It is indeed an interesting time to have in the show. The Indian markets have not been performing well lately, while a lot has happened worldwide – especially around rates, and there is also anticipation for a rate reduction in the near future. So let’s start with the global setup, because you have always argued that one should not concentrate a portfolio in one geography. Given the latest tariff developments and the current global sentiment, help us understand: where do you see potential outperformance and which markets now look attractive?
Become Mehra: Yes, as I always say, not only you have to be worldwide, but ‘worldwide’ does not only mean the US. You have to diversify in different countries because no theme takes forever – whether it concerns countries, activa classes or industries in a country. These things keep changing. We have been brought back into balance worldwide – although we have not yet done it for this quarter – but currently we are somewhat underweight on the US. Since January we have maintained that position. We are overweight on Europe, overweight on China even earlier and somewhat overweight on India. So in general, that is our global allocation. Of course, individual countries have their own opportunities, but on a broader level, Europe is better achieved than the US. That has been an important trend. And China, after years of underperformance – and I perhaps quoted this earlier – the market hit a peak in 2007 and despite the GDP that has grown six -time since then, that high was not violated until recently. So that setup is also important.
With regard to the rates, there have been some similarities, such as Japan that announced investments in the US, although they ultimately clarify that these are decisions at company level. So it’s like kicking the look on the road. But markets seem to have accepted it as usual.Since you are underweight on the US, do you place your overweight bets worldwide at the moment?
Become Mehra: Like I said, we have been underweight and Europe overweight since January. We have been overweight on China since last year and we are somewhat overweight on India. And in particular Europe has surpassed the US considerably this year.
If you say you are overweight on India, what looks attractive for you? Traditionally, in times of uncertainty, investors are advised to stay with Blue Chips – the “buy and forget” approach. But currently even blue chips do not deliver any income. So where do you see safety on the Indian market?
Become Mehra: When I say that we are somewhat overweight India, it is precisely that – a slightly overweight in our global portfolios, not a huge one. I smiled when you called ‘buy and forget’, because there is really no such thing in markets. The definition of a blue chip continues to change. If you look at the Sesex of Nifty history, you will see that many companies are ever considered blue chips completely faded – the Thapar Group, Scindia Steamships, Mafatlal, Hindustan Motors (who made the Ambassadeurauto), Première Automobiles (who made old fiants). These were all considered Blue-Chip companies when the SENSEX was created.
In fact, the only company in the original Sesex list with a relatively short history at the time was Indian hotels. The rest had decades of inheritance. And if you look at older portfolios – such as those from the age of our grandparents – you will find many names of these old business groups, such as JK, Thapar, Modi, Scindia, Mafatlal, all of which are now history.
Even in the Nifty, the composition has changed dramatically. At one point there were hardly any banks. Now banks and financial data have the greatest weight. In the late 90s, PSUs – MTNL, BSNL, BHEL, ONC, Indian Oil, HPCL, BPCL and others dominated. Then came a time when people forgot PSUs, even investable. So the collection meal is: the shares that lead one bull market are rarely the same that lead the next.
The idea of “just buy a share and wait 20 years” does not keep the board. Survival bias is very real. People remember the few winners – such as HDFC Bank of Kotak Mahindra – but forget the many who failed: Times Bank, Global Trust, Centurion Bank and various PSU banks. Even yes, bank had major problems.
I recently saw someone’s mother -portfolio from the early 2000s – for more than 20 years untouched – and it contained names such as DSQ software and pentamedia, which were not outdated well. So yes, markets evolve and buy-and-forget is not a feasible strategy.
Indeed. And looking ahead, the next key head is the TariefdeAdline of August 1. There has been some movement worldwide, but there are still negotiations going on for India. Given that, and everything you just shared, what is your advice for market participants now? How should they manage the risk in the midst of global uncertainty and a faint domestic profit season?
Become Mehra: So far, domestic income has been mixed, but I believe we will see some improvement from the second quarter. That was my opinion too. There have been some encouraging macro signals – GDP came before estimates. What is even more important is that inflation, especially in food and crude oil, has landed, which helps with the budgets of households.
The household finances are considerably stretched in India. If the prices of essence such as valley and oil go up, people cut back on other items such as soap or shampoo. That has been a resistance for almost two years. But now the prices are not only getting slower, they actually fall – especially in the Thali category. Although that is not great news for the agricultural segment (because the realizations are falling), for urban and non-farming consumers, it creates more room in the budget and increases consumption.
Crude oil also influences industry because of its role in downstream products. So I believe that we will eventually see margin improvements, along with better sales growth.
As far as investors are concerned, I always say: good investing is boring. People often tell me that I repeat the same advice. That is because good advice does not change every two weeks. You should never be 100% in shares, but it is usually logical for your sharing allocation to be invested.
Often, when there is fear and uncertainty – like now – that is when markets can make sharp upward movements, and you don’t want to miss that. Yes, the market could fall, but the key is evaluating risk versus reward. If you miss the 10 best days over a period of 40 years, you will lose two -thirds of your return. So usually you just can’t afford to sit outside.
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