At any given point of time, it is advisable to have some cash holding”
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Paresh Khandwala, MD, Khandwala Securities, is upbeat on automobile and bank stocks
What is your view on the markets?
I will not take a pessimistic view from here onwards. I will be optimistic but with a cautious approach and view. Factors such as rising interest rates, inflation, scams, etc, have severely impacted the markets.
Things should settle down in the next 6-9 months and a clear picture should emerge unless something goes wrong on the political front, which is very difficult to predict.
Are you concerned over global economic developments?
Developments on the world front should settle within the next 9-12 months. India has been impacted psychologically and may remain subdued for some more time under the influence of global concerns. It is a good opportunity to invest in the stock market.
Do you think the worst is over?
Yes, unless something drastically goes wrong on the political front as far as India goes.
Have you churned your portfolio in recent times? If so, how have you changed the composition?
I have always been a long-term investor. I have not changed my portfolio due to the market situation. I have booked profits to meet my need for money from time to time.
Do you think it is time to increase cash holding? How much percentage of your personal portfolio is in cash?
At any given point of time, it is advisable to have some cash holding. I have 10-12% of my portfolio in cash.
Which are the two sectors you are bullish on? And which are the top stocks in these sectors? Are there any sectors that you are exiting?
I am bullish on auto and banks. Considering the Indian demographics, I think the demand and buying capacity will continue to bolster auto stocks. India will implement new reforms in the auto sector going forward such as replacement of vehicles which are more than 20 years old. For this, we will need three times more capacity than we have at present.
Banks, being the backbone of the economy, will continue to perform well. The concerns over non-performing assets and margin contraction have been discounted in the stock prices. As for stocks, I like State Bank of India, Bajaj Auto, Punjab National Bank, Maruti Suzuki, Mahindra & Mahindra, Axis Bank and Yes Bank. IFCI can be tomorrow’s blue-chip provided it adopts the right strategy, just as ICICI did. In 1998, ICICI was at Rs 35 per share and has made fortune for investors. It was quoting at Rs 844 on October 4, 2011.
Are you taking a contrarian call on certain stocks? If so, which ones?
I like real estate stocks, but they have a long way to go. Promoters of real estate firms should have learned to be disciplined. They should try to focus on completing projects in hand, generate cash flow and use it to repay debt. They should focus more on existing land banks rather than acquiring more land, which will substantially improve their net asset values. They can reward shareholders by way of dividend payout and capital appreciation.
What are the criteria you adopt to identify good companies from the bad ones?
I always look at cash earnings of companies and the ones that have retained cash, besides their dividend record and the management’s ability to deliver results. Once you see consistent performance by a company, just pick it up. I have learnt to invest looking at the company’s fundamentals and future prospects rather than trusting others’ recommendations.
What strategy should retail investors adopt in the current market?
Retail investors should identify good stocks and buy them every month through a systematic investment plan. You can never go wrong with stocks which have huge value potential in the long run.
Are you diversifying into other asset classes such as commodities, especially gold and silver?
Yes, I have invested 20% of my portfolio in gold. 70% stays in equities. I have placed about 90% of my equity bets on large-cap stocks.