Book profits & take the cash home as policies are changing: Ajay Srivastava

"Among all the Indian sectors, IT perhaps offers the best place to be at any point of time and the market can go up and down but you got to be there but in the cash market, keep it at the cash holding," says Ajay Srivastava, CEO, Dimensions Corporate Finance Services.

I would not say good or great, but it is looking okay. Markets have suddenly stopped falling and mid and smallcap stocks are finally showing signs of life.
Absolutely. I would say it is a great relief rally for the Indian investors and which gives them a chance to ponder why they didn’t sit on their entire portfolio while this whole mayhem was going around. The implication of the last couple of months and more recently is the fact that the whole philosophy of investing now needs to change.

It needs to become a little more short term because not only in India, but the world over, the political class no more fears over the economic disadvantages they bring to the table with their policies. Look at the US; they dumped a president with the best economy, lowest rate, lowest unemployment rate for a man who pumped in $2 trillion when inflation was going high and look at where the world is today.


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The same situation applies here whether you look at windfall taxes or the export taxes in India. These economic policies do not give one comfort as a long-term investor and the reason is that this is a bumper profit which creates a corpus to do more investment. that India needs to do in oil. If you tax the bumper profit, you take it away from the companies.

So, from investor standpoint, one needs to be realistic about long-term aspirations on equity market and more critically, book your profit because when the economic policy changes as a total of the world and not only in India today, we will never know it and all your profits will disappear. So people need to book the profits and take the cash home. Nothing is long term in this world, the old paradigm in investing is dead.

Now it is time to book profits because we have seen a rally. It could be a bear market rally. So, if it is a bear market rally, raise the cash?
No I think one definitely needs to get out of some stocks because recession is coming and growth is going to slow down. There is no doubt about it. The RBI is saying so. How much more, we do not know the answer. Economic policies have a little longer term. Nothing will happen next morning but in three to six, nine months’ time, we will see the implication of what has happened. So I think definitely this is a stage and market has shown us that midcaps and smallcaps are not the place to hide.

If people want to be adventurous with their portfolio, for alpha return sure take a 10-20% bet on midcaps and smallcaps, but the game in town is still going to be the largecaps because that is going to survive and in the last 12 months, the only positive index is the largecap index. That is the one which has gone into positive at this point of time. I would say it is not about just booking profit. It is about booking profit in the right place. That is more important and eschewing booking losses perhaps could be the worst strategy in this market.

Inside of the index, what do you do now with the highest weighted stock Reliance Industries after the announcements that came in from the government and ONGC?
I have always said never buy PSUs unless you are buying for a dividend yield. Buy it, forget it and count your dividend yield. They are not a capital gain thing. I would put ONGC in that bucket. Also, the dividend yield has not been so good as well. One has to be a little careful with stocks like ONGC.

So forget ONGC. People like Reliance. The latest windfall gain tax was an unfortunate government policy issue but that stock has remained steady for a long time and then picked up. You definitely do not want to bet against it in a longer time framework. So if you are an investor in this country, this is one company which straddles so many sectors at this point of time – it has retail, technology, petroleum refining, chemicals, telecom. It is hard to get a conglomerate and if the company demerges, one could get a little kick off in terms of returns.

We do not know when it is going to happen but if you had to bet on the Indian economy, where do you start? It used to be the HDFC twins. But that is no more the case. I think as an Indian investor, there is no choice but to start from there. So it is not about whether or not, I think it is a must for a portfolio.

TCS is going to be reporting its numbers later this week. Is the pain already in the price after the commentary that we have heard from N Chandra himself?
Again we have to look at TCS from a little longer term perspective. I keep saying that IT in India is s very good investment in the cash market. To play in the futures market with a short term horizon, you could be playing with fire with these stocks because that is not the way to do this.

But if you are a cash buyer of TCS and Infosys, you are safe and sound. At the end of the day, business is robust, it is not going to go away. The rest of the world has to catch up on IT. It is only America dominated by and large. These companies pay back returns to shareholders. Governance is not such an issue at all in these companies. All those things together and given where rupee-dollar is, that is going to keep aiding them no matter what happens in this market.

Their ability to retain tech talent also will improve quite substantially in my view in the next 12 months. Therefore all in all, I think I do not know whether the pain is there because the pain in equity is going to be there for some time for all investors, but longer term, we will be very safe and sound with healthy returns in this sector.

Among all the Indian industry sectors this perhaps offers the best place to be at any point of time and the market can go up and down but you got to be there but in the cash market, keep it at the cash holding.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)