Knowledge Faqs with Gaurav Jain (Knowledge Yagya-14)6 min read
Here are some questions asked by the viewers in the Yagya dated 5th October 2021. These questions can provide you with insights on some grounds. Please read these questions for knowledge purposes only and make any investment decisions only based on your research or the advice of your financial advisor.
• Investing in IPOs/NFOs or other fancy asset classes:
o Bull Market is something when the market is at high levels where Sensex had even crossed the mark of 60,000 and Nifty crossing 18,000.
o If you see the trend, there were and there are a lot of IPOs in the stock market and a lot of NFOs in the mutual fund market.
o These IPOs and NFO are always launched when the market is in good times because things are positive and look optimistic.
o Different types of companies having different types of trends get IPO’s. It is mostly recommended to avoid IPOs and NFOs.
o The reason behind it is very rare that a good NFO is listed and it is seen that there is some benefit in investing.
o Now with SEBI’s categorization and mandates. There are a very good amount of funds in every category. It is better to stay invested in the existing funds.
o If there is any new fund coming in the same category and it is felt it will do better or NAV is low then it is suggested not to invest in NFO’s
o If there is some international fund which they were looking forward to. Then there could be chances of investment.
o If we want to invest in the NFO where there already has 10 to 15 funds of the similar category is available for the last 10 years then we should not go for it.
• Aligning portfolios towards the hot sector:
o It is very common. As the sector is doing well then the investment is also very high in stocks of such sector.
o One should avoid or invest carefully in such momentum investing.
• Most mutual fund investors have become stock investors:
o There is no harm as such but the problem is they are doing day trading by shifting/ affecting their main assets.
• Not following assets allocation and not the following rebalancing:
o Need to check the risk profile
o Asset allocation should not be changed as per the markets.
o The portfolio should be reviewed at regular intervals and if required need to do rebalancing.
• Completely stopped investing in equity:
o The thought process of stopping investing in an equity asset class when the markets fall is also wrong.
o There is no downside to it.
o If the investment is done in NiftyBees then the investment is done in the Top 50 companies of India and the equity allocation can be done from there.
o It is a behavioral and psychological issue.
o Currently, the Nifty Index funds are doing better. So it is felt that index funds are good.
o The important part is the need to take allocation in equity as per one’s potential.
• Corporate FD should be avoided. No issues with the company, Bajaj Finserv is a good company.
• If the allocation needs to be taken in debt for better returns. But it is suggested that if the investor can take little risk then it can be taken from equity. Why take a risk in debt (For Example Corporate FDs, etc.). Debt allocation means safety.
• If there is any risk in the equity market then the debt allocation is there to safeguard the investment. That is why it is important to have debt allocation.
• Sensex has 30 stocks because it is an automated methodology. In the same manner, Nifty 50 is having 50 stocks.
• It is not a benchmark to have stocks.
• It is always recommended to have stocks less than 20 because the number of stocks is more difficult to track.
• The more the number of stocks, the more difficult it is for an individual to track them.
• Yes, Competition is going to increase because it is a very fast-growing market.
• It is not highly regulated in India. There are very few entry barriers in the diagnostic space.
• Hence it is mostly unorganized, as there are small local players in it.
• Pharma companies are taking entry as Lupin has shown interest. Competition is going to increase.
• It will not be easy for the pharma company to remain in the diagnostic space. This doesn’t mean that they will fail.
• Trying to analyze the company but it is very difficult to understand.
• Affle is into very complicated business.
• Competition is with Google and Facebook.
• The company’s results are always coming late.
• Affle is a high-risk investment but it is in good space as they are into an online advertisement.
o In this, there is competition with china which is a very big player.
o There is still a raw material requirement from china.
o It is a purely export-oriented sector so there are currency risks and international policies.
o Highly regulated sector
o China is not doing so well, so there is a lot of opportunity in this space. India may get a lot of business from them.
o Government is more focused on manufacturing. India is having the skill set to do this work.
o Due to COVID, people are diversifying their manufacturing capabilities apart from China and other countries as well.
o There is a good amount of growth expectation also there is risk involved.
• There is a lot of opportunity in contract research and manufactures.
• There are a lot of interesting players.
• After IT outsourcing there will be research outsourcing as well because of the skill set.
• It is a low-risk job as compared to API.
• It is very difficult for rice companies to command FMCG multiples.
• The main benefit of FMCG is having a very strong distribution network and very strong brands.
• There is no specific brand while taking the rice or rice-related products. But this happens on the FMCG side.
• Rice is a more export-oriented product.
• It is going to be cyclical as a crop is dependent on the monsoon. If the monsoon is not proper then there will be a problem. Price will increase, demand will decrease.
• Malaysia and other countries are also into the competition.
• Comparison with FMCG will not be good.
• Need to understand the profits transferred in will act as a switch to reinvest in equity when the market falls or will continue to be there in debt.
• Gilt is not the recommended fund as it is very volatile.
• If the thought process is long term then investing in corporate bond funds, Banking PSU is a very good category to invest in.
• This will be good for rebalancing purposes.
• In the short term, if we see it from earning perspective or PE, We cannot say that we are overvalued.
• Due to COVID, the earning is not great because that GDP has also gone down. Once earning starts then things are looking good.
• If EPS is good then there is a chance of divergence as there is still liquidity in the market.
• US market had also reached on higher levels and it is a very big market as well from a growth perspective.
• We have already seen divergence.
• In short term, no one can predict. There will always be a correlation with the US market. Based on inflation numbers, interest rates. there will always be a correlation.
• If we see in the long term there is more divergence. Correlation is low between US and Indian markets if we see from decades of thought process.
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