1 week Ago
Deepak Shenoy, Founder, Capital Mind, says amidst tariff uncertainties and potential market volatility, investors are advised to remain cautious and avoid hasty decisions. Focus should be on Indian domestic manufacturing, infrastructure, and consumption-driven sectors, which are expected to thrive. Strategic allocation towards companies producing in and for India is recommended for long-term growth, capitalizing on the 'Surge India' trend.
Shenoy also says, in the long-term India will come out stronger and victorious but in the smaller time frame, a lot of bad things can happen. It’s better for investors to leave the portfolio to professionals and fund managers.You had tweeted early on Monday morning the pre-open rate settled in saying that it is going to be a crazy day.
It is. It has lived up to that, has it not?Deepak Shenoy: It started off crazy, it has not become crazier, thank goodness. But there are a lot of very strange things happening.
Gold is actually not going up. In times of extreme uncertainty, it tends to go up. Cryptocurrency markets are showing a fairly large decline.
We have not yet seen anything meaningful and the US markets are not open yet. Your Asian markets have taken it on their chin as well, apart from India as well. So to that extent, we might actually be seeing a lesser reaction compared to the US or the rest of the Asian markets, especially over the last three trading days we may be down maybe 4-4.
5% in total, but the US is down more, possibly 15% in this timeframe. So, yes, relatively less hit but hit nevertheless and has not gotten worse intraday which is a good thing. During this sort of an uncertain environment, what new commentary will we get? Donald Trump called the entire tariff as a medicine that was required.
What should one do? How should they actually go ahead and sort of kind of reallocate or realign their portfolio?Deepak Shenoy: If you look at the macro concept, you cannot predict what is going to happen, so I am not even going to try. All I know is that there are lots of stocks which have been on our watch list for years sometimes and many of them have been outside the range of the prices that we wanted to buy them at and perhaps this will give us an opportunity to buy them at those ranges. We continue to be buyers where there is significant value that is available to us in terms of our prediction of future growth and aligned, of course, with the rest of the world.
Today, we have largely had an India, domestic India kind of investment policy in our fundamental portfolio and there nothing major has changed because if you are making stuff domestically for India, unless India forgoes all its tariffs, this will continue to be a very strong market, very strong place to invest. So, at this point if you are an active investor, this is a great opportunity to realign portfolios. We have been doing that over the last three months, shifting away from stocks which are relatively higher value to a point where we can get into new stocks that we wanted to get into at lower valuations and we continue to do the same process.
Long term, this is all very bullish for India because in the long-term India will come out stronger and victorious. In that smaller time frame, a lot of bad things can happen and maybe that is the time you just have to close your nose and run through with the portfolio without having to mark to market your entire life every day, that is the job of funds and people like us, of course, all the time, but every individual does not have to do it. You did say that you are realigning the portfolio, trying to actually get in some good stocks at these prices.
Which sector would that be actually that you are looking at this point in time because all you can see is blood on the screen, you do not know where to put your money. You would not want to miss the bus at this point in time.Deepak Shenoy: You do not have to jump in hurry because it is like the first day of a fall.
It may be two or three more days. It may be a massive recovery the next day. We do not know the answer to that.
The tariffs start from the 9th and even before that they could suddenly decide to postpone the tariffs because not enough countries are playing ball. China has refused to play ball already and China is the only country that matters to the US because they cannot substitute China in any meaningful way in the next year or so, and without China playing ball, America is going to see a significant amount of inflation with the tariffs they are putting on them.So, given this, we will see a lot of volatility, both down and up.
If you find stocks coming into good valuations, that is when you should buy them. But it is not like you should hurry and jump into anything just yet. But I feel relatively unaffected are stocks that are manufacturing in India and for India.
Manufacturing in terms of defence, auto, and auto ancillaries and all of that will continue to do well. Of course, some of the tariff changes may impact them, but by and large they will continue to do well. There will also be a bunch of other stocks in domestic infrastructure, domestic consumption, financialization, these are trends that we will see go to the next decade because we will continue to grow in all of these areas.
When those stocks come down to a much more reasonable value, it is worth increasing your position size on them or it is worth increasing your investments in them and taking out some sectors that may be affected. We call this Surge India, if you may and we are increasing allocations to companies that are making for India and making in India. That is undoubtedly a future that will be brighter in the next decade.
The government has hiked the excise duty by Rs 2 per litre on diesel and petrol. It is coming at a time when ideally we should have expected some relief, not an increase.Deepak Shenoy: What to say, it is just very strange.
We could have enjoyed the benefits of a lower petrol price and a lower diesel price, but that is too much to expect because honestly we have not been given the ability to enjoy that for the last three years even though crude oil price fell a lot. I believe here it is a differential treatment for us but what it does mean is that there will be other areas where it reduces in terms of cost,.Plastics costs will reduce, there will be a little bit lower transportation cost, airline fuel surcharges hopefully will come down, but I do not know if duty is increased on that as well.
But we should have been given some of this opportunity. Hopefully, the government will reduce it in some other way. A bigger thing would be to cut the GST.
Hopefully, they will use this as a mechanism to cut GST as well. I cannot see the logic of increasing duty at this point when there is so much uncertainty. So, the government has something else in mind.
Like you mentioned, we have not been able to enjoy the lower crude oil prices each time the crude prices have fallen. We have not been able to enjoy lower petrol or diesel prices. In fact, this sort of an excise duty hike is coming at a time when there is such uncertainty in the environment and at a time when crude prices globally are down.
Deepak Shenoy: Well, you will get the same price of diesel and petrol, that is the point. If crude has fallen to $60, your petrol price would have naturally come down at some level. And instead of bringing it down, they have said, well, you bring down the price if you want, but we will increase the excise duty and therefore, you will pay the same price at the petrol pump.
So, it would not increase the price that you pay for petrol. It will be exactly the same, just that you could have got a reduction, you are not getting it. So, I do not think it will increase your cost.
So, you will still make the rupee tax saving per year but you will not be able to enjoy a lower price of petrol that your friends in neighbouring countries or in UK or Europe or something like that might enjoy because they allow the price to fall. The government has gone ahead and hiked the excise duty by Rs 2 per litre on petrol and diesel. But what sources are indicating that the OMCs may actually look at reducing the fuel prices as well which will be a win-win for consumers isn’t it?Deepak Shenoy: Well, it has been naturally a long time coming.
The price of crude has fallen to less than $70. Even when it was $95, the fuel prices were exactly the same. It fell to $70, we saw no price change and no duty change by the government.
The oil companies did not give us any discount because of that and now when it has fallen to $60, now below $70, they have chosen to give us a little bit. This feels like it is not like a really even market. Somebody else is deciding the price when a market should be determining the price.
But fine, we will take whatever scraps we get, I guess. So, I am going to be happy if we get a lower price. It will help reduce inflation and the impact of any depreciation of the rupee that would have affected us in terms of inflation.
So, yes, the rupee is up about 40 paisa today and therefore it is about a 0.5% increase in the cost of things. But by and large, if we get a reduction in the cost of fuel, we may see lower inflation going forward.
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