Value investor Rajiv Khanna says the D-Street rally ‘irrational exuberance’
- Khanna said issues related to economic slowdown would take their own time to play out, unless the government made sure the consumer gets more money in their pockets.
- Khanna, the brain behind Dolly Khanna’s multibagger portfolio, is one of the most successful stock investors on Dalal Street.
- Let consumption start increasing, then I will start investing. At this point, slowdown is a reality. I am waiting for data points to emerge, Khanna said.
He says new companies, for whom the FM has announced 15 per cent corporate tax, will get a lot of investment over time and, therefore, it is good thinking. Khanna said certain companies would benefit from the corporate tax cut.
However, he said issues related to economic slowdown would take their own time to play out, unless the government made sure the consumer gets more money in their pockets. “That problem remains unaddressed,” he told ETMarkets.com in an interaction.
“I wish she (Sitharaman) would address that. The current rally is irrational exuberance. I am a bit sceptical about it, unless consumer gets more money in their hands,” he said.
Khanna, the brain behind Dolly Khanna’s multibagger portfolio, is one of the most successful stock investors on Dalal Street. This Chennai-based investor has a knack for identifying quality stocks at the right time and has pocketed stellar returns over the years.
In the current market, he is still waiting for the economic slowdown to subside. “Let consumption start increasing, then I will start investing. At this point, slowdown is a reality. I am waiting for data points to emerge. I am not guessing it. I am looking for growth right now. Nothing at this point looks attractive to me. It is still a wait and watch for me,” said Khanna, whose portfolio is now worth Rs 200 crore based on the holdings as of June 30.
The aggregate market capitalisation of the BSE-listed firms swelled by over Rs 10 lakh crore in just two sessions till September 23. The market mood took a ‘U’ a turn after the government on September 20 cut corporate tax rate by almost 10 percentage points, as it looked to pull the economy out of a six-year-low growth rate and address a 45-year high unemployment rate by reviving private investment with a Rs 1.45 lakh crore corporate tax bonanza.
Khanna sold his stake in several companies through this selloff. He held six companies in his portfolio with over one per cent holding as of June 30 against 11 as of March 31, Ace Equity data showed.
The base rate for corporate tax for existing companies has dropped to 22 per cent from 30 per cent at present. For new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, it was slashed to 15 per cent from 25 per cent at present.
Among other notable investors on Dalal Street, Mumbai-based value investor Vijay Kedia believes short covering took the market higher over Friday and Monday.
However, he said the market might not rise substantially from here on, because the problems at macroeconomic levels – including job losses and demand issues – have remained unresolved yet.
He sees subdued numbers for automobile sales and GDP growth. “Things that were in bad shape are still in bad shape. It will take time for them to improve. One should look for opportunities in the midcap space from October onwards,” Kedia said.
With an 8 per cent rally each, both BSE midcap and smallcap indices outpaced the benchmark Sensex index (up 4.71 per cent) on a month-to-date basis till September 23.
Abhishek Basumullick, Kolkata-based value investor and Chief Investment Advisor, Intelsense Capital, believes companies that are able to effectively manage returns on capital employed (RoCE) would be able to use the additional tax saving well. Therefore, investors should look for quality and capital-efficient companies and avoid panic buying.
One in every five companies in the BSE500 index has managed to post RoCE of over 20 per cent in last five years. The list included HUL, Britannia Industries, VST Industries, Hero MotoCorp, TCS, Care Ratings, Asian Paints, Bajaj Consumer Care, Mindtree, Whirlpool and Alembic Pharma.
Aveek Mitra, Founder, Aveksat Financial Advisory, says the worst for midcap and smallcap stocks is over. He advised investors to look for companies doing better than the industry or have good capex in the recent past.