Only thankful that yesterday has ended but what really spooked the markets and do you sense that the pain could not be over just yet?
Deven Choksey: Well, more or less on anticipated line, the dollar index shot up above 110. The rupee fell below 86.20 which was a very crucial level and that was indicating that most of the traders who have basically taken the position, I am talking about FPI traders who have taken the position on the leverage side, they had to unwind part of their leverage largely because of this equation of rupee depreciating. So, certainly that pressure is on as far as the market is concerned. The larger part of the delivery volume gets reflected when we see the data, but the F&O volume is not showing the data where we believe that large FPIs are basically shorting the counters on that side of the market and gradually deliver the shares in the cash market as and when they get the depth in the market.
So, that is where the pressure is coming in. I always believe that Indian market because in the cash market, the lack of depth is there, as a result of which this continuous selling of FIIs would continue for a longer period of time. Any other markets in the world where the depth is high, probably they would have walked away with their selling at least three months before in given kind of a situation. But that is a pain that we are undergoing at this part of time. The large part of the drag in the market is due to the currency misbehaviour and that is the reason for which we are seeing the sell-off coming from FPI side.
But what are you doing in this market? Are you already starting to buy and deploy some of the funds? Are you completely staying away? What is the latest action that you have done in the markets?
Deven Choksey: So, we have been accumulating good quality stocks. Though after buying, you very well expect the fall in stock price, the likes of Tata Technology, likes of Bajaj Housing Finance which are fundamentally strong companies which in the recent times also we have added into the portfolio.
We believe that the large growth programmes are continuing to benefit these companies and as a result in their respective capacities, one is in the housing finance and second is in the aviation and automobile segment of the higher engineering R&D, that is Tata Technology, we believe that these kind of companies are available at a good valuation, good price, good correction. Even likes of Jio Finance, you are getting into good price correction. So, certainly, whatever the requirement of money that we require in our funds, we currently take up this kind of activity and position ourselves in buying these companies. What do you make of these big CEO transitions which are happening, hitting us quite surprisingly. It was Avenue Supermarts that came out with that latest news flow and now United Spirits we have Hina getting elevated at the group level and a new face coming in as the CEO. What do you make of some of the CEO transitions and do they impact the fundamentals of the stocks?
Deven Choksey: It is a good point. Company by company we have to keep looking around for how the transition is taking place from the earlier management to the new management. It is not a very surprising factor though.
As far as global environment is concerned, the CEOs, they do move from one to another because at the end of the day after a while definitely there has to be a management transition which needs to take place. So, even in Avenue Supermarket, I believe that it is a gradual shift into the new management position which is rightfully so as against you get the abrupt transitions.
So, this is a planned transition which is perfect, no issue at all. As long as the promoter is driving the business with the ethos, I would think that it should not affect the business of the company beyond a point and at the same time for every business the young energy has to come in.
Unless you bring in the young energy the kind of disruption that we are seeing in the business environment in respective areas of business, I think that energy will not come unless we bring it in. So, I guess the transition is making sense to me at this point of time.
I want to talk about the retail plays pretty much pegged against each other. A) the platform companies when it comes either to quick commerce or food aggregators they weigh in a Swiggy, a Zomato and how these traditional retailers are facing the brunt of it, case in point being DMart. Given the correction in a Zomato also yesterday and the fact that DMart has lagged for quite some time now, now there is that additional management rejig as well, where is it that you would be comfortable adding more positions?
Deven Choksey: Still the valuation wise they are still quite-quite expensive in my viewpoint. The kind of growth that these companies are assuming and I am talking about the profit growth, not the top line growth.
The profit growth that these companies are assuming, they remain quite at a tight place as far as the margins are concerned and from that perspective anything which you pay as a premium is not something which is of a greater confidence.
You look at Zomato, you look at Swiggy in the quick commerce space, in the food delivery space, they keep on building the new business model agree, but at the same time the kind of profit that they are making versus the market capitalisation in which they are quoting.
For example, you are quoting at three lakh crore worth of market cap, three lakh crore plus market cap between Swiggy and Zomato and against which the profit is in Zomato’s case some even as profit and Swiggy is yet to come into profit.
I do not know how much money one can pay as a premium to buy these kind of assets even though they may be fantastic consumer tech companies, even though they may be solving good amount of customer’s requirement but still valuation wise they remain absolutely elevated and expensive in my viewpoint.
