Knowledge FAQs with Gaurav Jain (Knowledge Yagya- Episode 1)

4 min read

Here are some questions asked by the viewers in the Knowledge Yagya dated 6th July 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 does an index fund help in a mutual fund to make a large corpus. Is it better to invest in real estate or do SIP?
Gaurav Jain:

• It is always better to invest more and keep that investment for a longer period, overall it is a game of accumulation.
• If the investment is for the long term for the tenure of 8-10 years SIP in equity stocks or mutual fund is good.
• It is required to have proper behavior management on the part of the investment.

Q View on Parag Parik fund for 5 years?
Gaurav Jain:

• It is a good fund.
• The fund house is transparent. They talk to their investors very regularly.
• They always tell about the methodologies.
• Very transparent on which stock is bought and sold with reasons.
• Also, they are having a consistent fund manager.
• One needs to understand its risk profile.
• 5 years is very little time to invest in this fund.
• They invest 25% – 30% in US stocks as well. So it can be a better pick for those who seek diversification in foreign stock as well.

Q How does time-wise correction last, what is the next trigger for time-wise correction?
Gaurav Jain:

• No one can accurately predict the tenure of Timewise correction in the market.
• Time correction means the stock will not be moving for a longer period.
• For Instance, In a certain period of 80-90 years, there were 2 decades where US Stocks yielded 0% returns in Dow Jones. Sometimes time-wise correction can be longer.
• If you are convinced with that fund and having a long time horizon and having high-quality stocks. Then the time correction will be for a shorter tenure.

Q How much allocation should be done in IT stocks?
Gaurav Jain:

• If the investors are of conservative or moderate type then the IT services sector with matured, export-oriented type stock should be good to invest in.
• The allocation should be a maximum of 20%. Again it all about risk profiling.
• If you are a growth investor with a high growth thought process. IT Companies with product side such as India Mart, Justdial, Infoedge, etc. can be a good pick.
• These are the different types of companies and segments in the IT Sector. Here one needs to decide how much allocation needs to be taken into it as per his/her suitability.
• Currently, IT services-related stocks (like Infosys, TCS, HCL Tech, etc.) are more than IT product-oriented stocks (Like India Mart, JustDial, etc.).

Q Is it the right time to invest in TATA Group stocks?
Gaurav Jain:

• A lot of restructuring is happening under the supervision of Chairman Mr. Chandrasekaran.
• The way it is going a good amount of value creation can happen with TATA group stocks.
• The large lump sum amount allocated should be avoided. Maximum 20%-30% of the total investment amount can be done in a lump sum and the rest amount should be an investment in staggered form.
• But the horizon should be more than 8-10 years.

Q How many stocks should be there in the portfolio for the long term?
Gaurav Jain:

• It is recommended to have 12-15 stocks that need to be there in the portfolio.
• So that there will be proper investment in that stock and easy to track the same.
• Need to have a proper review of the stocks that are invested.

Q Long-term view on AU small finance?
Gaurav Jain:

• As the moratorium is coming to an end and there is an impact of COVID. There may be a chance of a big impact on the small finance sector and microfinance institutions.

Q View Jubilant food and P&G stock which has more earning visibility and growth in earning?
Gaurav Jain:

• Growth wise Jubilant FoodWorks scores more.
• The problem of Jubilant FoodWorks is from the governance point of view, the pledge is happening a lot of times. So it is not that favored.
• P&G is typically an MNC company. P&G as a group feels that the product in the US is the same product that is going to come to India. So India-specific products are launched very little.
• Even though there are high-quality products and have a good distribution network.
• But from a growth perspective, they don’t have a strategy like Hindustan Unilever. They are having a very strict thought process. Hence it is conservative investor stock.

Q View on long-term investing, and not considering PE ratio as it does not give the right view on high-quality stocks?
Gaurav Jain:

• PE ratio is not the only factor that needs to be seen. It cannot be a sole parameter to select the stock. Especially in the current scenario.
• For few companies, 2 quarters have completely washed out. There could be a case where earning is low. If the price is the same the PE will be more.
• This happens with manufacturing sectors, consumer durable sectors, etc. So PE ratio cannot be the sole factor to analyze the stock.
• The high-quality stocks are bound to get at a high price.
• Need to understand about the stock either it is premium value or overvalued stock.

Q Is the corrections in IT stocks near?
Gaurav Jain:

• In IT stocks there could be time correction.
• There is a lot of earning visibility in IT services.
• As the valuation is slightly on the higher side there could be some correction from the growth perspective.

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