsicle as i keep saying again and again you know the small caps we have got it it’s done and dusted uh some consumer spaces we are investing in and quite sharply that we’re investing in because i think those companies will be sold so that’s a thesis

Of the investment of the consumer’s business i think we have now started to pick up some investment if you ask me back in the sugar sector at this point of time but that’s a very tactical it’s not a strategic investor our strategic investment is still continues to be built on commodity play at this point of time in india we are strongly building on industrial plays

At this point of time and that’s where our two biggest focuses uh and third is we continue to buy and continue to invest in the qsr space i think those will be still on the radar it’s not that something new will pop up on diwali but i think fact remains that between these three spaces we will be allocating a lot of capital and the last one we have already put in

Already is the power space where we believe that the best is still yet to come i think that’s going to be the most interesting space in the next five years or so because of the policy supportive three people running this country’s power industries leave aside ntpc basically there are three companies which will have the entire gamut of power control of power industry

In the country can you imagine what kind of that monopoly power kind of returns that can come out of it incredible because you got nowhere to go but to go to three players in a country this size for power in america there must be about 150 companies in india size three companies so you know request the point is when you bet with those three companies i think you’re

Betting well in terms of control on india’s most critical resource yes government may come and put like steel uh charge etc etc but i think power is one sector they will not touch because we have short of it and we have seen what happened in the west so i think these four sectors i think should combine to give you all the returns that we should anticipate i still

Don’t believe banking is the place to be i’m sorry to say this because if india has to succeed rbi has to stop defending the bank’s profitability and let the interest rate rise for departments people will spend more consumer will come back to the market till rbi suppresses deposit rates through the bank and supports the bank india’s remains inefficient i hope some

Politician one day will convince rbi to say let the deposit rate go up to nine percent stop giving liquidity to the banks let them go to the market to complete deposit once people are showed nine to ten percent in the fixed deposit which is matching inflation they will spend more money and economy will revive just to protect the bank profitability rbi is doing it and

I think that will come to a stop and that’s why we don’t not betting with the banks to say you are sitting on profit which you are not making legitimately and hurting the economy one day it will turn around and that’s the day that’s why i said industrial consumers etc i’m betting more because if that happens india’s economy will bound back quite sharp so but i think

For the economy industry consumer a saver against the bank about an outside the thought this is just my personal thought that u.s economy comes back or u.s markets come back and we could see a deep swell in some of the tech i.t fintech stocks because at some point in time next year ajay the fed will hit a pause button and that time maybe india will underperform

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And global markets will outperform and they will take it fintech or new tech stocks along with it when the world outperforms it’s not going to be next year it’s going to happen in november if the republicans win the senate and congress i think you will see a rally of a lifetime in the u.s market you know the democratic party winning and the work america brought

The economy down look at where trump left it look at where we are today that disaster globally disaster when you have a weak president in america this is what happened the putin can come and fight election and destroy all the other economies of the world you know it’s not russian destroying ukraine it’s everybody got destroyed so if you know the trigger point is

This november election midterm i can promise you and this if the republicans win senate and congress you will see a mother of a rally before the year ends so just watch out for this election it’s not about the fed pivot because fed pivots are important because fed pivots are response to global events but if the republicans take charge of senate and congress they

Can control the narrative in america they can control the events happening around the world and if that happens thus you got a rally coming your way maybe perhaps yesterday also people found comfort because the new things strategy is coming out says that the republicans will win both the things and if it happens i’m turning a gear up for it that will be the day

We’ll have a program and show i think it’ll be a five percent plus market if republican wins senate and congress in the u.s well you have a lifetime that’s what you’re saying and we’ll call you for that for that show as well as where i am comes and if of course the time comes but you know you spoke of industrials but given that everyone’s talking about this huge

Manufacturing boom a manufacturing renaissance if you will how are you looking to play that space is there you know a tilt within say defenses or look at you know the capex theme how are you looking to play that space listen so if the capex has to happen in this country the capex will start with the commodity supplier who is going to supply you aluminum steels

And etc right copper and zinc and lead etc so it has to start from there and there there is a monopoly of a maybe a single company in some products maybe two three companies and two other products at the end of the day so i think you will play will start if you really believe the capex story has to start from commodities and then it will move to suppliers like

I’m not recommending a name but give an example like a cg power and supply right you have siemens is one of them and you have other companies so i think they will be the beneficiaries of water transpire first the commodities then will be that those companies will come into the play at that point of time so i think it’s a very good part very small set of five six

Companies who are the key infrastructure players in this country and engineering players in this country so it’s not a big market it’s not a big kind of segment of companies in it but these are about five six companies so that’s the way commodities and then is the engineering uh machinery suppliers and who are supplying the latest technology and you know my view

Is that yes the capex range will not happen because uh the uh you know the pli will happen and so on because that’s we already seen what’s happening on that front it’ll happen because people will need to change their setups in environment norms so i think companies which are responding globally with new environment technologies will be the bigger winners and in

That will come on the manufacturing side is the pharma manufacturing it’s done very badly in the last couple of years but i think you should see a pickup of that basic thesis is that if manufacturing will first come in engineering and pharma in this country before all other thing in spite of the pli so i think those two industries will remain the bigger focus of

Us compared to all other and we have seen what happened to assembly industry some of the stocks are listed on the stock and you see the results ebitda margins are five four percent and they’re about so pillar is not going to solve it i think it’s always the replacement of capex to address the change the environment norms the thing ajay always a pleasure interacting

With you thank you very much you have a wonderful day you too and have a lovely weekend all right that’s the view coming in from

Transcribed from video
You Need To Focus on Winners In This Market | Ajay Srivastava, Dimensions Corporate Finance By ET NOW