Tangible Products Make For Tangible Benefits

Arun Kejriwal
Founder
Kejriwal Research & Investment Services

It all began in 1988, when I quit working and decided join the capital markets on my own. Having been in the industry for a good 13 years, I knew a bit about manufacturing, marketing and administration and about a number of industries like sugar, dairy, textiles to make me competent to talk and understand the markets.

I began as a sub-broker and was a badge-holder, which gave me the right to go to the trading hall. Today, the outcry system has been abolished in India, but it was quite an experience. I moved on and helped set up the trading desk for an FII in the country. Finally, after the meltdown when technology went bust, I decided that there is no future in being a sub-broker or an intermediary as it is becoming very capital intensive and decided to get into advisory services. I charged clients for giving them investment ideas, and that became my source of revenue. They were free to transact anywhere and with anyone.

I have always believed that companies whose products can be touched, used or are visible or whose services are used are far better companies which you have to rely on based on third-party information. As very simple example, the shoes manufactured by Bata give you an idea of how good or bad the product is. Similar would be the case of sending a document through a courier service, say Blue Dart.

I enjoyed psychologically and financially investing in PSU companies. Way back in 1998-99, two particular companies caught my fancy – Bharat Electronics (BEL) and BEML, which traded in the range of Rs 18-20. I bought these shares and advised friends and people who later became my clients about the potential of these companies, and today everyone knows about them. I enjoy meeting people, managements and travelling to see factories to get hands-on experience of the ground reality. This philosophy has paid off well.

The present government has brought the country to a virtual standstill in terms of new investments. Post the December elections, there is hope that things will change and that it would benefit all in the country. The Assembly results have been a wake-up call for the political class, and this augurs well for India Inc.

The elections in 2014 are important for the country, and we need a decisive mandate. A hotchpotch government will just not do. Being an optimist, I believe that we will have stability, which will open up investment opportunities in the country again. Infrastructure creating companies will have a great role and opportunity. The revival of the US economy and the currency depreciation will become our strengths in increasing exports of software, pharmaceuticals and textiles.

I would look to invest in Large-Cap companies to make the core portfolio and look for Mid-Cap and Small-Cap companies which are in niche businesses and not necessarily sector-specific for some icing on the cake. Shipping looks to be the story for 2014-2015, and I believe that this is the sector to be in. The Baltic Freight Index is just unbelievable and it looks like a ‘Kumbhakarna’ is awakening.

From the benchmark indices, my top picks would be Sesa Sterlite, Cairn India, NMDC and NTPC. The draft guidelines issued by CERC has shaken NTPC’s prices, but logic will prevail in due course of time before the final guidelines are issued. Secondly, the environmental issues will get resolved and benefit the other companies mentioned above. IT and Pharma will continue to do well, but I believe that the rural story is the one to watch out for. We will have a bumper harvest in March-April and that will increase the cash available in rural India. This could augur well for two-wheelers, agriculture equipment manufacturers and help in raising the GDP. With ever-growing demand, realty companies based out of Bengaluru look well-poised to benefit in 2014.

Retail investors have left the market and they need to come back, because the markets alone can help in beating inflation. There are no shortcuts to making money, and trading for a living cannot be the forte of retail investors. Money attracts money, and you need to choose your stocks. Following business channels on TV during market hours will never be beneficial, as the focus is on eyeballs and intra-day. Research on your own from published data, which is now freely available and in plenty. There are no free lunches, and hard work alone will pay dividends.

Wishing you all a happy and prosperous New Year.

(The author may have investment interests in the stocks recommended here. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Dalal Street Investment Journal.)