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We now have a historic opportunity and I am on the hope trade here. I do not think we are going to do it in a way that will make markets look attractive all the time and in fact it is darkest just before the dawn, says, Head, Institutional Research,. Excerpts from an interview with ETNOW.That is a very good question. We have been in perennial hope versus disillusionment back and forth for the last two-three years, I would say.2014 was the big hope trade and after that, we have just gone up and down and up and down and it is a very fair question to ask – are we near a sentimental and real bottom in the markets? Is this the time for the 90 odd per cent of Indian savers who are not exposed to stock markets to now begin to build a portfolio?Let us look at the ingredients of such a situation and whether we really have the right ingredients for a bottom or durable bottom to be made. I am putting it out there in front of you and then we can take a call on it. On the face of it, investing in the stock markets does not look like a great idea despite all the brave noises that we hear.Yes, equity inflows are not happening. If you strip off the passive equity flows from there, the discretionary and the lump sum inflows have cracked month on month. The tax cut which we all got so excited about, simply did not cut it beyond a point and we were one of the few people who said that this just makes blue chip India more blue chip. Does it really make stressed India less stressed? That is the thing that can swing things in a big way. Of course, it will pull in some foreign interest and people may want to set up something here. But look at the big picture. Global GDP is challenged. Domestic GDP is struggling. We are at I do not know how many quarters low -- 17 quarter or something at 5% the last declared print.There is solvency crisis, that big monster in the room in the NBFC pack, and again it is selective but it is there, it is big and it refuses to go away. We are now reluctantly recognising that our credit system needs fixing. Of course, there are great lenders out there. Blue chip banks were doing very well, but as a system, the credit system needs fixing. The ability to lend money and recover if something goes wrong, has always been low and it has only gotten worse.Despite all the noise around IBC and all of those resolutions promising to come through, nothing has really moved in a way that swings the needle and gets us excited. The monetary policy which has been very accommodative so far and corporate India looks forward to it and makes polite noises for cutting 25 bps yet again. We have lost I think about 130 bps since the last time we thought that accommodation should happen. Fiscal policy is now stepping in perhaps to do what monetary policy cannot and so we will pay more to government servants. We will spend more on infra. We will build India all over again. None of this is helping!Lst us look at a little bit of history. In 1947, India was the biggest political experiment in modern world history. Can this country stay together and naysayers were out there and we have done admirably well from there; things have not worked out perfectly but we have done very well. It was a huge experiment to take on. People even questioned whether we can remain one country or not and that we would be split down the middle and so on.India is probably the modern world’s largest, greatest and most ambitious economic experiment, policy experiment and I am waiting for the policy 2.0, Modi 2.0 bold reforms to come through -- not just cutting tax rates. It is part of the list that you will have but there are so many things in which you can make a difference, starting with the steel frame of India’s bureaucracy.Making taxes easier to file and understand and interpret could be another one. Eliminating corruption from the rank and file of the bureaucracy and administration could another. There is a whole list. Building infrastructure, railways, all need to be done urgently. China tried a big leap forward, though not the Mao leap but the leap which happened after 88-89 and look where they have reached! They had their own way of playing it.We now have a historic opportunity and we are going to do this. I am on the hope trade here. I do not think we are going to do it in a way that will make markets look attractive all the time and in fact it is at times when things look the darkest, just before dawn. It is a time for all those brave people out there who have faith in India, at least hope.Yes, so just going out and seeking value buying just because it is cheap has not worked. It actually never works and this is something that we do not learn, buying something when it is cheap and likely to transform is when it will work. If you are a company which has made losses, should I just go and buy your stock because the stock has come down to one-fourth of this original value? We have seen that playing out repeatedly in stocks, that have imploded from the top, particularly the levered financials.Financials by definition are leveraged. DHFL, YES Bank, you can take so many names there and if there is a governance problem, a structural problem or an unknown, then there is no way that you can make money on such ideas. I suspect YES Bank is approaching a strategic bottom but we still do not have enough clarity.I do not. I suspect that we are close to a massive cleanup, there is a good management in charge and we do not have them under coverage. I have been criticised in the past for being sceptical about asset quality there. I continue to remain sceptical on asset quality but I believe that the intent with which the bank is being run now is probably the highest it has seen in a decade.That is the old fashion lesson yes…Give me an example I will challenge you there.If you have been value hunting and nibbling at value, you have gone nowhere.Sasta aur sasta ho jayega (Cheap will get cheaper);Actually the old lessons are being applied on these stocks. You may not like the multiples at which they are trading as a result of the application of the old lessons. The old lessons are about management quality, longevity of the business, customer franchise, moats and pricing power. All of that is there in the blue chips that you talk about. Avenue Supermarts is close to a 100 times trailing earnings.Is there a bubble in the quality is the question to ask. May be the price looks wrong and may be in the next few years, the real alpha is to be made in companies which are not yet recognised. They are not consensus blue chips, but they show the signs of the coming blue chips.Some of them look terribly out of fashion. I must confess, we have gone absolutely right for the trailing year on SBI Life, a large life insurance company promoted by a PSU bank. This is one of the lowest cost structures. It is not as sexy in terms of the valuation multiples that you might put on some of the other private sector names. But it has been a terrific alpha trade over the last year or so. A very good cost structure, improved product mix, fantastic distribution upside, great brand name, you know what, it is completely wrong to call them a PSU promoted company. They have all the ingredients of a private sector company.If you look for the right stuff, play by the rules. You may not spot all the winners that move the markets but if you play by the rules, you will get a good average in investing. Right now ITC is at something like a 20 multiple or is it sub 20 if I look at 21 earnings.Global investors may not get excited but just look at the fact that they are looking at volume growth after six years of being in a funk. They have now got more than critical mass on their FMCG business which may look challenged in the modern emerging digital world and like a whole lot of FMCG companies, they have got challenged. They are on the verge of providing very steady safe and stable returns to investors over a period of time.If you are an investor who has not been in markets for two decades and who always thought that markets are all about gambling and not making rational money, allocate a little bit to ITC as a high quality value trade. There is an Axis Bank which has turned around spectacularly, but just going back to the basics under a dynamic new CEO, who is a completely no-nonsense person and who is driving reforms through the bank, I do not know why they raised money recently.We ourselves are a little puzzled that a little more can happen on asset quality clean up. May be, they will acquire Max. I do not know what they might do with the money, but I think Axis is another compounder for some time to come.On the largecaps, India’s largest cap TCS is down some 15-20% odd from recent peaks our experience and our interactions with their peers in the US tell us that TCS’ growth story is far from over.I do not even track what my analysts write for, what is going to happen this quarter. They will do 2-2.5% constant currency or some such thing. That is not the reason you should be buying it. In fact, if they report a bad set of numbers, that is an opportunity and if they do not disclose or if you do not suspect or read between the lines and do not see a breakdown in the structural argument for TCS to continue growing, remember it is still nowhere near the market cap of global peers in the services business.We had good stuff being told about them from even people who are way ahead of them in business at a global level. So, unless the argument breaks down completely, you should have a good and safe and steady ride with a company like TCS. Companies like Petronet, where we were cribbing about not having adequate clarity on capital allocation, go and make announcement on capital allocation and what have you! They have got a reasonably safe deal there, the jury is out on whether they will eventually make very good money but it is better than earning 4%, 5%, 6% post tax in bank deposits.We see that in consumption. Not everything in consumption is cheap. You have to look for people who are aligned with the new and emerging India which is coming through. The new and emerging India is changing its consumption habits in ways that you and I need to think over very carefully. Maruti is going through that struggle right now. They also have a tech shift happening not just in terms of BS-VI, but electric vehicles are probably becoming the norm over the next few years.I would fish for value in Maruti at some point of time or other, but if you look at a company which is completely aligned with the shifts even as we speak today and which seems to have got what digital disruption is all about and is faced with a multi-year growth opportunity, I would go out and pick Jubilant Food Works. You may say it is a pizza delivery company, it is going to be hit terribly by the food services companies and so on. But we have a slightly different view here; one, they have known exposure in only one cuisine which is Italian or let us say pizzas and they are getting into Chinese and we went and took a look at their Hong’s Kitchen outlet. You know, Chinese more than Italian is the second most consumed eat out cuisine in India after Indian.Dunkin was a bad idea and they have been careful. What can be wrong in running an experiment with the second largest ordered cuisine in this country, unless you slow up?It does not. At least not with investors. I do not know about your consumers. They have gone through some of those accidents and they have willy-nilly figured out what works and what does not. Give them some space. They did mess up their business by recklessly expanding at one point of time; after that Pratik Pota came in as CEO and set things right and ran it with a more hard nosed business perspective and that protected margins as well as delivered value to customers.They have figured out the everyday value proposition that the global Dominos franchise has played around within the US and a whole lot of experiments from there in terms of setting up multiple stores and having more intense distribution in the geographies which are working for you, ruthlessly withdrawing from geographies which do not work for you, putting a lot of digital flavours in the business.You will be surprised what you can do with digital in pizza; you are not going to eat chips that are digital, but what happens is how hot the pizza is when it is delivered, what is the uniformity of that cheese layer on top, how much of toppings have you put etc. And you can run all this on AI. Can you get the pizza in the oven just as the guy who is coming on the scooty is 15 minutes away so that it comes out piping hot and you put it in a container, so that it is delivered in not 30 but 22 minutes and does that get you more franchise with your customers? If you are delivering through the food service apps or the food aggregator apps, then you just get the order from there, the delivery boy is still a Dominos guy who drops in a Dominos menu and exhorts the customer to download the app and say Sir, hamara directly deliver kariye and they will not bear discounts, they will say if you want to sell my pizzas at a discount through your aggregator model, then you bear the discounts, my pricing is what it is.