Roop Bhootra, Executive Director Investment Services at Anand Rathi Shares and Stock Brokers, said investors should avoid companies that have low growth prospects and high leverage.
Bhootra has more than 26 years of experience in the financial service industry. Over the years, he has successfully handled several critical responsibilities in the group, particularly in the area of business processes, risk management, derivatives, system development, and operations.
In an interview with Moneycontrol’s Kshitij Anand, Bhootra says there is no fixed rule as to how much debt is good, it depends on various factors like the nature of the business or industry in which the company is involved, growth prospects etc.
Edited excerpts
Q) What does the MF data suggest about the investment trends of fund managers in the recent past?
A) In March 2021 we saw positive flow in the MF excluding ELSS and SIP flows are still positive since last year (8-9K crore on monthly basis).
Today’s market happens to be a stock pickers market, unlike last year where any and every stock gave good returns due to heavy correction early last year due to the Covid pandemic.
Retail investors may begin better participation through MF, although direct equity investment will still have an upper hand and in flavor.
Q) The RBI policy was largely dovish, but do you think it was enough to battle another phase of lockdown in case COVID spreads to other states?
A) Status-Quo monetary policy gives that elbow room to the economy for CAPEX in the future. Strong OMO (Open Market Operations) keeps a strong liquidity situation in the economy.
Hence, if few states apply lowdown without manufacturing disruption, keeps RBI to continue low-interest rates for a longer period of time and no rate hikes in the near term.
Q) How is March quarter results likely to pan out for India Inc.? Which sectors could outperform and which ones could lag?
A) March quarter can be strong on a YoY basis on the back of last year’s base effect. Added, the shift of business from unorganized to organized sector, lower cost of capital, and cost optimization will bring better profitability for the corporate.
We believe that sectors like IT, Pharma, consumer discretionary, Chemical and Metal are likely to do well. On the other hand, the tourism and exhibition sectors may see a setback.
Q) 2 sectors that stand to gain from COVID, lockdown, and have proved their worth in 2020 were Life Insurance and AMC companies. Do you think these 2 sectors are good for a decade that could produce the next set of multibaggers?
A) Privatization was one of the key take away from Union Budget 2021. Giants like LIC of India may plan to come in the secondary markets for the public which will keep the Insurance space buzzing.
Lower penetration and awareness created amongst citizens will keep the Insurance space upbeat. We see Indian equity markets keep the positive returns in coming years and the lack of any other investment asset class keeps Equity upbeat and favourable assets class for investors for long-term perspective to create returns and value.
AMC is deemed to continue the positive show in medium to long term perspective.
Q) If we see another phase of lockdown do you think IT, pharma specialty chemicals could lead the charge? The trade would once again tweak towards sectors that were winners of 2020 lockdown?
A) Yes, we are of the belief that these sectors are evergreen sectors and with a decade perspective India needs a big push in manufacturing which will be received from Chemical and upper hand from China.
Exports bring flows and foreign capital, so Pharma and Technology will keep the value creation strategy going.
All corporate around the world moving towards IOT, AI, and Machine learning which will keep IT space evergreen. Covid kind of situations today and going forward should keep healthcare on the top priority list.
Q) Many interesting companies have hit D-Street in 2021 and many more have lined up to hit D-Street to raise money in the near future. What is the checklist that one should follow to avoid traps? Over 20 companies have listed so far in 2021. But, most of them are trading with marginal gains after initial pop?
A) Scalability is something we are looking at the business with strong financial not just on the listing year but for last 2 years even. Newer segments and sectors emerging should be watched out along with business dynamism.
Q) Do you think managing debt is an important parameter especially after COVID outbreak? How much debt is good for companies on books and should investors avoid companies that have high leverage on books?
A) There is no fixed rule as to how much debt is good, it depends on various factors like the nature of business or industry in which the company is involved, growth prospects, etc.
Investors should avoid companies that have low growth prospects and high leverage.
Q) Which stocks are likely to be in focus after the Cabinet on Wednesday approved production-linked incentive (PLI) schemes for white goods and solar modules, which would together cost the government Rs 10,738 crore over five years?
A) Positive for a contract manufacturer of LED panels manufacturer and Air conditioner manufacturers like Dixon technologies, Amber Enterprises and Bajaj Electric, etc. We currently don’t have an active target price for these stocks.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
