| e conditions in the US are going to get worse by the day. They are saying they expect the second quarter in the US to be better .
Q: Which is when you think the problems will start dropping in?
A: I think there will be three stages of the problem in America. First is the realisation of the subprime problem. Second, the economy will slowdown as a result. I think defaults would creep into prime housing, into credit cards and auto loans and maybe commercial real estate. I think that will be the second stage. The third stage is going to be a depression.
Q: Have you ever bought an FMCG stock in your life?
A: Yes, I have.
Q: Not Tata Tea?
A: No, not Tata Tea. I have another FMCG stock in which I own more than 5%.
Q: So, a largecap FMCG stock?
A: I won’t say largecap but fairly good company called Agro Tech Foods.
Q: But none of the ones we know like Colgate, Dabur, Marico, and Lever. You have never bought them in your life?
A: I may have bought some stocks like and sold it. I bought some shares in Lever in 2004 and sold it in 2005. I have made good money there.
Q: Have you ever been a big pharmaceutical investor?
A: I have a large investment in Lupin and made good money in Matrix. I made some small investments in Ranbaxy.
Q: Do you subscribe to the theory that capital goods or power is a sector, which was such a big leader, is on the wane and will not lead to the next rally?
A: Wane is about P/Es. Pharma P/Es are set to go up. That’s one sector which will not dip if we get a prolonged correction. If you look at some of the P/E ratios of pharma companies, they are certainly attractive. Everybody has been so ebullient about capital goods and that’s why P/E’s are high. It will take time for earnings to catch up.
Q: What are your thoughts on oil and gas as a space? You just spoke about crude; do you think there is an oil and gas play in India from a stock market perspective?
A: Well I would Reliance is a big oil and gas play. There could be some interesting plays in the smallcaps and the midcaps.
Q: Exploration?
A: Yes, exploration.
Q: You were once a bull on Indian Oil Corporation. You lost your hope in them?
A: I will never buy them, I promise. Wherever government is involved I am going to be very careful.
Q: That’s surprising coming from you because you made a lot of money from PSU companies like BEML and Bharat Electronics?
A: But at what valuations? I started buying Bharat Electronics at Rs 32, BEML at Rs 30. Also what I realized and why I sold this is that for companies to really gain at these valuations, one has got have that plus-plus. The investor has to have faith that these companies are innovative, they are going to do something new. They are going to do something different. I don’t find that in the public sector. They are constrained. Indian Oil–I read Rs 450 crore is what we are losing on fuel everyday. But there are interesting opportunities in exploration. I have some investment in that sector.
Q: But they are small and midcap companies?
A: Yes.
Q: What are the chances that in 2009 you go to something much beyond the old high that you saw on the index? Do you think it is conceivable? What needs to fall into place for that to pan out?
A: America needs to go for present tense. It is important that Infosys achieves this guidance it has given. What is important to the Indian economy is the value-add that software brings. If Infosys adds |
