Knowledge Faqs with Gaurav Jain (Knowledge Yagya-07)

5 min read

Here are some questions asked by the viewers in the Yagya dated 17th Aug 2021. These questions can provide you 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.

Q How to identify growth stocks is it good to look into the Nifty 50 list or Midcap category?
Gaurav Jain:

• It is not required that it needs to look in the Nifty 50 list or Midcap category. It is not recommended to go with that thought process.
• It is recommended to first see the growth sector.
• Then find the company which is of good quality and the aggressive type.
• The other factor is the company’s sales and profits can also need to be considered.

Q Factors for retirement planning?
Gaurav Jain:

• The savings rate has gone down. It is seen that the spending is happening more.
• So the savings rate of early people was more. Earlier people used to save 60% to 70%.
• The fixed income rates in the year 1992-1993 were 13% to 14%. But currently, it is even less than 5%.
• Initially, government employees use to get a pension. Now NPS has become market-driven.
• In India, the life expectancy is 70 years.
• To do financial planning we have to keep in mind the age as 90 years and if the person retires at 60 years then he has to fund for 30 years so retirement planning is required.
• At the retirement time, it is required to also consider inflation.
• So it is required to build the corpus so that there should not be any kind of dependency.

Q It is always said compounding doesn’t work in stock and Mutual Funds?
Gaurav Jain:

• By Formula, compounding means Interest on Interest that is earned.
• The assets that have got the interest so that will only be calculated in the compounding. This is for all the capital assets.
• The compounding can only happen on fixed-income assets.
• But by the concept when the asset has come to a certain level. After that, the growth is considered.
• There is an upward trend from the long-term perspective.
• As the world economy is growing the market will also grow.
• If the market is growing so early we invest we will get the benefit of this

Q Should the amount be invested in lumpsum or should be done in SIP on the debt side?
Gaurav Jain:

• It doesn’t matter investing a lump sum or in a SIP manner.
• It matters in what category you are investing in and the horizon.
• Based on the horizon the category should match.

Q Is it better to invest in under-penetrated sectors or pick & shovel sectors?
Gaurav Jain:

• Even though the stock is underpenetrated, it is required to know about the growth prospects.
• There are a lot of under-penetrated sectors in India
• Under penetration is a good strategy but it is required to have good companies as well.
• Pick and Shovel strategy advocates in favor of not investing in the companies making the final product, but investing in the underlying business which helps in producing the final goods and services.
• It is a lower-risk strategy. But they are not consistent. Pick and Shovel Strategy is good for conservative and moderate investors.

Q View on Alembic Pharma?
Gaurav Jain:

• The company is more dependent on the US market. There is a risk of the international market.
• As it is always said that pharma is more on the export side based on other regulators. Also, there is a lot of competition.

Q Which sector for 2021-2022 is most promising??
Gaurav Jain:

• As per the long-term view today the sectors that are promising are Insurance. This sector is having less assumption sector.
• The next segment is the infra segment such as the pipe segment.
• Natural Gas will be there for the medium term despite keeping aside the EV’s impact.
• The other interesting sector is Path Labs.

Q Can MCX copy the IEX business model and take away its monopoly?
Gaurav Jain:

• MCX cannot copy IEX business.
• The rally of MCX is not happing is because of gold. Gold is not doing well. The majority of the revenue is coming from gold.
• IEX is having the same business model as MCX.

Q View on Glenmark life science?
Gaurav Jain:

• It is a good company and is with a good group.
• But in comparison with Lauras Lab and Divi’s Lab, they are a little conservative.
• From a Governance point of view, it is looking good.
• Good for moderate investors.

Q View on Amara Raja Batteries long-term?
Gaurav Jain:

• Amar raja is a very decent player.
• The opportunities in the battery sector are in EVs there are 50% chances whether they will win or they will lose.
• Most automobile manufactures are planning to make their batteries. They are focusing on lithium-ion batteries. They will be in the retails market and the batteries that are made are still going to make it.
• As the business is going on the cash flow will also be going on.
• Their growth sector is also coming from the telecom sector, data centers, and also solar cells which will continue in the future as well.
• Due to political involvement in the company, it is advisable to avoid this site.

Q View on Ujjivan SFBs?
Gaurav Jain:

• The major concern about the banks is NPAs, especially in Retail NPAs.
• SFB is also having that kind of risk about the loan repayment.
• They will get to know when the moratorium will come to an end.
• It is expected they will have a lot of NPAs.
• No one currently doesn’t have an idea about it.
• Therefore there is risk involved in it

Q Why does free cash flow matter?
Gaurav Jain:

• Free cash flow matters a lot.
• It is not that If the cash flow is not there then the company is bad.
• Need to know what is done with that cash flow needs to know. Need to know about the company about its cyclicity of the cash flow.
• It is a good parameter but it is not a good match parameter.

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