Rajesh Khothari: Be agile and don’t get hit unnecessarily from global events: Rajesh Khothari
I just want to get a sense as to what your outlook is, as to how one should really read into the situation amid this acute volatility. Clearly now investors will be raising a lot of questions when it comes to the global financial system, and in terms of a lot more regulatory pressure perhaps on these corporations down the line. Is that going to be on top of mind?
Undoubtedly there is a global uncertainty, a little bit more volatility. But I think the biggest lesson, I think the regulators have also learned in the last 20 years or so, particularly post Lehman collapse is to be agile and to act fast. So if you look at the SVB financial crisis, before the market opened up in Asia, US Fed came out and they supported not only the depositor, but they gave a solution to the full economy that set an example. And the same thing yesterday happened even for Credit Suisse Bank, whereby the new lender scheme came in support of Credit Suisse.
So I think the world has become agile because there are two important factors, social media and of course the sentiments. And both need to be addressed in the right way, otherwise you can create chaos. And that is good news from the equity investor perspective, because it basically helps to contain the crisis to the specific case rather than allowing it to make it a contagion effect. And I think that is basically a good thing. And that is why if you look at the global market, despite these two crises, the US markets are not going down. And I think therefore one needs to give a little bit more time and a longer time horizon.
And in fact, if you ask my personal view, we have opened up mid and small cap PMS, which was closed for inflows because market has corrected handsomely. The valuations have also now corrected. We are getting mid cap index and small cap index at almost probably less than last 10 years average valuations. And in India on ground, the economy growth is remaining rock solid. The story is still good. Look at GST collection, look at fuel consumption, look at any macro parameter I think as India, we are doing reasonably well. And I think it provides good opportunity that is why we opened up our AAA Budding Beasts mid and small cap offering again for open for inflows, because I think it is a good entry point for investors at current level.
What do you think is now going to be the approach or what should be the approach for a lot of investors at the current junctures? We are making sense of all that is taking place globally? Do you think that there is now going to be a tilt towards perhaps safer havens for investment?
Undoubtedly, I think when you say safer heavens, it all boils down to what kind of quality you are buying. You need to make sure that the companies what you have bought, they are resilient. They are fundamentally, of course, very strong. They have the best of the risk management practices. And of course, as an investment house, we believe in diversification to make sure that if there is any shock, you should be able to absorb that shock.
So the companies need to be agile enough. Their risk management practices need to be, of course, strong, because the world is changing very fast. And you need to make sure that you do not get hit unnecessarily from macro or micro factors. And therefore, definitely there will be premium for the quality because the world has learned that there is nothing that you can predict. Make sure that you do not get hit unnecessarily from such global events.
What do you do right now, book out from all the profits that you are sitting on or buy the dip already?
I think, as a house, we are very agile. If required, book the profit and if required, buy at dips. So that strategy varies from company to company, stock to stock, our view on the company and their earnings growth over the next 12, 24, 36 months. And that is what mantra, what we always believe in. Remain agile, remain nimble. If required, exit the stocks where you think that probably things may not work as per what would have thought one year back. So discipline, exit strategy is critical.
Give us a glimpse into the agility. What is it that you have been selling? What is it that you have bought already?
Difficult to talk stock specific, but on a macro level, I can tell you we have been bullish on capital goods as a theme, and that is working very well. Banking is another theme on which we are positive. Of course, you need to be very, very selective when you buy the banking stocks. Pharma, we have been avoiding almost from last two and a half years, post October 2020.
IT is the one sector which we have been underweight since last about 12 months, and our view remains the same. So broadly, these are the basically, our sectoral call from the portfolio perspective.
