foreign of the CNBC TV 18 Market Cafe I'm your host surabi upadhyay remember this is our show it's a digital First Property it's a show where we talk markets we talk money or we do that with a little bit of ease we take a deep breath we step outside the studios I am not in the studio right now as you can see we sit down grab that cup of coffee or tea whatever I guess like and really go in for an in-depth conversation but as I said at ease remember uh in the last episode you heard from Gotham Dug
gar of motilal oswal institutional equities Gotham is someone who's sort of very deep into institutional equity research and he gave us some great insights about uh the connection between stock markets and elections if you haven't caught that episode just yet I suggest you go on our YouTube channel and do so right away because of some very interesting uh sort of stocks and sectors that he speaks of as well now today we speak to you at a time when the market has finally touched that Milestone 20
000 on the Nifty has happened the question that a lot of people have on their minds is what next may happen is mutual funds should I add more stop myself continue myself buy more PSU what to do and there's always that fear right that fear of high height said oh my God all-time high will this market Fall now today our guest on the show the person that I'm going to speak to uh has been doing this for over 25 years he's got so much experience and you probably know him already I'm very certain of th
at he needs no introduction but anyway let me tell you about him anyway uh my guest on the show is Nilesh Shah the MD of kotak Mahindra Asset Management it's a pleasure to have you with us on this show thank you this is your debut edition of the CNBC TV 18 Market Cafe thank you for joining in my pleasure so uh welcome to the office today as I told our viewers I'm not taking you to the studios are you okay with that I'm fine I'm not going to ask you about the stock ticker about what is happening
with the Nifty now none of that is happening today thank you this works but you know the effort is to try and humanize you know the stock markets and the way we cover them because I firmly believe uh that it's it can't be rocket science it's money that you're you're trying to build a wealth Corpus of a long period of time so it can't be that difficult right Market is all about common sense which is unfortunately not so commonly available really a brilliant brilliant but you know before uh we get
started and before I take you to the cafe and we'll sit down um I know a fair amount of this but I want our viewers to know as well your journey and 25 years plus with the with the Indian Capital markets right yes and a huge period of that with I think kotak Mahindra yes and before that I think even with the ICICI group so I started my career in ICICI group lucky to be groomed over there and then traveled to Templeton and Nexus and that was the early 2000s I'm just trying to understand the map
of the country and the economy also back then so I came in a market where you know there were words like one though all kinds of things even I don't know what they mean now I've seen markets getting shut down because of payment crisis I have seen Brokers always selling at the top of the buying at the top of the market and selling at the bottom of the market and calling it officially uh you know or uh yeah no matter what you sold it was always at the bottom of the day no matter what you want it w
as always at the top of the day and this was officially known as Garo the difference oh so from the wild west to come to this Market where everything is electronically settled I think The Regulators have done a great job in safeguarding our Market I think uh and uh you know you folks have played such a huge part in educating investors I think that much Common Sense everybody has that you don't sell at the top uh you don't buy at the top and you don't uh keep selling when there is a bottom we nee
d to do the reverse we know that much the question is how do we do it how do we you know how do we prepare ourselves for these bottoms and these tops because we don't know you know what is what so one is the financial awareness moment you realize that it's difficult to capture the bottom or the top you are aware about it and then you don't search chasing it the second thing is a simple tool of systematic investment plan today there are more than 15 800 crore coming by by way of a site that's the
last month there are host of people who have built their Financial Security through sip I think India is a rising type every boat here will get lifted unless until they have a big hole hole in the boat and just do a sip that will provide Financial Security okay that's lesson number one avoid boats that have a hole in them you need to be aware of how to identify those votes okay um before we get started on you know markets Full Throttle lineage uh you know we have to take you to our Cafe so plea
se tell me what is it in your usual day what is it are your green tea person coffee person water person so normally I tell the host whatever is best in your place give it to me oh okay and that has worked well I can drink green tea I can drink black coffee I can drink cappuccino I can take Masala tea and moment you put the onus on the host give me the best you know they deliver the best you know okay so I mean I think I'll go with my choice I'm very much a coffee person especially when I'm in a
good mood which I am with with your company so I'm Gonna Get You cappuccino does that work I'll join in okay let's go cappuccino coming right up and we get our conversation started [Music] please have a seat and coffee will be served shortly and I can assure you it'll be a good coffee because I've had it before like you said right the onus is on me so therefore so in Malaysia you know tell me how has it been these last couple of days or this 20 000 Euphoria you know just ahead of Ganesha turkey
the festive season in Diwali what's the buzz uh how are you guys feeling happy and excited or a little overwhelmed because expectations are I'm sure Rising higher so I think we are a little bit overwhelmed okay there was a time when we used to tell in you know request people to be bullish on India growth Studio of India is good now it's the other way around people tell us that don't get bearish India growth story is good is that a worrisome sign when investors are so euphoric and you know I thin
k everything is gold I think this time there is triveni sangam or flow sentiment and fundamentals flows sentiments and and fundamentalism our earnings are growing at about one percent every month so it's not that fundamental survey behind domestic and Global both investors are willing to buy and sentiment towards India is like we have done well but others are doing badly so our line looks bigger so with this combination of flows sentiments and fundamentals I think investor confidence is Justifie
d thank you thank you thank you there you go please please see check it I'm sure it is good why don't you take a sip and then and then we'll decide yes it's a great coffee okay great cheers to that yes sorry you're saying please continue so this combination of flow sentiment and fundamentals do justify investor confidence now given that you yourself sound fairly optimistic even at these levels I could ask you about the five things to buy but today as I said the topic is the five things to not do
in this market I'm the reason I'm asking is maybe one of those five things can be uh don't not participate or don't don't sell that could also be one of the things but you tell me at twenty thousand the five things investors should not do in this market so first don't think last six months will get repeated in next six months okay keep your expectations last six months was luck and now you have to make money on your skill okay that's an important one guys did you hear that please hear him again
he's saying last six months were luck and the next six months will be skills your skill your fund manager skill basically pay attention that's the first lesson okay please continue second this is not the market where I'll recommend people to Leverage okay leverage returns have been fantastic in last six months but now not the time to Leverage third this is time to clean up your portfolio so don't buy kachra stock by quality okay so I'll just repeat going a little slow second is don't leverage b
asically don't borrow money and then invest it in the market uh and the third is it's time to do house cleaning house cleaning okay so this is time to clean up all your non-quality stocks but okay on that do you think that in this rapid rise right March onwards April says the moment this financial year started do you think people or funds for that matter have accumulated has there been an issue of quality in in this rally going up to twenty thousand so we have learned our lessons in 2000 and by
and large avoided kachra stocks but in the market there are many stocks which have run up be ahead of their fundamentals second the valuation also one will have to keep in mind today A lot of people are buying what is moving fast I think it is time to look at valuation don't buy things based on tips buy based on your conviction because when markets correct it's your conviction which will allow you to hold on to those stocks okay so number one keep your expectations real realistic last six months
won't repeat exactly in the same way in the next six months do not borrow money and then invest in the market right now and third it's time to clear the Katra that's three now fourth do your research and invest not just follow someone's step so the the fourth thing is do not follow tips absolutely on social media there is explosion of tips other than your parent no one is interested in making you wealthy so please you know don't get trapped into tips so do not follow tips that's number four and
finally you know don't chase momentum a lot of people are playing momentum investment people are going into fno and trading I think this is time to curtail your trading instincts and take some profit out for longer term investments you know on ethanol trading a good friend of mine met me after many months and he said so to be like there's no use having a friend like you I said why what have I done and he says uh that yeah you are doing the stock market business you're covering it for years and
years you've never told me are you into fno trading I have recently started and uh tell me some ideas some strategies I said you know with folded hands I said my friend maybe you are going to be the master here I never have never will because I never can understand that but it told me something relation that's where I got scared because he's someone who's a regular investor with a day job who definitely has money in mutual funds maybe he has money in your funds as well but we've also seen after
covet this era where investors think they can become better fund managers think they can become better Traders what's your your view on this a lot of it is because of the easy DIY you know the zero discount brokerage platforms and it just seems very easy what would you say to this trend because we can't wish it away it is real let's face it so one there are periods where there's a broad based rally in market and whatever you buy makes money for you as a Trader you feel that this is easy way to m
ake money but please remember 89 of people who traded in fno ended up on the losing side this is and only 11 made money yeah if you are an investor 89 makes money 11 loses money do you want to play the game where the odds of losing are one is to nine or where odds of winning are nine is to one so my recommendation is that whenever you hear Trading do remember the statutory risk factor trading is injurious to ordinary investors Financial Health okay so keep that in mind in case you are feeling th
is compelling need to go out there and become this uh you know new age trading Maverick uh probably want to keep some of those uh sort of risks in mind as well so we've we've discussed the five things that you said people should not do and the fifth one was not Chase momentum and knowledge here I think I want your advice more uh because I think that might be the hardest right now a lot of people say that the sectors that have started doing well in this rally uh these sectors haven't worked in th
e last 10 years right we're talking infrastructure we're talking power we're talking BSU stocks For Heaven's Sake I mean I in my career and I've been doing this for 15 16 17 years I never thought we'll see these kind of levels I mean the stock like ntpcs crossed its 2008 high I thought I will retire I thought my ntpc but it has happened you know so there are people who say that uh you need to prepare yourself for what is maybe a you know a completely new blue sky territory for some of these uh a
reas Industrials psus but at the same time like you're saying we shouldn't get carried away with momentum so how to balance so one on the power stock we are bullish the power utilization or capacity utilization has reached its peak and we are actually studying at a scenario where power rates will have to go higher but on many psus we have seen that the floating stock is very very limited there is no divestment Supply and prices are running up because there is no Supply tomorrow when the governme
nt begins divestment there will be Supply and PSU stocks will come down so don't invest because there is momentum because there is limited floating stock invest because you believe in the fundamentals I'm not letting you have your coffee please please go ahead I'm you know asking for all of this uh advice but then what to do I mean it's just that kind of a market what's the Mandate like do you have a mandate that you give to your fund managers for instance if they're sitting on x amount of gain
or Y amount of gain or let's say if you know some of the infrastructure funds that might have done really well uh is there a mandate that you have to book profits if you've done fifty percent Child Care stock how do you navigate this so I mean again playing momentum retaining the gains but yet also not getting carried away how do you apply that to your own funds so in our funds we take a longer term you're never a short-term View and we move from a company to another company only when we believe
valuations have become expensive on a longer term basis and there are cheaper alternates available see out of 500 odd stocks in the market about 100 delivers return so your success ratio is 20 percent when you have got a winner why Let It Go you make money by letting your winner continue and cutting your losses most people end up cutting profit and letting losses accumulate that's the hard part right realizing which is the horse you keep backing let the horse run and which is the one where it's
time to kind of get off and then you know absolutely start start getting it okay so let me ask you that which are the horses which will keep running you think in this rally and which are the horses that it's time to oh no jump off so one is manufacturing okay thanks to China plus one lot of global companies are looking to diversify that Supply base any Indian company which is servicing local market and which can become part of Global Supply Chain management will have let's say double engine gro
wth okay the second sector where we are extremely bullish is power utilizations are Peak and there is huge demand and power rates will go higher and higher it's really interesting that you say that because power was considered like a dog of a sector right now very uh three and four or five percent sort of growth I remember back in the day nobody it was not an exciting or a hot sector to to speak of you think that's that's going to change yes because now there is demand for power and the supply i
s getting constrained the newer capacities will come over a period of five to six years so in the meantime power companies will have better realization okay uh we also believe ahead of election government puts money in the pockets of consumers and the consumption stock consumption basket also should do well okay now here the only concern is monsoon in the month of August fmcg volumes have actually registered negative growth thanks to restocking at the stockist level yeah so subject to Monsoon I
still think consumption stocks will do well ahead of election Cycles so that's manufacturing power and consumption three horses that you think still have the stamina to keep you know flying ahead in this rally but within that by quality by reasonable valuation and buy foot long term there is a red signal in market for all micro caps mini caps and a semi exchange IPOs I think their prices are way ahead of fundamentals some of the mid caps and small caps also are looking little bit expensive so pl
ease think of buying quality long term and reasonable valuation okay I think that's really saying advice and you're hearing it from the man himself I mean he has been in this industry for so long so please listen when experts are giving you that that piece of advice uh on consumer I just have a follow-up question this whole uh so Trend that arose after over that there's a lot of consumption and expense expenditure on the the premium end but we see fmcg companies they'll you know shampoo or a com
pany they're still doing four or five percent growth they're struggling with you know those kind of volumes uh So within consumer are you looking at playing this play the the urban consumer the rich consumer and don't look at sabon tail shampoo or could that also change I mean there is a k-ship recovery post covered the upper middle class and Rich are enjoying growth far more than the lower middle class and poor people and within that there is premiumization happening my favorite example is that
one percent of Indians enjoy lifestyle of French citizen about 25 percent enjoy Indonesian lifestyle and rest are enjoying sub-Saharan Africa lifestyle we have to keep on migrating people from Africa to Indonesia and Indonesia now journey of African lifestyle to Indonesian lifestyle is going to be far more than people moving from Indonesia to French okay and hence mid-market premiumization is the theme to play on makan was the basic necessary correct correct all those things work yeah now if yo
u are getting incremental money where will you spend you'll spend on entertainment you'll spend on travel and tourism you will spend on Health Care you will spend on education so where incremental money is going to be spent in this sectors this is where you will find Opportunities okay not that I now want to talk about what you see as the biggest red flash or the biggest risk you mentioned micro caps and small caps you want to elaborate on that and beyond that what could be the biggest risk that
people need to keep in mind so I think there's a lot of complacency in micro cap mini caps in a semi Exchange where thanks to limited floating stock prices have run up ahead of their fundamentals and many people believe whatever is moving higher will continue to move higher that complacency is not good I think we have triveni sangamma flows and sentiments and fundamentals but there are certain zones in micro caps and many caps where prices are ahead of fundamentals this is where one needs to ex
ercise caution there are events like higher oil prices like Monsoon like election which could have an impact on the market be ready for correction don't assume that markets will continue to rise in a straight line we're coming to the the final sort of leg of the conversation so therefore I want to ask you uh a couple of you know simple questions like a bit of a rapid fire Maybe if you were to put in your next six month salary into any particular Financial product what would it be so I'll be putt
ing into a set a location fun okay this is where I Outsource my asset allocation requirement to a professional fund manager okay this is one category of fund which is likely to become extremely popular so just blindly put money into a set a location fund asset allocation funds all right again let me ask you your one month salary you have to put in a mutual fund will it be an active fund managed by an active fund manager or would it be a passive fund on you know I have Nifty sensex any of the ind
ices so as long as the fund manager is adding value to me by outperforming indices it is active the day I realized that no there will be no value addition I'll go passive you um suddenly get a bonus of I don't know three four crores or five crores whatever it takes to buy a house in the city of Mumbai so basically you get this big bonus Corpus will you go and buy uh a house so if I don't have a house undoubtedly I will go and buy a house there are people who can stay on a rented property and I'v
e stayed there for 15-20 years but ultimately so undoubtedly if I don't have a house I will go and buy a house once you're in that house and you're done with your day your office time is over how would you unwind how do you unwind so nowadays thanks to Netflix and Amazon you can watch out some of the amazing documentaries and there are days when you don't want to watch a television then there's always a book available I am still a physical book reader I haven't graduated to Kindle but the best w
ay to unwind is by reading some book nice which one are you reading now let me ask you if if you're reading something at the moment so I have been reading some of the books which has been gifted to me by you know some of our Distributors who have written on financial planning okay so very recently I got a book on financial planning if God was your financial planner oh wow I'm going through it right this the title itself has got my interest I think I'm going to take some notes on this after our c
onversation is over uh and last but not the least if you could go back in time and if you could go back to the 90s when you were just finishing College what advice would you give to your 21 year old self and if you could do things differently if at all what would you do if you go back in time nilesha 21 years old what would you do with life so I'll give the same advice which I got from someone uh you know in those days HDFC Bank was doing extremely well and as a fund manager I wanted to go and f
ind out next HDFC Bank of course and that's where my boss told me even today everybody wants to know the next HDFC bank right yeah that's where my boss told me that look HDFC Bank itself is creating new HDFC Bank in three and a half four years why do you want to go and find another HDFC Bank invest where it is already happening so I'll give advice to myself by quality and just stay invested okay all right Nilesh it has been a very very nice conversation and a really enjoyable one I I have to tha
nk you for coming out taking out that time and being with us in the Market Cafe today I hope to have you back often more frequently and have more of these sessions thank you so much thank you all right viewers hope you found that interesting and informative and fun I surely did remember you can catch us on YouTube check out all our episodes and we are going to be back very very soon with one more such engaging interesting conversation catch you over my next coffee foreign
Comments