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'Base investing on long-term fundamentals and it will pay rich dividends'

Lalit Thakkar, Director, Research, Angel Broking tells how investors can profit by sticking to market basics and the reasons for his confidence in India’s growth story.

R. Sree Ram        Print Edition: October 2009

Lalit Thakkar
Lalit Thakkar

Lalit Thakkar, Director, Research, Angel Broking tells how investors can profit by sticking to market basics and the reasons for his confidence in India’s growth story.

Considering that sectoral themes have begun to alter at a fast pace, how should investors brace for this change? Though conventional wisdom states that one should stick to blue-chip firms, there are worries that most large-cap stocks will not offer an upside when the trend picks up.
Sectoral themes will continue to display varied movements. However, as investors, it is necessary not to lose focus. The approach to stock market investing hasn’t changed over the years and long-term investing still pays rich dividends. As far as buying frontline stocks is concerned, while some have matured in terms of growth and returns, there are many that still warrant attention.

For instance, HUL continues to remain a blue-chip because of its current market standing. But in terms of business growth and, consequently, stock returns, smaller companies like Godrej Consumer Products or Marico score higher as they offer superior growth rates. This process of attaining scale and capturing new markets will lead to wealth creation for the investor.

After the slide in the Chinese markets, do you think a similar development will take place in India?
I am not too concerned about the news from China. At worst, it will hit the country’s markets by a couple of percentage points. China will still remain among the fastest growing economies of the world. It’s the same in India, although not in the immediate term. This is largely because of our favourable demographic divide, which will ensure that several themes play out over the next few decades.

The chief among these are consumption (beneficial for auto, FMCG and consumer durables, among others), backed by the credit leveraging theme (beneficial for banks) as the credit-to-GDP ratio in India is still quite low compared to global averages. I am confident of India charting its own growth trajectory like Japan, South Korea and, recently, China.

Do you expect India Inc. to enter a high growth phase?
Indian companies are expected to enter a period of high growth from 2010-11. This expectation can lead to an expansion of the Sensex valuation premiums.

Which stocks should be considered by retail investors who have a two-three-year perspective?
At the current juncture, investors could consider the Amtek group, Axis Bank, Madhucon Projects and Bayer CropScience. I continue to favour private banks and believe that infrastructure will play out over the next two-three years.

What is your saving and investment style?
Investing is related to one’s risk-taking ability. I prefer to put a substantial chunk of my savings in equities with a long-term view. I am always on the lookout for stocks that offer both value and growth. However, if I am unable to find both in one stock, I prefer to invest in something with deep value rather than one that only offers strong growth.

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