Do the markets secretly assess the reduction as soon as it begins?

The reduction was in the foreground in people’s minds just a few weeks ago, and now it is going to the background because it is realized that the Fed may take notice of this new variant. of Covid and may not tighten the screws as much as we expect.

If the Covid variant spreads, what happens then? How do you think the markets would adjust?

Last year when this Covid situation hit, there was panic. The market fell dramatically but recovered very quickly. People have heard about Covid, big disaster, big trouble, and now they’re starting to say that last time it wasn’t that bad the market did well. So why should I panic about this situation?

Yes, the new variant is very contagious, but it doesn’t have to be fatal. In other words, the deaths so far are minimal. So, you may come across a situation where people will realize that this new variant is not as bad, but people will tend not to react as strongly as they did when they first panicked.

Your exposure to India was limited to three stocks. Did you do four or five?

No, we’re sticking to those stocks and we’re very happy with it. We continue to explore the possibilities, but so far we are not making any changes.

Any reason why you opted for a persistent name and not a first line name like TCS or Infosys?

Yes, the whole idea of ​​the fund was to be different from indices. ETFs are instruments that many investors use because they are index-based. So for us to offer something different than what people have now is to do something where the clue is not involved. We make a point of not investing in index companies.

In our portfolio of three stocks, maybe two are part of an index and not the main index. So this is one of the fundamental principles that we have in our portfolio. The second thing is that we want to tackle medium and small businesses, which people haven’t noticed.

People don’t think these businesses are going to grow. They will gradually recognize the value of companies, of course, and then the prices will go up.

PolyCab and Apollo, two stocks that you own, in a sense, are commodity consumers. At a time when we are witnessing a revaluation of the raw materials complex and when companies are struggling to maintain their costs, is it wise to bet on raw materials, consumers and not producers?

Not necessarily. If you look at both manufacturers, yes they are using steel and steel prices are going up, but that’s only part of their overall cost.

The other part is labor and other aspects of manufacturing. The impact on prices is therefore not that great.

The good news, on top of that, is that with the power of quality, they can get a higher price tag. They can increase prices without impacting demand too much. It depends on the individual business.

You will find that many consumers of commodities continue to do well just because the demand for their products is so great and their quality is good that they can keep the market going while raising the prices.

Is there a reason you are worried about your exposure to India?

We only care about one thing: the companies we invest in. What is the situation of the company? What is the macro environment that impacts them? We don’t focus on the index or what ICICI or Reliance is doing. We focus on the companies we invest in and find that the pricing behavior differs from those companies and others.

Are you surprised by the kind of IPO euphoria we’ve seen in some of the new tech companies? Have you looked at names like Zomato or Paytm, or ignored them completely?

We are going to jump for two reasons. We don’t get into IPOs too often because they are perfectly priced. Their prices are not necessarily a bargain. Second, many of these IPOs, especially in the tech arena, are built on hope and lack of cash as companies continue to lose money. Our policy is not to invest in companies that lose money. Now, yes, prices can’t skyrocket when people are excited about the technological innovation or the business and their hopes and fears, but at the end of the day we find that it’s best to go. stick to companies that have a solid foundation, low debt and good income.

Many global investors who invest in India buy from private banks or financial companies. Why did you give this a jump?

Financials are often part of the index, so we avoid them. It is often difficult to know what is going on with the banks. So if you go to a bank to interview management and ask them how many loans they have, they won’t tell you what’s going on. They don’t want to look bad.

Let’s say the NPLs are 2% or 3%, but in reality they are probably more like 20%, so that kind of opacity makes it very difficult to invest in banks. You have to be extremely careful. These are the two reasons why we cannot favor the banks. It doesn’t mean that you will never go to a bank, maybe a small bank that grows quickly for one reason or another and that is solid and where you can get the information you want, but otherwise, you have to be very careful.

Would you buy Bitcoin? So if you have to consider buying, selling, and holding for different asset classes, how would you rank them?

People should have gold, maybe 10% of the assets in an emergency. Gold has been a currency throughout the history of mankind, and it’s something you can have. Bitcoin or cryptocurrencies are in the religion class, it is a belief that they will increase if others believe like you, but if not, it is not an investment. It’s not something that makes money, that pays dividends, that produces something. It is not only a currency but can be used for industrial purposes.

I was talking to a semiconductor maker and I said, have you ever used gold? He said yes, we love gold for connecting semiconductors, but the problem is its price. It’s a bit too high. If it goes down, we will go from copper to gold because gold is far superior to copper. This is why I don’t think cryptocurrencies fall under the category of viable investments. It’s speculation, you could play with it, have fun with it, but don’t think of it as an investment.

Do you think there is a budding bubble throughout the electric vehicle space?

In some cases there is a bubble. Every buyer rushes into this space. New electric car companies are listed or formulated.

It’s like the California Gold Rush. Many years ago the people making money were the ones selling shovels and tools for miners, and it’s probably two of the people in the electric vehicle area that make battery or battery components. some driveshafts, that stuff is probably going to make the money, but a lot of automakers aren’t going to do that well.

What is this data point that you would be monitoring that will convince you that it is time to sell or exit your Indian portfolio?

The most important thing, of course, would be government regulation. For example, the Indian government says that we are now going to impose a large tax on foreign investors, or we will limit the ability of foreign investors to limit their income. Things like that would panic us and worry us a lot.

That would be the number one problem. Others like the income issues, the characteristics of the business. So far we can handle this. We can work with the companies or sell depending on what we think they are going to do. In general, we tend to turn our wallets a little. We have very, very low turnover because we have businesses that we believe in and know that they will do well in the long run.