Is it safe to assume that gold will continue to be a safe haven for the next foreseeable future?
I have never invested in gold personally or allowed anybody in my family to do so much to the unhappiness of several members of the family. It is a waste of money and I do not want to comment on that. It might do well, it might not, it is just a complete waste of money in so far as I am concerned.
It does not give you anything, it does not give you yield, it does not give you anything, it gives you a false sense of security in my view. So I do not want to comment more than that.
Which part of your portfolio are you reasonably confident could be a long-term portfolio component for the next couple of years? Are you committed to maintaining 15-20-25% weightage in that space?
One of the lessons I have learnt over 25 years is that if you have well managed, well-run businesses which generate reasonable amounts of cash, it is a business leader which has a reason to remain as a leader. You should not bother about trimming a little or buying at dips or trading around your core position. You should continue with the core position or trade a little bit around it but do not disturb it.
So let us go back to the first principle, if a company is catering not only to India but to the global market, has a very good solid balance sheet, has business leadership in the business it is in and is more of a necessary product than a discretionary product and the valuations are not terribly expensive, you should just hold on and see through this volatility. Why would you want to turn that into cash and try and time another purchase hoping that the US election related volatility gives you an opportunity. But having said this, you also mentioned Covid and China. Covid is a bigger question.
None of us know the extent of the damage that Covid has caused or will continue to cause and that to me is the real risk out there. There is a very interesting article in today’s Mint newspaper where Niranjan Rajadhyaksha has referred to a particular aspect called the demand shock. We still do not understand what is the demand shock which will arise as a result of corona. That is the real test and the test of that will be visible during the festival season.
It is something of an event which I will watch very carefully. China of course has both political issues and it has other issues related to it. One has to watch that very closely.
How realistic do you think the push towards manufacturing is going to be because if we are able to get it right as the labour reform has kicked in and cost of capital is getting better. Do you think it will throw up outsized gainers or is this still storytelling right now?
It should do well. If you look at places where we have a very large domestic market, we could easily build a scenario where companies that are very large in India could become a base for exports to the rest of the world.
We often do not think about autos in that way but if you think about it, India has global competitiveness in two-wheelers today, India has probably global competitiveness in small cars. So if you have a large scale in the domestic market in manufacturing and we give it a little bit of a nudge which the government appears to be doing, you could easily become very large from a global marketplace perspective.
It is not just the cost of capital, it is the size of capital. Look at the size of FDI that is coming into India. We have finally reached a point where if you had to sink in a couple of billion dollars into a very large opportunity over two or three years, it is not a problem because there are large pools of capital available to you globally that are willing to back you up if you have the right entrepreneur, if you have the right market opportunity and the government seems to be doing its bit.
So yes, I am quite optimistic that some opportunities will emerge out of it. I just hope that we use that opportunity correctly and from an administration perspective, things do not go wrong. The Nokia factory in Tamil Nadu had a certain outcome. Those are the things that we have to watch out for so that we do not get swayed by short-term revenue targets and kind of lose sight of the bigger picture from a policy perspective. That is what I would hope for.