Value investor Porinju Veliyath of Equity Intelligence India continues to be bullish on Indian market despite consistent selling for the past few sessions. He disagrees that the previous Samvat was a disaster. There are "smart investors, value investors who created huge wealth in the last one year," he said. Veliyath is willing to bet on Samvat 2072 as a fantastic year for the value investor, just as the previous year was. Below is the transcript of Porinju Veliyath’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18. Anuj: Your hypothesis on twitter was that the market should rally from here on. Are you surprised by the consistent selling that we have seen over the last three or four days? A: Markets are weak. There is no doubt about it. There are many concerns, economy-specific, market-specific and even politically, these things are a part of our day-to-day market life. At the same time, we should look at the big picture. If somebody is an investor, that is most important and that is what is missing in our markets today. And I am very bullish on Indian markets and people change the mood just looking at the day’s Nifty or Sensex being beaten down or a couple of stocks falling because of some company-specific news. But, equity investing or rally investing is much beyond that. Now, media is saying Samvat 2071 was a disaster. Nobody made money. I do not believe so. Maybe those who are following the Nifty and Sensex, or if they buying the broader market. But I am telling the thousands of Indians, smart investors, value investors created huge wealth in the last one year. Anuj: That point is taken that last year was all about individual bottom-up stock picking and a lot of stocks did well. But, at the end of the day, a lot of retail sentiment is driven by what is happening at index level which is where the market is clearly hurting. A: That may continue. See, this Samvat 2072 also, it is not going to be very exciting for those who are looking at the general markets. What I am telling is something different. What I am talking is about stock picking. The opportunity, whether there are opportunities in the Indian markets for stock picking. We had it a lot in the last 2070 and 2071; and 2072 also is going to be a fantastic year from that perspective. I do not know about foreign institutional investor (FII) selling or Morgan Stanley Capital International (MSCI) recasting their indices on emerging markets, on India or if Fed will hike the rate in December. If people are looking at those kind of things, they miss the big picture on India, the big opportunity for value investing in this country. So, what I am trying to tell investors, leave all those things. Of course, one has to be aware about the macro and everything, but you ignore the Nifty what the National Stock Exchange (NSE) has made, you make your own Nifty. That makes sense. If wealth creation is your motto, you make your own Nifty and create wealth and Indian markets, I am telling you it is a great opportunity in this coming one year. Ekta: I wanted to actually extend the point that you have to look at the larger picture of stocks. Would that apply to pharmaceutical stock, because we have heard bad news with regards to Dr Reddy's Laboratories and Sun Pharmaceutical Industries, and these were stocks that were the biggest wealth creators for many years for a lot of investors. Would you then hold on to your positions in those kinds of stocks and ride the storm? Or maybe lighten your positions there?
A: I am so lucky I do not have that kind of positions to hold on. I am a value investor, so Sun Pharmaceutical never came to my radar in the last few months or a Dr Reddy's or Page Industries or Eicher Motors or Bata India, Kaveri Seed Company, Kitex Garments. I hated these stocks in the last one year because there are no values left, they are great companies. That is again I am repeating, I have been always talking look at the stocks, the great stocks and not the great companies.
I am telling you one more thing. In the last one year, Samvat 2071, what happened? The moat became a trap for all the new investors in this country. A lot of people I know, thousands of them, they started first time investing in this last one year. They listened to the biggies and the big people, fancied guys and they were all talking about some stocks which have gone up by five times and 10 times and 20 times and now, it has become moat stocks.
This was the biggest trap and people are losing 20-40 percent by doing that kind of safe investment._PAGEBREAK_
Anuj: So, why don’t help our viewers? I believe you have one value investment for our viewers today. Why don’t you take us through that?
A: In June, four or five months ago, I talked on your channel about a company. The company’s name is Future Consumer Enterprise (FCM). The stock price was Rs 13. Now the index is down by 7-8 percent, today this stock is up by around 45-50 percent. And this is a stock; I am even looking at for the next one year investment or next 5-10 years investment, looking at the big picture. This is a Biyani Group Company, very clean balance sheet. Look at the growth model, profitable growth model with zero debt on their balance sheet for the next many years and the company management is projecting something like Rs 20,000 crore of revenue which is very much possible and logical, looking at the style and structure of their business. The business model itself, it is very relevant to Indian conditions for the future; starting from procuring products from the farmers in rural areas, processing it, branding it, cleaning it, and packing it and selling through their own retail outlets and through other networks.
So, this is a business, our consumers are going to benefit with lower prices and this company. I think this is very relevant and perhaps this company can replace a part of Nestle India, Hindustan Unilever of this country. So, that way I find, investor should look at and focus on companies which can create wealth in Indian environment today, considering the consumers' attitude, their affordability and the network. So, I find selective stock picking and that is going to make money for you.
Anuj: Do you have any price target on Future Consumer?
A: There is no target. Target and all is for traders. This is like, Future Consumer, it was Rs 1,800 crore when I recommended it and now, it is Rs 3,000 crore. This can go to Rs 10,000 crore and Rs 20,000 crore over a period of time, but you have to watch. There are no readymade multi baggers in this market. I am telling you. A lot of people misunderstand. Listening to some people, when they tell the stories of multi baggers they have made. Multi baggers evolve over a period of time. You have to give time and you have watch and monitor the business, the industry environment, the country’s economic environment, the global competitiveness. So, that is how the multi baggers evolve over a period of time. Then at some point of time, people get excited and Morgan Stanley Capital International (MSCI) will add those kinds of overpriced stocks into their index, then only people start buying. And that is when normally, the decline starts for those companies.
So, people following the MSCI index, I am not talking bad about the MSCI index, but if you see the pattern, today, why I noticed today, I think there was an announcement on CNBC-TV18, they have changed the structure of the indices of India and other emerging markets wherein they have added some stocks. If you see the stocks which they have added, they have already gone five-ten baggers in a short period of time and the stocks, what they have removed, just gone down by 90-80 percent. So, how can somebody follow that kind of a pattern and make money?
And again, people now, Q2, the sensation is over. People are looking at one and two quarters of results. I know people who are selling Dish TV at Rs 50-40 because of bad quarter. Now, I saw people in a big way buying the same stock for a good quarter at Rs 120. How can you make money like that?
People buy Vedanta at Rs 300 because copper and aluminium prices are high. They sell it at Rs 80 when Aluminium prices are low. That is not the way to create wealth. You have to be sober. You have to see the world goes beyond a quarter. Investors have got life beyond a quarter. So, that is a kind of big picture, value picking and never got compromised on valuation.
Ekta: So, you have to have the courage to hold through the bad news also.
A: It is not courage. It is conviction and knowledge and wisdom. It is not about courage. This is not something like Circus.
Anuj: Anything else apart from Future Consumer. I know you have given us Future Consumer, but anything else that looks good to you?
A: I am mostly into smallcap companies, so these individual names are dangerous. Nobody benefits by talking it on the TV. So, I feel let people keep their eyes and ears open, look for ideas where the comfortable valuations. Do not go after too much fancied ideas and moat kind of stocks.
Ekta: Your earlier picks included the likes of Arvind Infrastructure, Tata Global Beverage which you have mentioned a couple of times, any of them that you would like to revisit?
A: Tata Global is still a very good bet. We are holding stocks, even Future Consumer Enterprise Limited (FCEL) and Tata Global. Tata Global is an underperformer. I have bought recently, of course I am not underperforming in that regard. But FCEL, we have been buying from Rs 10 in portfolio management system (PMS) one of our major stock in our PMS. We plan to hold it for the next 5-10 years time. So investors can get some pockets of weakness, they need not buy these kind of stocks today.
Tata Global, again, I am telling you, at one time the revenue, it looks like a very good pick. The negative is they are under Tata management.
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