OB: So what are clients being advised right now?
Gumashta: One of the things that we have done is to diversify our client’s exposure internationally. We are also very traditional in our approach and that reflects in our AUM, where the majority is in basic debt products. To that extent, while we missed the alternatives bus, we were saved from the crisis. But there are opportunities today. For example, the dividend yields of some of the country’s large PSU companies are currently more than their bond yields. So, one doesn’t have to do anything exotic to fetch returns. In tough times like these, if you are not very smart, stick to the basics and follow an asset allocation model.
OB: Would that also mean buying stocks at 100x PE?
Iyer: The point is that you must wait for economic tailwinds to set in before taking bold bets. Right now, it’s the time to stick to quality stocks and not get adventurous.
OB: How would you define quality stocks?
Saluja: Quality doesn’t mean blue chip. In fixed income, DHFL was rated AAA, but was it a quality instrument? Besides the size of the business opportunity, planning and capital efficiency, other parameters such as corporate governance and the integrity of the promoter matter too. As far as equity is concerned, you have to consider whether a company is a capital guzzler or capital efficient, and also assess the quality of its earnings growth over the past five years. Just because a stock has been battered 60-70% doesn’t necessarily make it a good investment.
OB: Have valuations captured the impact of corporate tax cuts in terms of earnings growth?
Kapoor: From a macro perspective, for the first time, we are seeing monetary and fiscal easing being administered concurrently, which shows the policymakers’ resolve. The tax cut is more to do with the competitiveness of India Inc rather than its earnings. Our macro is great minus exports — engineering and non-oil exports are struggling. Just wait for another two years -— quite a few large groups are contemplating floating new companies to take advantage of the tax cut. The cut will improve our competitivenes