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    If you want to make money you have to be in global assets: Pashupati Advani

    Synopsis

    Right now, I see a trend right now in the larger midcaps.

    Pashupati advano-1200ETMarkets.com
    If you are in global assets, then even if the domestic market does not pick up, you have the export market. You have to find companies that are at that cusp, says Pashupati Advani, pashupatiadvani@globalforay. Excerpts from an interview with ETNOW.

    What would you like to start with – earnings, the Budget or global tensions?
    Today we could say Happy New Year because the markets are flying up and that is nice. Let us take global tensions first. I feel that this is not over yet and I am a little apprehensive. I actually feel that a lot of people will sit on the sidelines until there is a proper resolution of what is going on in West Asia. Yesterday’s Trump speech was a kind of a stand down and hopefully that is the way it is going to go. Oil prices have also reacted. As far as I am concerned, our market tends to run on one thing alone -- oil prices. It is such a dominant import for us and oil prices have backed off and the rupee has become stronger by 50 paise today. The oil marketing companies (OMCs) have gone up and everybody is happy.

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    I would love to see oil at $50 again but I think we are a little bit away from it, now having touched $70 last week.

    Is that largely because it is going to be an election year and we are going to see a different rhetoric from Donald Trump?
    No, Donald Trump is in a position where he is trying to make sure that he throws does not get impeached before the elections. People who I have talked to in the US feel that he has a pretty reasonable chance of getting re-elected as well. So middle America still seems to be with him. It is going to be interesting time for the next one year. But again, it has been a tradition of all American presidents to make sure that gas is under $3 a gallon. He is definitely going to want to bring oil prices down.

    As an Indian investor what is it that you do? The earnings are officially kickstarting with Infy tomorrow. Do you re-align your portfolio? Do you take profit from the 15-20 odd names which have done well or do you protect capital? What would be your approach in 2020?
    I am not so concerned about the market overall because we are going to follow, not lead. But I do see a trend right now in the larger midcaps.

    We are going to follow but we could fall more because we have domestic issues as well?
    Yes that is true but we have not seen it yet. The falls have been less than in all the other places. China seems to be doing a lot worse than we are this year. But we are looking at a trend where Naren is going around saying that let us go for midcaps. So, some of the larger, less liquid midcaps are starting to move quite rapidly. At some point, that trend has to be there. Sunil Singhania has put out about high PEs and that trend is going to happen. Now whether it pans out is within the market play. The overall market depends on what is happening in Washington. So you outperform within the market space and then hope the market goes in your direction.

    So you book out from quality, chip in into midcaps is that what you are saying?
    Quality midcaps. The trade has always been to buy illiquid large midcaps which are in good businesses and you are seeing it in terms of good chemical firms. You are seeing a move into cement which means that something is happening in that market. Maybe there is a push to get some projects finished before March 31st and that is going to be incentivised. Maybe the government is going to release money for roads which they have been sitting on for a while.

    The fact that cement stock prices have moved up this week has been a trend which hints at some kind of news probably coming in.

    Reassurance?
    Yes, it is reassurance that things may be turning.

    Everyone is banking on financials to lead the way in earnings. What are you anticipating? Would you see merit in booking partial profits at least?
    I do not like the financials and NBFCs although they have got some tick marks because of NCLT having given them some awards. A year ago, these companies were looking at zero, now they have got 30-40-50% and in some cases even 80-90% of their debt. That has been good and they are adding it back. Tthere are still explosions coming because there has been a push in terms of people saying that bills are not getting paid. A lot of big companies are stretching out their payments from 60 days to 90 days to 120 days which is not good for the system. The banks are not lending and as the NBFCs are not getting any money, they are not in a position to lend either.

    Metals seem to be the new theme given the global environment. Suddenly, a lot of buying is coming in. Coal mining has been thrown open to the private sector. This will impact select names. Would you be looking at the commodities basket?
    I believe that the money is to be made in global assets. Whatever the Indian government has tried to do, for example, gold has continued to go up. It is not a good commodity for India but the Indian public love buying gold. But it is now over Rs 40,000. It touched Rs 42,000 a couple of days ago. So, $1,600 has come down to $1,550 but everyone says you should have some gold in your portfolio, Half of India wears it on their wrists and so it is there to stay.

    The reality is that if you want to make money you have to be in global assets. We are not allowed to buy bitcoin but bitcoin is a global asset. Likewise, some speciality chemicals are doing well because they are globally priced. So, if you are in those things then even if the domestic market does not pick up, you have the export market and you have to find companies that are at that cusp. That is what we are looking for.

    Telcos are in focus. The mega cash hunt for Bharti Airtel is on. There has been stress on the balance sheet of all of the players. What is the future, according to you?
    It is a catch-22 situation for the government. If they let one player go, they are going to suffer in spectrum revenue. They are also going to have 30 crore subscribers landing up at 9 Race Course Road shouting and throwing their mobile phones. I think it is unthinkable, it is too big to fail but there is pressure to waive, though the waiver has not yet come through.

    The reality is that India is hooked on telecom and we need it. We have got the cheapest telecom in the world even though the ARPUs have gone up. But now that all the companies have raised their ARPUs, it is like the government has said fine, you have been too cheap, now raise it so that we can all make money.

    Once everybody settles into the new pricing, things will stabilise and then they can do a relook at how much they are going to waive in terms of the charges. It is skewed in favour of one player but that is the way it is. He has used a smart way to get the license but the others are saying fine, equalise it, give us interconnect charge, to equalise. I do not think they will ever be equal because Airtel and Voda paid Rs 100,000 crore and Reliance has paid Rs 20,000-25,000 crore for the same licences. But if the revenue can be equalised, it will help matters.

    But I do not think it is going to really come to that because Bharti is now picking up the pieces and drawing up a plan B. They have announced $2-billion fundraising. Now they are trying to figurr out how to raise the money.
    Well somebody looked at the balance sheets of both Airtel and Voda. Bharti has the assets to be able to dispose off to still stay in this game, Voda does not have it on the Voda-Idea balance sheet. So, both the partners have to step up and put more money in.

    But Voda Idea has within the group?
    Yes, Idea has and Voda can also write a cheque. Voda is sitting on cash overseas. The point is they have said that this not fair, we want you to make some concessions. The government has to figure something out and let us see what happens.

    The other thing is the 5G spectrum auction is coming up and both Vodafone and Airtel have the technology for 5G. They just have to press a button, Jio has to buy it. That is the big difference. 5G is in its infancy and it is going to take a couple of years. But Jio may say, fine let us not have 5G for two years in India. Most places are still running on 3G rather than 4G in India.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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