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- #RBI sees CPI inflation at 5.4% for 2023-2024 - RBI to issue FAQ on #Paytm next week  Niraj Shah speaks to Manishi Raychaudhuri on 'Market IQ'. #NDTVProfitLive ______________________________________________________  For more videos subscribe to our channel: https://www.youtube.com/@NDTVProfitIndia Visit NDTV Profit for more news: https://www.ndtvprofit.com/ Don't enter the stock market unaware. Read all Research Reports here: https://www.ndtvprofit.com/research-reports Follow NDTV Profit here Twitter: https://twitter.com/NDTVProfitIndia , https://twitter.com/NDTVProfit LinkedIn: https://www.linkedin.com/company/ndtvprofit Instagram: https://www.instagram.com/ndtvprofit/ #ndtvprofit #stockmarket #news #ndtv #business #finance #mutualfunds #sharemarket Share Market News | NDTV Profit LIVE | NDTV Profit LIVE News | Business News LIVE | Finance News | Mutual Funds | Stocks To Buy | Stock Market LIVE News | Stock Market Latest Updates | Sensex Nifty LIVE | Nifty Sensex LIVE

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00:57 - All right, thanks for tuning into Profit Insights.

01:06 Immediately after the RBI policy,

01:08 let's try and take stock of what could it mean

01:11 for risk assets and other factors impacting.

01:13 So we've seen the markets drift off post the status quo

01:17 on the policy and the Nifty down about 0.6, 0.7%.

01:22 The banks and private banks in particular hurt a bit more,

01:25 while PSU Bank Index, which was well and truly up

01:28 about 3% has also come off a little bit,

01:31 but still 2.5%, so not that bad.

01:34 I think that's the key crux.

01:35 And the broader end of the spectrum,

01:37 a bunch of insurance companies and some result reactions,

01:41 Cummins is up about 8%,

01:42 Trent is up another 6%.

01:44 So there's strength there.

01:46 And insurance companies, at least the PSU insurers,

01:49 LIC, GIC, RE, et cetera, all doing well.

01:51 And last but not the least,

01:53 look at what's happened to ITC after the news bits

01:56 that have come up on your screen about British Bat

01:59 talking about how they want to go ahead

02:01 and maybe reduce or monetize some of their stake in ITC.

02:05 The stock is down 3.5%.

02:07 So lots to talk about with our guest on the show today,

02:11 Manish Ray Choudhury, a veteran investor in Asian equities,

02:13 joins us right now with his thoughts.

02:15 Manish, great having you.

02:16 Thanks for being in the studios.

02:17 - Thank you, thank you very much.

02:19 A visit to Bombay after quite a while.

02:22 It's always a pleasure to be here.

02:24 - Okay, yep, thanks and pleasure to have you.

02:27 Manish, what's your sense?

02:28 I mean, the equity markets have taken a bit of a step back

02:31 today because maybe they anticipated the RBI

02:33 to make some move on stance, at least if not rates.

02:35 That hasn't happened, a bit of a pullback here.

02:37 Do you expect that pullback to be more pronounced

02:41 as the week comes to an end tomorrow?

02:46 Do you reckon that it is difficult to portray that?

02:49 - I think RBI policy was no surprise really.

02:53 So none of the rates changed

02:56 and the gradual withdrawal of accommodation,

03:00 that chance will also be maintained.

03:03 So I think in the market nowadays,

03:06 there's a degree of anticipation about some actions.

03:10 And if that doesn't really come about,

03:14 then the correction tends to be deep

03:17 because the valuations are already

03:19 at a relatively steep level.

03:22 India is possibly the most expensive market

03:25 in the entire emerging market universe.

03:27 So after the market did so well across November, December,

03:32 I think this present drift that we're seeing

03:35 and the kind of reaction on any real

03:39 or imagined disappointment,

03:41 that's also not much of a surprise.

03:43 Would there be a major correction anytime soon?

03:47 Difficult to predict these things,

03:49 but I would rather be possibly focused more

03:53 on a kind of a drift down or what's called a time correction

03:58 over the foreseeable time horizon

04:01 so that the other emerging markets,

04:04 valuation and India,

04:06 while not entirely converging,

04:08 comes closer, relatively closer.

04:10 - Got it.

04:12 Would Chinese markets need to perform

04:14 for that to happen, Manishi?

04:17 Or do you reckon that EMs can attract flows

04:21 even if China doesn't perform?

04:22 - Well, China is the 800 pound gorilla in EMs.

04:28 So the EM basket as a whole performing without China,

04:33 that's still difficult to sort of imagine happening

04:38 because if you look at the emerging market index

04:40 or MSCI Asia X Japan,

04:43 China, despite this severe underperformance

04:46 over the past three years,

04:48 it's still about maybe 30% or so,

04:51 30 to 35% of the index.

04:53 So for such a large weight,

04:56 it's difficult for the headline indices

04:58 to perform with such a massive market staying down

05:02 or continuing to underperform.

05:05 Now the question is what would make China recover?

05:08 And that's a question that we're all grappling with

05:11 because it's clear now

05:13 that the Chinese authorities old style stimuli,

05:17 they're not really working.

05:18 I mean, they announced the triple R cut

05:21 coming in from early Feb.

05:22 There was a small spike over there,

05:25 but nothing beyond that.

05:27 So it's clear that the Chinese authorities

05:29 would have to think about different measures,

05:31 maybe more fiscal stimuli than monetary policy,

05:35 which is more directed at supporting consumption.

05:38 So we're all waiting for that.

05:41 We have the meetings,

05:43 so-called the twin meetings coming up in March,

05:46 but it's something to look forward to.

05:50 - Okay, that's interesting.

05:54 And we'll slip into a quick break

05:56 in a couple of minutes from now.

05:57 But before we do that, Manish,

05:59 the question therefore that comes to mind

06:02 to any Indian investor would be that

06:04 while Indian markets are expensive, headline,

06:07 you could make an argument that for a foreign investor

06:11 who is heavily invested traditionally into banks

06:13 and into IT, those two indices are not.

06:17 And therefore it's a tale of two halves.

06:19 So if I want to put money into India,

06:21 do I have, and if I have a long-term view,

06:24 do I get pockets where there are very liquid

06:27 and where I would love to put in money,

06:29 where the benchmark weightages are high

06:31 and I get them at decent valuation?

06:33 So can FI inflows into India happen

06:38 even if the headline nifty numbers stay expensive?

06:40 - Right, now that's a very important point you make.

06:43 You know, historically we have seen these two sectors,

06:45 financials and IT.

06:48 They were close to 60% of the Indian market put together.

06:52 And they used to corner bulk of the FII flows,

06:55 you know, particularly FII flows, not so much the DI flows.

06:59 But now we are actually seeing,

07:01 if you look at the consensus earnings growth forecast,

07:04 they're much stronger in consumer discretionaries,

07:07 they're much stronger in industrials,

07:09 in power, power equipment, and so on.

07:12 So I think there are alternative avenues of investments

07:16 for both domestic institutions

07:17 and foreign institutions opening up gradually.

07:20 And that's an encouraging sign.

07:22 - Okay, my final question before we take that break.

07:24 Because in your previous avatar,

07:26 you spoke to FIs of all sizes, all types, et cetera.

07:30 - Absolutely.

07:31 - Is India becoming a favored destination independently

07:36 or do you reckon it'll still continue to remain an EM,

07:41 a part of EM and therefore dependent largely

07:44 on what happens to EMs?

07:45 - Now that's a very interesting point.

07:48 And after continuous and extensive interaction

07:53 with foreign institutions, and I still continue to do that,

07:56 I think India is gradually moving into that status

08:01 where the Indian market on a standalone basis

08:05 is looked upon as the likely candidate

08:08 for providing super normal returns,

08:11 not just for the next two years or five years,

08:13 but possibly for the next decade or two.

08:16 So in a sense, if I hark back to the early 2000s,

08:20 when China was first inducted into the WTO

08:24 and the next decade and a half

08:26 was possibly the golden period for Chinese equities

08:29 and other financial assets,

08:31 in a sense, India might actually be entering

08:35 that kind of a phase.

08:36 There are quite a few things falling in place for India

08:39 and that's being appreciated by the FIs,

08:42 not just in terms of economic growth,

08:43 not just in terms of flows,

08:46 not just in terms of say inclusion

08:48 in the emerging market bond indices,

08:49 which opens up additional avenues for flows,

08:52 but also look at it, a geopolitical sweet spot,

08:55 which no one can ignore today.

08:58 - Okay, okay.

09:00 So, okay, so that's interesting too.

09:02 And okay, let's do this.

09:05 Let's digress a little bit and talk about

09:10 some of the most recent developments

09:12 before we take that break.

09:13 One of them is what's happened to Paytm.

09:16 And I first want to get in my colleague, Vishwanath Nair,

09:20 who is at the Reserve Bank of India.

09:21 He's heard the press conference.

09:24 He was a part of that, asked questions to the governor

09:26 and has heard with keen interest

09:30 what the response on Paytm was.

09:32 Vishy, fill us in on what you thought was the statement

09:37 and the implication of that statement with regards to Paytm.

09:42 (crowd murmuring)

09:45 - Right, Neeraj, this press conference turned out

09:47 to be slightly more fiery than what was expected earlier.

09:51 Of course, a lot of focus on Paytm.

09:53 The RBI governor as well as deputy governors

09:56 have been very clear that they do not want to say anything

09:58 about specific entities, especially Paytm.

10:02 However, the broad guidance that the RBI governor

10:05 and the deputy governors have been giving

10:07 is that any entity that is found in breach

10:10 of the norms which RBI has laid down

10:14 will need to face the consequences

10:15 of that breach, of that violation.

10:17 No entity has any kind of free pass to act as they want.

10:22 They have to entirely listen to what the RBI is saying

10:27 in this matter and how exactly

10:30 the RBI has drafted these norms.

10:32 What the RBI is also saying is that the customer protection

10:37 is a very, very key part of this entire discussion

10:40 and that is how the RBI will ensure that companies

10:44 do remain within that band of regulatory limits

10:49 and ensure that their operations do not affect

10:53 the customers at the end of it all.

10:55 Because remember that that is the biggest fear

10:57 in this entire saga, that after the 29th of February,

11:00 what exactly happens to Paytm customers?

11:02 So the RBI has been very clear that we are there

11:04 to protect you and we are there to ensure

11:06 that the system is protected.

11:08 However, any entity that is found in breach

11:10 of the norms that the RBI has set

11:13 will face the consequences of their action.

11:15 The RBI will come out with a list of FAQs

11:18 for such supervisory actions so that people's doubts

11:21 can be addressed adequately.

11:23 So that we'll watch out for next week.

11:25 However, a very clear dialogue on entities

11:28 which may be very big, big brands,

11:31 but does not matter as long as they do not follow

11:34 the norms, they will face action.

11:36 - Vishy, just quick 30 seconds.

11:39 And we have Manish Ray Choudhury here also

11:41 and we'll take his opinion.

11:43 But just quick 30 seconds, in some sense,

11:45 if the street, rightly or wrongly,

11:48 was hoping for assurance of quote unquote leniency,

11:53 did that come about or was the exact opposite

11:59 heard from the Reserve Bank?

12:04 - Well, it's interesting that you bring it up

12:05 because leniency is not something that the RBI

12:08 wants to be associated with,

12:09 especially in situations like this.

12:11 Because if you remember in the past,

12:12 wherever banks have been in violation,

12:15 or any financial services entity has been in violation,

12:17 the RBI has been very clear that this is the law

12:20 of the land, you've breached it,

12:21 and therefore we are going to introduce

12:23 business restrictions, penalties onto you,

12:26 and you have to ensure that compliance

12:29 is achieved at all costs.

12:30 Now, remember that with respect to this specific case

12:33 in Paytm, it's been about two odd years

12:37 worth of regulatory action that's been going on.

12:39 So the RBI is very clear that we have given you enough time

12:42 and if you have not achieved what was required

12:44 on the compliance front, then that's really your fault

12:48 and you have not done what is required.

12:51 So as long as compliance is managed

12:54 and the RBI is convinced that the company

12:56 has learned its lesson,

12:57 that's when those restrictions come off.

13:00 Till that point in time, there's really no debate.

13:02 At this stage, there is bilateral communication

13:04 that is happening between RBI and Paytm.

13:07 That's all that the governor and deputy governors

13:09 have pointed out.

13:10 No further granular details on what exactly

13:13 is the nature of those conversations

13:14 or how that is going to pan out in the future,

13:17 but it's very clear that they do not want to be lenient

13:20 as long as there are non-compliances.

13:22 Once those non-compliances are addressed,

13:25 that's when the RBI will come in

13:26 with some kind of remedial measures.

13:29 - Fair call, Vishy, thanks.

13:31 And in some sense, Manishi, is the regulator saying

13:33 that we are being transparent and fair,

13:38 unfair to say that we are biased

13:40 against FinTech space at large?

13:42 Does this set an example?

13:44 Does this kind of damage the FinTech space

13:48 or nothing like that?

13:49 Is it an isolated incident?

13:51 - Right, I don't think at all that this should be construed

13:56 as a reason to damage the FinTech space.

13:59 This is a specific case.

14:01 The RBI has made it clear that their focus

14:03 is on consumer protection and financial stability.

14:06 There are certain clear guidelines

14:08 that all the companies would have to adhere to.

14:11 And if they're not being adhered to,

14:13 after significant conversation, bilateral conversation,

14:17 such action have followed.

14:18 So it is a specific instance against a particular company.

14:22 The RBI has made it clear.

14:23 I would certainly not think that this has

14:26 a broader implication for the FinTech space as a whole.

14:29 - So startup founders, viewers may have written

14:31 to the powers to be and all of that,

14:33 but the RBI going by what they have done,

14:36 even in the past with some of the other

14:38 systemically important institutions as well,

14:40 if they have in RBI's eyes have gone off

14:44 from what needs to be done.

14:46 So Paytm locked on a 10% lower circuit,

14:49 markets tightly off as well,

14:51 but there are individual moves which are doing well.

14:53 Manish Iyer Choudhury, reasonably bullish on India right now

14:57 save for the valuations, believes that China and EMs

15:00 need to take a bit of an uptick for favor to return.

15:03 We take a break, come back and try and talk

15:06 about some specifics as well.

15:07 Stay tuned.

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18:46 - Okay, thanks for staying tuned to Profit Insights.

18:52 We're talking to Manish Red Chaudhary,

18:53 and I think amidst all this talk of power,

18:56 rather, PSUs being expensive,

18:58 two pockets which are continuing to do well,

19:00 PSU banks and power.

19:02 Now, let's talk about one particular name,

19:05 which is Power Grid,

19:06 which is up quite significantly in the session today,

19:09 up about 5% on the back of strong Q3.

19:13 The other ones are some of these power ancillaries.

19:16 Inox Wind, for example, is up on the back

19:18 of an order wind from CSE,

19:19 which itself is a power company and has done really well.

19:22 Meeka is here to talk about a few of these details.

19:24 Meeka.

19:25 - Yes, so first I'll go to Power Grid,

19:26 which did run up to an intraday high of 7.5%

19:29 on back of their quarter three results,

19:31 which were much better than expected.

19:33 Revenue growth of 2.56% driven by the transmission segment.

19:36 A bit of a loss of 3.23%, net profit was up 10%.

19:41 What worked for the company is mainly their finance costs

19:43 fell 18% year on year,

19:44 and the debt equity ratio improved at 1.37 versus 1.57.

19:49 We also have a city note,

19:50 which has maintained a buy on Power Grid at a target,

19:52 raised target price of 300 rupees,

19:54 and they say that the improved discount payment situation

19:58 and the longer term need for creating more capacity

20:01 creates opportunity for the firm.

20:02 And the company's also approved a dividend of 4.5 rupees

20:06 per equity share,

20:07 but because of the 55% run up in the past six months,

20:10 the dividend yield is now at 3.4% versus 6% six months ago.

20:14 They have Inox Wind,

20:15 which has signed an agreement

20:16 for India's single largest wind order,

20:19 and it's an agreement with CESC,

20:21 and it's gonna install and supply 1,500 megawatts

20:24 of wind capacity over the next three to four years.

20:27 They've also extended that two

20:28 and three megawatt product offerings

20:30 and have entered an agreement with Wind2 Energy

20:33 to launch a 4X megawatt series,

20:35 which does give them an edge in the space.

20:37 For Inox Wind, it is up 6.6% in intraday,

20:40 and the stock has also run up 148.94%

20:43 in the past six months.

20:44 - Megha, thanks.

20:47 And thanks for putting that into perspective.

20:49 Manish, before we thank you,

20:51 power as a space. - Of course.

20:53 - Generators, ancillaries, what have you,

20:55 are you constructive?

20:57 - Possibly the best economy proxy,

21:00 especially when the economy is growing

21:03 not as a consequence of boost to consumption,

21:06 but as a consequence of boost to infrastructure

21:09 and industrials is the power sector.

21:12 What do you need for industrials to,

21:15 for, think of an economy,

21:16 C plus I plus G plus X minus M,

21:18 consumption, industrials, government spending, and so on.

21:22 So for industrials, for investments to grow,

21:25 there is almost no other direct beneficiary

21:30 than the power sector,

21:31 and particularly in the present day and age,

21:34 where for the past several years,

21:36 there had not been incremental investment

21:38 in the power sector.

21:40 It's quite natural that investors would be enthused

21:44 at a point when incremental investments

21:46 are just beginning to flow in, right?

21:49 So there, and the best part of it is

21:51 that you have an entire chain of power generators,

21:55 power distributors, the equipment suppliers to the sector.

22:00 And if you move back even further upstream,

22:03 you have, you know, the likes of coal or other,

22:07 you know, fossil and non-fossil fuel sources.

22:11 So it is actually quite obvious

22:13 that this entire chain would perform

22:17 in an environment where investments had not been made

22:20 for the past several years.

22:22 Got it. Okay.

22:23 So constructive on power is Manish Redh Choudhury as well,

22:25 but pick and choose carefully is the point.

22:28 But Manish Redh Choudhury, we'll have to wrap it up here.

22:30 But thank you so much for joining in today

22:31 on Profit Insights and giving us your thoughts.

22:33 My pleasure entirely.

22:35 The pleasure was ours.

22:36 And viewers, thanks for tuning in.

22:37 Stay tuned to NDTV Profit.

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26:42 Hello and welcome to the Mutual Fund Show.

26:44 I'm Nidhar Chou.

26:45 The next 30 minutes or 25 minutes,

26:47 we'll talk all about mutual funds.

26:49 But before we start talking about mutual funds,

26:51 it's important to put something into perspective.

26:54 And that is what's happened to ITC.

26:57 While we get in experts to talk about

26:59 the best mutual fund strategies to deploy,

27:03 here's the news on ITC.

27:05 British American Tobacco is looking to monetize

27:08 some of its stake in ITC.

27:10 Let's go across to Sajid Mangat for more on this.

27:12 Sajid.

27:13 That's right, Neeraj.

27:14 The V8BAT or British American Tobacco

27:17 is looking to monetize some of the stake

27:19 that it holds in Indian FMCG and cigarette maker ITC.

27:24 Basically, as part of the earnings statement,

27:28 BAT has released that they plan to monetize some of the stake

27:31 which in ITC over a period of next few years

27:35 and is working with the regulators

27:37 to ensure that it gets the due permission for that.

27:41 To put in context,

27:43 it's planning to offload roughly around 4% in the ITC.

27:49 It holds nearly 29% stake there.

27:51 It's one of the early investors of ITC from early 1900s

27:55 and over a period of time, it has gone up to 29%.

27:59 Now, it wants to bring in little capital efficiency

28:04 because the value of the stake is now valued at

28:06 roughly around $18 billion or 1.5 lakh crores.

28:11 It plans to use that as part of its cash management

28:14 or capital management where it has told its shareholders

28:17 that it plans to generate over $43 billion

28:20 before dividends over the next five years.

28:23 Neeraj.

28:24 Okay.

28:25 Sajid, this comes at an interesting time

28:27 when ITC for the longest time hadn't done anything

28:31 and now has had a significant up move.

28:33 So, the timing is clearly interesting

28:35 that they're taking advantage of the fact that

28:37 ITC is no longer the laggard that it used to be.

28:39 That's true.

28:40 Also, the fact that there's a demerger in process

28:43 for the ITC hotels which comes in

28:45 and BAT would be getting a stake there

28:47 as part of the shareholding in ITC hotels as well.

28:52 And ITC hotels is not going to be a core business for BAT.

28:56 So, as and when that demerger happens,

29:00 it seems that ITC or BAT would look to monetize that stake as well.

29:06 Okay.

29:07 Sajid, thanks so much for putting that into perspective.

29:12 On today's edition of the Mutual Fund Show,

29:14 we are joined by Kalpen Parikh, MD and CEO of DSP Mutual Fund

29:18 and Vineet Samre, Head of Equities at DSP Mutual Fund

29:21 to talk about a very interesting note.

29:23 It's an annual note 2024 which they have titled

29:26 A Winning Team and amongst things that we will talk with them on the show

29:31 is what they are talking about as insights

29:35 from the Tour de France for thoughtful portfolio approach.

29:39 You know, I saw the report and I was like,

29:41 we have to do this conversation.

29:43 Lend itself to a little bit of mutual fund investing as well

29:46 because we're talking on the Mutual Fund Show.

29:48 Kalpen and Vineet, thank you so much for joining us today.

29:50 Kalpen, let me start with you.

29:52 What was the genesis of writing a note like this

29:55 with such a comparison of insights from a major sporting event?

30:01 Thanks Neeraj for firstly inviting and more importantly for deep diving

30:10 on a very detailed document that Vineet and team have come up with.

30:13 So since the last three years we have been coming up with an annual document

30:17 which mainly is about our reflections from the year which went by.

30:21 And our observations on broadly data points,

30:24 trends which are playing out in the world of investing.

30:27 So this annual note is actually meant for us to improve our learning,

30:32 our reflections and transparently share with our investors

30:36 and marketplace what we are thinking about.

30:39 And this is also a point in time where many turning points are there.

30:43 Many beliefs are getting questioned and challenged in terms of

30:46 a certain part of the market becoming frothy,

30:49 some part of the market remaining reasonably safe in terms of margin of safety.

30:53 So this note allows us to put across our points of view.

30:57 Also at DSP as a 27-year-old asset management company,

31:02 it is over time leveraging a lot of data technology

31:05 along with fundamental experience of our teams.

31:08 So the whole concept of a winning team was to see that

31:11 how can we try to marry both together and take certain investment decisions

31:16 or get inputs on a daily basis which can help sharpen our decision making and improve.

31:21 And we have given a lot of examples in the note.

31:23 So I think that was the backdrop and glad that you invited us to talk about it.

31:26 Pleasure is ours. Vinit, you want to add to this?

31:32 Vinit, you want to add to this?

31:33 Yeah, so again thanks for inviting us today on the show.

31:37 Yeah, so see I think why we actually picked up this theme more importantly

31:43 also beyond what Kalpen mentioned is the fact that

31:47 we wanted to highlight two important messages out here.

31:51 One, just like in case of these sporting events,

31:55 there is a team effort which actually leads to success.

31:59 Here we want to drive the fact that the whole DSP team as such,

32:05 including our core investment team,

32:08 I think the divergence of knowledge what these team actually gets in,

32:14 the divergence of skill set what these team gets in,

32:17 allows us to think maybe in a more variable manner, think more differently.

32:23 And that is what is maybe defines how the long term success has to happen.

32:28 So that is one aspect why we have aligned.

32:30 The other aspect also is the fact that just like in case of this sporting event,

32:35 there is a team effort here also what we are seeing at this juncture when the

32:38 valuations have reached where they are some part of the markets are a little expensive.

32:43 It's also good to look at diversified asset class to maybe bring your portfolio

32:51 more into aligned in a manner given the current valuation.

32:55 Also to see that long term success will be a factor of how your asset allocation

32:59 strategy today is defined rather than just taking a call on a specific segment,

33:03 which may be doing well today. So that's the overall thought process.

33:07 Now Kalpen kindly mentioned that I have already done a deep dive.

33:15 I obviously not done as deep a dive as you would have liked,

33:17 but I'll still try and pick up the three or four key aspects that at least we thought

33:21 were relevant to talk about today.

33:24 And we're trying to correlate them to how can a mutual fund investor per se,

33:28 you know, kind of take insights from in her or his investment journey.

33:35 So let me try and understand from you guys.

33:38 You've spoken about how 2023 was a year of mid caps and small caps.

33:43 And either of you can take this answer. But could it happen again,

33:47 looking at insights from a sporting event and looking at what's happened in 2023

33:51 that an encore could happen or should a person be careful about that space

33:57 now that that space has done so well? Either of you.

34:04 So let me start before we need that. And I want to give a disclaimer that if you

34:08 would ask this question to me six months back or one year back,

34:11 I would have said that the space looks a bit expensive.

34:14 So, you know, broad base or diversify and be more in large caps or be more in

34:19 flexi cap funds. So in a way, I have been wrong.

34:21 And yet you're asking me this question. So I'm grateful that you are.

34:25 But we genuinely believe that, you know, the starting point is never market cap.

34:30 The starting point always is that, you know, what type of businesses are available?

34:34 Where are they in their earnings and business cycle?

34:36 And what is the price that we are trying to pay for it?

34:38 And then if the outcome of that ends up giving us large cap stocks, so be it.

34:43 If the outcome ends up giving us smaller mid cap stocks, so be it.

34:46 At large, you know, two things have happened.

34:49 The small and mid cap segment has also seen a lot of significant improvement in

34:54 the operating matrix. So ROEs look good. Profitability has improved.

34:57 All of that has turned very sharply positive in the last two, three years.

35:01 That has coincided with a lot of money also coming in in that bucket.

35:06 So end of the day, there are 250, 300 stocks which are available for Indian

35:11 investors via mutual funds or directly to participate in.

35:14 And more flows in the last couple of quarters going into that bucket is also

35:19 creating some bit of premium in terms of their valuations.

35:23 And around the same time, if companies report marginally positive,

35:26 you know, operating matrix, it's only adding to the tailwinds.

35:30 So I really don't know. I've been wrong last year in terms of

35:33 predicting that small caps may not do as well or mid caps may not do as well.

35:37 So I don't want to hazard a guess again. But I personally, you know,

35:40 this is what I do in my own portfolio. My preference always is in diversified funds.

35:44 And typically at market extremes, you know, you get into smaller mid caps

35:49 when there are sharp corrections or use SIP as a consistent method of investing.

35:54 Most of our investors have been significant beneficiaries by, you know,

35:59 doing SIPs in our small cap and mid cap funds. And typically when there are,

36:03 you know, phases of poor returns in the last three, four years,

36:06 if you come in at that point in time, your odds of getting better return outcomes are in your favor.

36:11 That's my view, personal view. But Vinit, if you want to add anything.

36:14 Yeah, just one data point. So, you know, we've covered one analysis, a short analysis in this note,

36:21 wherein we've captured the seven year rolling return for the mid cap index and the small cap index.

36:28 And if one looks at that data point, one sees that in the, maybe the last 10, 15 years for which we have done that analysis,

36:37 on a seven year rolling basis, we'll see that the, you know, the index has provided upwards of 12 percent return 75 percent of the times.

36:46 And and zero percent returns. The probability is zero. I mean, the history has been zero.

36:53 So the point which we wanted to make here is why it, you know, at various points,

36:58 we'll have extremes created in different categories. The way to deal,

37:02 one of the ways to deal, because it is going to be very difficult predicting how things are going to turn out.

37:06 One of the ways to deal is that not to get out of the asset category, but to expand the time horizon.

37:12 So once you have, let's say, four categories which are getting expensive, but these are good categories to own, good ROEs,

37:18 the companies are inflecting growth metrics are there. Only point is that at extreme valuations, higher valuations,

37:24 one needs to have a longer time period for as far as the investment decision is concerned and not maybe lose track of your asset allocation is broadly what we wanted to highlight.

37:34 You know, viewers, it's a very interesting statistic that we need somebody is is is pointing towards.

37:41 And I just wanted to lay out that point that they've made in that note that for a much maligned,

37:47 broader end of the spectrum and everybody likes to say that, oh, mid caps, small caps, having done so much, et cetera, et cetera,

37:53 because you are investing into mutual funds from a long term perspective.

37:56 That statistic that we need somebody spoke about that they've highlighted on a seven year rolling basis in September 12th.

38:02 The mid cap index has returned over 12 percent returns. 76 percent of the times on a rolling basis has delivered negative returns.

38:09 Zero percent of the times on a rolling basis, even for the small cap space, by the way,

38:13 on a seven year rolling basis, delivered negative returns only one point two percentage of the times.

38:18 It's a telling statistic. If you're investing for the long term, maybe just maybe these statistics will help you make some thoughts.

38:26 We need just can I ask you a quick perspective, because you guys made this famous decision of not taking investments into your small cap fund

38:34 at a point of time when you thought to be when you thought it to be overheated.

38:37 The brave move then as well. Would you say that if you're investing from a slightly longer term perspective on the back of this statistic

38:44 and on the back of the nature of the market currently, because so many sectors are formed only in the mid cap and the small cap end of the market,

38:51 it might not be a bad idea to keep your SIPs going?

39:00 Yeah, definitely. So that's the thought process that and then more so when we do this analysis for SIP,

39:07 this works out to be even better that investing at a high point also yields to decent returns over a long period of time.

39:13 And hence, from that perspective, I would say that if one really has a good six, seven years perspective,

39:18 despite the high valuations, it's OK to be part of this category.

39:22 The other matrix is that, you know, when we look at our own portfolios, there are still maybe roughly about 40,

39:27 45 percent of our investments are still into companies where the valuations are not expensive.

39:34 The valuations are below 15 multiple even today. Maybe some of them are facing a low business cycle.

39:40 Some of them are not in the positive momentum or narrative today.

39:45 But the point is that, you know, one needs to create a portfolio which is designed to yield success over the long period of time

39:53 and have a mix of companies which can potentially deliver good returns when the cycle returns.

39:57 So I think from that perspective, it's not that everything is sort of over at the moment with these high valuations.

40:03 There still are opportunities and definitely one stretches the time horizon to maybe five, seven years.

40:08 We don't see, you know, material negativism as far as that decision is concerned.

40:16 OK, well, gentlemen, stay on. We need to slip into a short break.

40:21 On the other side of this conversation, we try and talk about one more aspect that this and two more aspects.

40:26 One is the PSU outperformance, which is probably more than just a narrative or is it?

40:31 Let's ask Vinit and Kalpen about this on the other side of this quick break. Stay tuned.

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43:56 All right, back with the Mutual Fund show in conversation with Mr. Kalpen Parikh and Mr. Vinit Samre.

44:02 And we are talking about that annual road, annual note, learnings from the Tour de France

44:07 and trying to understand those or juxtapose those learnings with a thoughtful portfolio approach.

44:15 Some of the things we've discussed, one important thing that we did want to talk about is this whole excitement around PSUs.

44:25 Now, Kalpen, I don't want to spill the beans. You guys have mentioned that is the header.

44:31 The header is that is this whole PSU quote-unquote excitement more than just a narrative? Can you talk about this?

44:41 Sure. So like the title, Neeraj, what we are trying to highlight here is that investing has to be a rational attempt.

44:50 And if data changes and if numbers change, we have to evolve and adapt our opinions and views.

44:57 So over the last few years, even at DSP in our portfolios, PSUs which had fairly low weights over the last two to three years,

45:06 when they started screening in on two counts, one on account of significant operating efficiencies in their businesses,

45:12 second on account of certain regulatory changes or certain other environmental changes,

45:17 which gave confidence or conviction on the durability of their business cycle or revenues.

45:23 We started increasing our weights significantly so much so that in some of our funds, the weights are in excess of 20 percent in the PSU bucket.

45:30 Now, an important dimension was that they were also cheap.

45:34 So typically, how do you make money in stocks is, you know, you get significant earnings, growth and momentum.

45:40 And secondly, there is valuation expansion. Now, PSUs were cheap for long periods of time over the last eight, nine years.

45:48 So if you had entered in the second year or the third year or the fourth year, they were always cheap.

45:53 But some of the triggers which came out in the last two, three years in many pockets, whether it was in the defense segment,

45:59 whether it is the cleanup on the PSU banking side or in the energy space or even on the power side,

46:08 there were a lot of regulatory changes which also came in.

46:11 And that coincided with significant improvement and enhancement in business performance.

46:16 So as money managers, we constantly look for data. And if that data is questioning or making us evolve our beliefs,

46:24 you know, it's not easy many times when you're anchored in a certain space that we invest only in a certain pattern.

46:29 The reason to highlight this dimension. So this was also a dilemma that, you know, the team kept keeps on having that, you know,

46:36 is this for real? Is this narrative? And there are always two schools of thoughts, two sides of a coin.

46:41 But looking at how data points were evolving, operating metrics were changing,

46:46 the behavior of these companies in terms of, you know, a very high quality business model.

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