With the government's push on a cashless economy and digitisation of banking and payments, the Street has its eyes set on companies that can benefit from it but Basant Maheshwari, Author and Portfolio Manager at Basant Maheshwari Wealth Advisors is of the opinion that it could take several years, if not decades, for the digital theme to evolve.
In an interview with CNBC-TV18 he said the best bets, like Paytm, in this unfolding digital scheme, are still not available in the secondary market. So, one has to wait until these companies come out with an initial public offering (IPO).
On demonetisation, he said that economic transactions are not much impacted by the cash ban and sees the pain easing by February, 2017.
Listing his sectoral outlook for the coming year, Maheshwari said that he is 'super bullish' on the housing finance space and sees a pick-up in consumer finances in the coming days.
Below is the verbatim transcript of Basant Maheshwari’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: I wanted to ask you about this digitisation theme which is on us. Is it giving you any ideas?
A: As you know, digital India, if not decades, it is going to take several years. Nothing gets changed overnight and right now it is a theme, right now we are talking about it because we don’t have cash to distribute at some areas. As we all know, this can’t happen overnight. You have people who can’t send WhatsApp messages, who can’t send SMSs.
So, for the guys who are doing Paytm, they are already using the debit card and we are doing this digital India theme for people who don’t have debit cards. I think that is going to take a lot of time but the trend starts immediately. So, it is not that it doesn’t start but it is too early. I think the best of the bets over there are something which is not available in the secondary market. So, Paytm is one of them; it is not available for us, so, we just have to wait till they come with an IPO. So, it is that way right now.
Sonia: As we head into the New Year, what are you optimistic about, what are the themes that you think could bring some value or wealth to investors?
A: First thing I am optimistic about is the increase on withdrawal limits on December 30. I think once that happens we will be back on track. Secondly, I was out in rural Bihar last week just to get a sense of what is happening, I think as you would know, the liquidity preference theory says people hold cash for three reasons, the transaction motive, the precautionary motive and the speculative motive. So, economic transactions are not being handicapped right now.
If you want to buy vegetables, eggs, wheat and meat, you can get them. Problem is in holding cash; that is the speculative motive which Keynes talked about. So, I think we don’t have enough cash to put into our homes. Earlier, if we were holding Rs 50,000, now we want to hold Rs 1,00,000, so, that is the problem right now. Every day it is improving, I think it should get better. It is just a stoppage. I think in February we would not being doing this program on demonetisation; I can assure you of that. We will be talking of what happened in the Budget. So, this is just a passing phase.
Of course it looks very big and right now all of us have got scared about it but the struggle is whether it is going to improve in 15 days, 30 days or 45 days. The struggle is now not that whether it would improve or not improve because earlier we had the problem of how much cash could not be deposited into the system and now the problem is that what if more cash is deposited into the system. So, I think we have handled this well. The price discounts were worst and I think we should be fine and running again maybe by January-February next year.
Latha: Since you said you travelled in rural Bihar, I wanted to get your view on the housing sector itself and therefore housing finance. You were the early identifier of Repco Home Finance and the housing finance theme; will realty be impacted to such an extent that even the other sectors like cement and housing finance we should be wary about?
A: I am super bullish on housing finance; not the one which you spoke about. The housing finance which we own -- of course I can’t disclose names; they are growing at more than 30 percent. When home prices go down, what happens is you defer your purchase. You say maybe you will get it cheaper later on, so, you defer your purchase. So, to that extent, for a quarter or two quarters, there will be postponement of purchases. So, this is not like toothpaste that if you don’t brush your teeth today, you are going to brush it two times tomorrow or maybe four times the day after. So, all of that demand is going to come back in a lumpy nature.
Once the black component goes out, the ability of these guys to fund more would increase because you need more white money. Thirdly, as the unorganised lending and borrowing finishes, the organised financers would have bigger pie to run on. So, for example, if I am buying a house, I will say give me Rs 5 lakh and I will pay you interest every month and I take cash from you and do it; all that business is going to stop, nobody is going to give cash, nobody is going to take cash. So, I think the entire activity would increase. However, the screen discounts all of that. I am not giving you something which is out of the extraordinary. This is very fair knowledge to everybody and screen discounts all that.
Lower home prices increases affordability and lower home prices encourages people to go and buy it. So, I think that is going to come back with a bang. It might take a couple of quarters but afterwards it is all going to come back. So, out of the NBFC which I own and like, nothing has changed. I still own all of them -- the NBFC space, the sector that I am talking about, housing finance is top on the list.
Sonia: Why don’t you give us something that is out of the ordinary and something that viewers, retail investors can look forward to in the New Year?
A: It is not rocket science. Housing finance companies are growing at more than 30 percent. I think anybody can go and just do the math. Not the 18-20 percent, not the 25 percent, the ones which are growing at more than 30 percent, I think they should do very well.
Latha: Anything else in IT, pharmaceutical, or healthcare?
A: IT, pharmaceuticals, are the defensives. So, when the market goes down and US will be increasing rates and we will be decreasing rates, that is dollar bullish and the dollar index is already reflecting that. However, you don’t buy stocks just because your single unit of dollar will get you Rs 2 extra; you buy stocks for growth and all that. So, at this stage, I think IT and pharmaceutical are mostly in the defensive case.
Preventive healthcare should become very big but that is in the initial stages right now, diagnostic space and things like that but very initial stages and stocks are priced to perfection as well over there. So, apart from that, I think the old things would do well. Consumers will come back with a lagged discretionary nature where you were just postponing your purchases or you could look at consumer finances as well. So, I think all of that will be fine but the struggle right now as is said is 15 days, 30 days or 45 days; it is not of zero and one. It is not a binary now or never.
However, let me tell you, in rural India, Modi has become the Robin Hood of the 21st century and people are happy not because the ordinary guy on the street or the farmer understands economics, he is happy because the rich are getting a little poorer; at least he thinks so. However, the rich are very smart; Indians don’t throw away old clothes and they have not thrown away old notes, they have all stacked it up left, right and center. Now, it is for the income tax department to come and do their work.