We are stuck in the metal space; the call went wrong: Ajay Srivastava

“We do not know if the banking industry the way it stands today, at least the PSU banks, are going to be in trouble very soon because the mudra loans are going to start coming to the table and the fact that they have increased the MSME exposure now, does not sound good to me. That means the composition of the bank risk is changing. So leave aside PSU banks for argument’s stake,” says Ajay Srivastava, CEO, Dimensions Corporate Finance Services

When you talk about one of the best markets out there, where are you putting your money? In the past you have talked about multiplexes being a great bet and you have talked about the QSR space?

We have been pulling out our money from the cement right now. We have not got any money in cement. We are stuck, honestly, in the metal space where the call has gone wrong at this point of time so I must share with investors that we also make mistakes, we are not the brightest sparks in the world but where we are putting our money right now, we are trying to find money to put in agriculture related companies.

We are trying to find money to put in cotton yarn, back into the cotton yarn companies because I think they have suffered a lot and if that commodity changes path you will see growth coming into this thing.

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I think it is a very limited buying at this point of time. It is nothing at all if you ask me and we are still sticking to our strategy of leaving our money in an investment trust, which is the power investment trust that is still there. We have put some money in the real estate as well but across the board buying, no. If you ask me about our equity portfolio, we are asking customers to shrink it a little bit and keep some more fire power going at this point of time. Consumer durables have become zero at this point of time, It has been a selective move out then but that is a way we feel about the market.

What about the banking pack? We have been waiting for that pack to start performing. You had talked about shattering confidence when it came to the HDFC twins.

Banking industry is a hope industry at this point of time, everybody has invested in it at this point of time, so everybody has to kind of take it up now.

We do not know the reality of the banking industry. The way it stands today, at least the PSU banks are going to be in trouble very soon because the mudra loans are going to start coming to the table and the fact that they have increased the MSME exposure now, that does not sound good to me because the composition of your bank risk is changing so leave aside PSU banks for argument stake.

In the private bank space, what has happened HDFC is a deathblow. Axis Bank is struggling and I do not know what they will do after they absorb Citibank and what is going to happen at the end of the day because that is not the smartest way to do things in the world. But they have done it now, Kotak is steady. ICICI is the second bank which is doing okay and now all the subsidiaries are on the sidelines, not going so well.

So, the banking industry is these four companies. So gamble and eventually thanks to lending etc. these banks will come up.

On the flip side, the argument is that the supply of domestic stocks will start getting hit. People will start getting out of these heavily weighted stocks which everybody owns. Everybody owns these banks at this point of time.

What is going to happen to government debt? We do not know how much of the pain will come in the June quarter results. It is not very clear whether RBI will allow them to carry it forward, move more to HTM market etc. Net-net, it is a hope trade and if we are betting on the Indian economy and stock, we have to start here because at the end of the day, how much more can it fall is an argument rather than how much will it increase on its positive spend.

If the FII selling in the banks has stopped, we will get some strength in the banking stock but that is all about it.

We are buying some gangbuster fundamentals. You could be disappointed, if you are buying from demand supply, things may change. Perhaps you will get a little better yield than the market but now you just have to look at demand supply. If selling stops, banking would do little better than what it has done. If it does not stop, wee will have to wait a lot longer with the stocks.

Vedanta has got this real mystery around itself: high dividend yield, good capital allocation but a reversal in metal prices?

We hold the stock and the for disclosure purposes, we are quite biased and we have just now blocked our mind to the fact that we will have to ride through the storm and if it goes down much more, we will add on to the stock because longer term it is an underleveraged monopoly and if the zinc thing comes through, it will do better at this point of time.

Therefore, I would say at this point of time no matter what the government policy is, you can fight economic forces for some time, but you cannot suppress it for all time because it will come back to bite you in the back at the end of the day as did demonetisation.

Today you are left with the economy which is 80% surviving on free food grains and government employment so our view is that these monopoly in industries, commodity industries linked to US dollar prices will do well, they have a short-term setback, policy setbacks but eventually with rupee where it is their production value is going up for nothing but the rupee dollar as well.

So, hang in there, add on corrections and ride it through because there is good money flowing through the system and they will also stop the capex at the end of the day so that money would possibly come to shareholders and not go to the capex. All in all, ride through the storm because this has been a tough year when it should have been the bumper year.