Putting a short-term view as you said behind us, what is the ideal portfolio structure right now, what sector or market capitalization flavor should a portfolio have if you are looking at the next two or three years?
Vikas Khemani: Again, we don’t change our portfolio constructs every day. I have repeatedly said that India remains one of the most promising markets in the world. Your portfolio should reflect five to ten years of views rather than short-term views, and you don’t make tactical assumptions. So, from that point of view, banking, financial services, of course, continue to maintain a very large exposure, especially for us, in the current situation where interest rates are falling.
So for the past six months we have been very bullish. Secondly, manufacturing is a huge trend, something that will be coming here for a while, and there are many opportunities. Of course, manufacturing is a very broad subject between specialized chemicals, so there is a lot of intermittent trends. It’s very spacious. So you can play in those things, but generally speaking, the tail fin is favorable and we think recently that chemicals have come back to interesting places.
We own a lot of CDMOs. Therefore, it is a very promising basket to manufacture as a basket. It’s about staying there. And while there are generally a few options available, there are still options in the full consumption basket, which can be seen between discretion and non-judgment. So, of course, if you allocate capital to these three broad buckets, then of course, if there is only one part of the sector, then you need to identify the correct set of companies.
But since you mentioned chemicals, in that memo I would also like to ask about aviation stock, tires, other crude sensations besides paint, your refiner or OMC. Since we’re mentioning chemicals, will the next dip be crudely surge in some of these sectors and make these sectors attractive to buy now in the long term?
Vikas Khemani: Again, this is not the first time I’ve seen gross prices go up or down. Therefore, due to this short-term move, if you get a company you like with a retracted evaluation, there are certainly cases where you will see it, and it will vary from company to company again. Even within the sector, companies have different sensibilities, so it’s very difficult to call out a particular sector because you have to be very careful about looking at some of these things, but yes, gross prices are soaring, worrying about margin squeezes, everything tends to always work out from a short-term perspective. For example, I think it’s pidilite whenever oil prices go up and stocks go down, but those are generally good opportunities. This means that every inventory has its own nuance and you need to know more about each one. What we’re hearing is the export opportunities ahead for these companies, and some companies are moving towards some of the other segments like Aero Defence, so please tell us more about what you like within the automatic auxiliary pack. So, are there any particular segments of your preference in the car aid, or do you like some of these diverse plays?
Vikas Khemani: Again, automatic aids are very common and I can only say basketball, but each company has a very different business model to study. So we own some names like durability. In general we ask what autos we like because we are positive in the automotive field, but in particular we are studying those individual companies and feel that we are protecting the risks.
So, according to me, it’s about understanding those spaces, companies that aren’t exposed to ice alone. So you need to look at your company and consider what your exposure to transition, exposure to market, and exposure to imports and exports are. So all of this needs to be considered, and each segment also has its own margin profile and capital strength. They all have to be kind of seen before investing.
