Vikas Khemani's Unfiltered Analysis Of The Stock Market, Economy & The India Story | Talking Point

Summary

Highlights

• Vikas Khemani feels current market corrections are natural and happen every few years. 🔄
• He believes India's economy doesn’t have structural issues impacting growth. 🇮🇳
• Liquidity is being restored by the RBI, signaling a positive move for growth. 💧
• AI and technology changes are more about adaptation than job loss. 🤖
• Khemani remains optimistic about India’s market and economy, despite global uncertainties. 🌏

Key Takeaways

• Market corrections are a natural cleansing process, not a sign of long-term problems. 🔄
• Vikas emphasizes the robustness of India’s economy despite temporary slowdowns. 🇮🇳
• Liquidities are like blood in the body, crucial for corporate growth and market health. 💧
• Vikas suggests that the risk-reward for investment is currently favorable. 📈
• AI's impact on jobs is feared but it's more about adaptation to new technology. 🤖

Overview

Chapters

• 00:00 - 01:00: Introduction and Market Overview The chapter introduces the topic of the series 'Talking Point Unfiltered,' emphasizing the need for straightforward and honest discussions given recent market conditions. The host expresses appreciation for the opportunity to have an open and honest dialogue with Vikas Kimmani from Carnelian, highlighting that he is a suitable participant for such a candid conversation. The tone is set for an in-depth market overview and discussion on current trends and implications.
• 01:00 - 02:30: Market Corrections and Historical Context The chapter discusses market corrections with emphasis on recent events that have been challenging for many in the financial world. The speaker converses with Vikas, highlighting how recent market memes have influenced perceptions, particularly noting the shift in focus due to political figures like Donald Trump. The conversation explores whether the current market conditions are comparable to those in recent years or represent a new phenomenon.
• 02:30 - 05:30: Growth Issues and Liquidity Concerns in India The chapter discusses economic growth challenges and liquidity concerns in India. It highlights past economic corrections, comparing them to current trends. The speaker reflects on historical patterns, specifically mentioning the market conditions in 2021 and the impact of external geopolitical events like the Ukraine war on the financial markets.
• 05:30 - 10:00: Sectoral Insights and Investment Strategies The chapter discusses the impacts of geopolitical events, inflation, and oil prices on markets, emphasizing that many people initially underestimate the duration of such events, like wars, leading to prolonged market instability. It highlights the initial expectations of a short conflict being extended, causing investor fatigue. The narrative views these disruptions as natural corrections or cleansing processes in the market system.
• 10:00 - 13:30: Technology and AI Impact on Jobs This chapter delves into the effects of technology and artificial intelligence (AI) on employment sectors. It highlights the frequent nature of economic corrections occurring every 2 to 3 years and postulates on the uncertainty surrounding global political influences, such as actions by prominent political figures like Mr. Trump, and geopolitical events like the Ukraine war. The chapter suggests that while such factors might instigate fears of a significant downturn, the situation will likely stabilize without major upheavals.
• 13:30 - 16:00: Investment Tips During Market Downturns The chapter "Investment Tips During Market Downturns" discusses the psychological impact of market downturns on investors. It highlights the tendency of people to exaggerate negativity during tough times and to overemphasize positivity during good times, reflecting a human psychological cycle between fear and euphoria. The chapter also notes that a large percentage of stocks were below their 200-day moving average, indicating a prevailing bearish sentiment.
• 16:00 - 26:00: Conclusion In the conclusion, the speaker discusses the current tough times and debates whether they are due to India's growth issues or international trade conflicts. During a conclave discussion with a colleague, Rhythm, it was mentioned that there have been continuous financial outflows for five months. Rhythm believes that these issues are temporary and will resolve as economic growth resumes. The speaker also references a previous discussion or clip they were part of.

Vikas Khemani's Unfiltered Analysis Of The Stock Market, Economy & The India Story | Talking Point Transcription

• 00:00 - 00:30 [Music] thanks for tuning in to talking point unfiltered and tell you what with the markets the way they have been in the last couple of months the conversation has to be unfiltered but I I'm duly glad to be doing this conversation with somebody who I can truly have an unfiltered conversation with our guest today is Vikas Kimmani of Carnelian a
• 00:30 - 01:00 very very dear friend and and a brilliant mind more importantly and Vikas so good to be talking to you today thanks for thanks for agreeing to do this no it's my pleasure and it's always great to chat with you yeah but because a lot of people in the markets I mean there are two memes which are the most famous Donald Trump has taken over right now but otherwise market or shanka was the was the mantra for the last two months have been very rough is this is this unlike what you may have seen in the recent past or in the last few years or have you seen this
• 01:00 - 01:30 tape play multiple times i mean if you take if you if you sort of uh take your time horizon longer 20 years you've seen it multiple times but I think uh you know this kind of correction we we've not seen for you know at least last two three years uh the only period again which reminds me forget very often is that 22 was also similar period you know uh 21 was a great year and nifty had touched almost 18,500 and then Ukraine war had started and if
• 01:30 - 02:00 that time every day you know geopolitical inflation oil price and I'm sure you know with the initial reaction that two weeks war will be over and then it kept getting extended and and you know most people ended up giving up and that by the way the first half of 2 was it was very rough so time and again these kind of situations come i feel that these are not reasons will come but these are in my opinion natural uh cleansing process uh correction process whatever you want to call it or you know
• 02:00 - 02:30 bringing down to the levels or normalization process every 2 three years you see some sort of uh correction now whether it will degenerate into a big one or not that only time can tell you because uh given the fact that there are uncertainties around Mr trump and all what he does who knows uh but my own view is that I think uh this is not a big one i think it'll probably you know settle somewhere here like Ukraine war looked very big in fact I remember some point in time people started talking
• 02:30 - 03:00 about it can lead to world war kind of thing i mean there were all kind of conversation was happening right so in the negative times people tend to pronounce or you know extrapolate more negativity in positive time it positivity is more pronounced and that is the normal human psychology of moving between fear and euphoria and that's what it is yeah I mean the sentiment was very low right somebody from Noama was pointing out that some 86% of the stocks below some 200 day moving average etc
• 03:00 - 03:30 not seen such times is this because of because is this because of growth issues in India as well or is this got to do with tariff tantrum because you know I was talking to we had a conclave and I was talking to rhythm this and I was asking him five straight months of incesscent outflows right and he was saying that his view was that there's a growth issue of India which will resolve itself once growth come back and then sorry to extend this question but my mind took me back to a clip of yours you spent spent 5 minutes
• 03:30 - 04:00 explaining how India is almost like a teflon coating growth politics combination and therefore we will probably not see too many tumultous periods do you still stick by that no absolutely the point I made that point in time was there are no structural issues in India right agree there are no uh I didn't say that growth will not temporarily slow down right there no structural issue our big structural issue comes from current account deficit fiscal deficit weak banking system uh
• 04:00 - 04:30 you know inability to manage inflation excessive leverage none of them are there right now today in economy and we think they are addressed also in a you know reasonable good way but there will be you know there will be along the way journey like why it growth slowdown if you see last year RBI had tightened liquidity in the system beyond measure in order to defend rupee RBI sucked out liquidity and we were for a large part of the year we were running three and a half lakhs rupees kind of negative uh
• 04:30 - 05:00 systemic deficit and uh and then we had that clamp down on the unsecured loan and it got coupled with uh uh government's because of elections slow down in the government spending release of payment by the government so you have suddenly in a very short period of you know two quarters you had squeeze on the liquidity and liquidity is like blood in the body if you squeeze blood out obviously you will feel weak so so that played in the corporate earnings with
• 05:00 - 05:30 two quarters of lag now if you fast forward today if you see both policies are pivoted right rbi is now pumping liquidity back into the system they have you know stopped defending rupee beyond requirements you know unsecured loan weight has gone down nbfc weight has gone rba has put more accommodative stance government has started spending government's you know the release of the increase of tax limit of 12 lakhs is a very big measure so I think if you see all those things will start impacting with the two quarters lag okay so both
• 05:30 - 06:00 ways it does same way right so I I believe that you know growth story will get addressed more or less in a quarter or two uh I think 15 16% earning growth of India is not in question according to me it's not you don't think that's FI26 you think 15% growth might happen i think so i think so i don't see much risk to that okay just one quick follow up there right a lot of people said that December say uh and remember this conversation and play that video in 26 agree
• 06:00 - 06:30 completely agree completely agree completely no no but but hence the idea of talking to right because you this somehow in a lot of your tweets or our conversations that we have right you have this uh deep passion for the country itself it comes out in your tweets per say and therefore I try to corroborate that passion for India is it coming in the way of your judgment about earnings
• 06:30 - 07:00 seems right of course I am a patriotic I am a hugely nationalist at the core but also I run family I run business I have clients to address so never confuse two things beyond a point right I might be patriot I patriotic I am nationalist but you have to money will not be made by that my business will not survive on that so I have to do justice to what I do right so let's never confuse on that no no in a good way I'm saying that I believe that I'm a shark you are a
• 07:00 - 07:30 bigger shark in a good way I'm saying that it's a compliment from a markets perspective it's a compliment so okay so just a quick word to I know you look at long term now uh in a big way in the last five six years you look at very long structural stories but just a focus on the short term there's a lot of question marks around growth quarter 2 end even quarter 3 6.2 to okay you know nothing too great but capex rebound a little bit in December government capex etc Jan conversation was okay in your
• 07:30 - 08:00 conversations with your private investy companies or your fund investy companies do you sense that the optimism is back whether on capex or on growth or on both no see it is not a switch it's a dial right like it changed other way around last year like I said everything moves with the two quarter gap see liquidity answer is nothing you know but liquidity It's like true right so you know like we took out liquid last year why the interest rate went up I bet did not increase interest because there was no liquidity in the system deposit growth
• 08:00 - 08:30 was not happening for the banks right today with 12 lakhs rupees minimum no tax your post tax returns become 8 8 and a half% which is a great money for middle very wide middle class so you'll start seeing deposit flow back so I think these pivots we are ignoring these pivots both on the liquidity doubbish commentary by regulator clearly tells you that we have shifted from you know risk to growth government is clearly moving to growth so I think all those things are like I said it's
• 08:30 - 09:00 not a switch it's dial so as it it will you will start seeing people and people feel more with numbers as numbers come out as markets do well we will feel more and more confident it is it is a human psychology yeah yeah that's true that's true actually you know two days ago Vikas I put out a tweet as well uh wherein I said that when this tide eventually turns and and people look back uh people will realize what a crucial role the Reserve Bank of India has played in the last month month and a half right the measures that they've
• 09:00 - 09:30 taken not too many people anticipated it people were talking about it but not people anticipated one after the other kind of moves that they kind right in a good bull market when this if the sentiments were good this would be cheered beyond measure in a bad sentiment people markets have ignored it yes that's a beauty that is giving opportunity to buy in a great development ments and giving the right price to buy but markets are saying okay big deal but but if you understand the meaning of these macro changes these pivots tend
• 09:30 - 10:00 to market people will say okay pivots but what happened nothing has been improved it does not happen automatically it immediately it takes two quarters leg will happen it will happen okay unless something goes wrong globally and you know which is you know I mean some major chaos happen I can't big risk comes from obviously right now from us that we do not know yeah are are you worried about the the tariffs and the impact it could have on selective growth or sectoral specific growth see sectoral can change happen we don't know you don't know but see big deal a big
• 10:00 - 10:30 thing about here is that if Trump is going to put tariffs on everybody then a everybody's at par but I think the real battle US has is with China not with India india is either a collateral damage or it probably politically he has to keep making noise so that he does not seem to be favoring India in my opinion I think India will come out better way because see there will be some deal made you import LG we will to this and India anyway has to import you know energy so I'm sure there will be some deal made in
• 10:30 - 11:00 next 2 three months it will all settle down i don't think India given India US relationship strategic importance and given the US and China uh how China's reacted to this this there's no easy answer to that so I don't think net net India will be uh major negative uh negative negatively impacted but you know some sectoral here and there can happen who knows yeah so is this the market that invites you to really put money to work with us see I yes in my
• 11:00 - 11:30 opinion like I said Ukraine war nifty came down from 18,500 to 15,500 almost 20% correction look at what happened after June 22 Second half of 22 was good 23 was great first half of 24 was great right same way now Nifty came down from 26,500 to 22,000 right so almost 18 20% correction very similar kind of situation i think second half of this year will be far better than first half now whether it
• 11:30 - 12:00 turns in April May June who knows i don't know at least but I tend to believe the riskreward of investing committing money from here is favorable 80 90% of the damage is done last 10% nobody can tell you when it will happen both in terms of time and value nobody can precisely predict so riskrewards are turning favorable I think if you have to allocate money you have to put money over next 1 2 3 months you know next 3 4 months I think it's a great time caps I think I personally am not a big believer
• 12:00 - 12:30 of large gap midap small cap I am a believer because for a long-term investor you know uh caps don't matter what matters is the market cap matters the management and the business model right and your ability to withstand you know in mid and small cap the volatility risk is very high yes but you know I always say that if I like a management and a business I would rather buy it small than buying right that's a very simple right so so large
• 12:30 - 13:00 cap the people who say large cap midap they come from the managing volatility perspective they come from the short-term perspective people who have five 10 year horizon And they know that that big money is made in mid and small cap i'm not saying large cap money i'm not making that point the big you know beat or the supernormal return if let's say large cap or index is going to give 15% you can make 25% return also by investing into mid and small cap over a long period of time right that's possible so again you choose what kind of you know uh the the the risk appetite
• 13:00 - 13:30 you have for the volatility risk and then you invest have you done that right now no chosen midcaps small caps right now in the last are nothing has changed now in both but if you had incremental money have you put it to work in midcaps and small caps we see we have multiple strategies we have multi cap strategies we have you know small capid also so we do based on what mandate of the strategy okay it's not like you know we are deviating you know significantly here and there I don't there are mid caps which finding interesting there are large caps we are finding interesting in fact we recently in
• 13:30 - 14:00 uh during the Ukraine 22 uh Ukraine war time We had launched a contra portfolio strategy right uh that strategy you know we said we'll beat because that that time nobody was ready to listen so we said we'll beat inflation by two uh the the fixed income by 2 3% so we guided for 12 13% kind of returns and that strategy has delivered almost close to 35 6 36% return last 3 years we had closed for subscription now we opened it again because we think the time to get
• 14:00 - 14:30 money back in that now whether it will give 15 or 20 I don't know but the fact is that right now risk reward is finding favor and hence we opened it so so that tells you but that's a largely large cap strategy 60 70% large cap balance made a small cap again their philosophy is so I am more guided by the approach philosophy rather than you know cap I we have made 5x return in large cap also we made 5x return in small caps as well no the okay maybe the other reason why I asked this question was that I remember
• 14:30 - 15:00 a newsletter that you guys wrote at the start of the year maybe that this is a year not for hitting sixes I Yeah not paraphrasing it but capital conservation will be as important as well which is why my question so no we said that you know keep the expectations low from this year and you're still keeping it low in we keeping see any in general we should keep in life expectations low but we were like since we are in a business we have to keep you know give all kind of views so I said this year will be you know challenging year it'll be a difficult year we expected that to be u
• 15:00 - 15:30 uh now uh that is true for large cap that is true for middle and small cap mid and small cap tend to take more beating in a bad market but they tend to also run up very fast in a good market if you go back and check 22 May you know that when recovery happened it was far more sharper in middle and small cap you know than than large cap so that's the nature so again to you all we are saying that hold on your nerves don't panic nothing is wrong with India environment
• 15:30 - 16:00 settles down uh equity will create wealth I see similar to 22 kind of situations and that is your I should be soothing thing for a lot of people because I still I'm still are wanting to understand from you because you talk to a lot of companies I know that right both on the private side and the listed side as well presumably what are corporate conversations like are promoters slightly shaken because of the lack of growth are they telling you that no they are confident about FI26 what
• 16:00 - 16:30 have you tell us a bit about the feedback you're getting on this sector to sector company to company I'm telling you banking no problem people are reasonably positive and you know uh you know growth is there and the recent whatever is happening very I think reasonably positive uh capeex sector I think order books are very very strong they're executing well I don't think anybody's expressing any sign of worry if you ask me pharmaceutical business are going reasonably well some part of uncertainty is there on US front but you
• 16:30 - 17:00 don't know and fact that they they account for 45% of the US medical market I don't think if it happen it will be passed on and you know so I don't think there will be any challenge on that so consumption side again mixed back depending on what size of the company you are and you know what sector you are uh but you know we have few names where things are you know doing pretty well u so I think the worries are coming in some pockets where there is a little bit of international trade where they don't know what's happening so whether what to do and what not to do how the things will pan out you know like some I
• 17:00 - 17:30 yesterday I met some auto component company they export to Mexico and Mexico does some work on that and goes to Tesla in US now he was saying I don't know how it'll pan And like he said I send to something to Canada and Canada say it comes to Detroit uh it gets machined and goes back to Canada gets some work done and goes back to Detroit and he say I don't know how those business will play out and that's like 25% of my business i don't know so certain wherever uncertainty is there they are kind of dealing with this whole uncertain period
• 17:30 - 18:00 we don't know and obviously that's right so all those things should settle in next 3 4 months but generally speaking I don't I have not heard companies saying that oh my god you know it's it's like we are kind of canceling our growth plans and scuttling it down none of those things I think you know people saying that this can be challenging year challenging environment will come out so as a there's nothing which at least we have heard uh and negative from corporates very nice the other other question Vikas that I have is on what could happen to job creation if indeed
• 18:00 - 18:30 AI which is the big buzzword i mean it was the biggest buzz word in Davos this year everybody was talking about one thing even though it was Donald Trump presidency and that was AI now my question is if AI is increasing efficiency reducing need for duplication of jobs what have you and if it is negative for global capability centers being set up across the world and India for IT sector etc is is India sitting on a worry when it regards to jobs versus availability of labor so again
• 18:30 - 19:00 it's a very interesting a very common question which comes all the time and I have my favorite answer on that which is uh so basically AI it's I think there's lot I'm not saying AI is not going to change the world it is going to change the world it's going to change the world fast but I think there's a lot more fear than the reality i'll tell you why ai is nothing but similar to like internet 15 years ago we didn't have WhatsApp we didn't have Google map our life was going on right we all adapted to that today you can't think of your life without WhatsApp without Google map and all those things right so point I'm trying to tell you is that everybody
• 19:00 - 19:30 will adapt to new ways of doing things right in that process again another analogy I give you is in our capital markets in 97 or whatever 95 when demineralization happened there was a strike in Bombay stock exchange that lots of people will lose job um you know people who are handling the share certificates physically and this and that right will lose jobs fast forward sebi went ahead did dematerialization made technology as a base capital markets because of that automation has probably created 2,000
• 19:30 - 20:00 times more job than it had that point in time the problem the point I'm trying to make is that technology always makes life easier expands market expands your it makes your life like I said Google map has made your life easier we were living before also so pointed technology is an enabler to makes your life easier we all adapt to it of course some people who are handling share certificate will lose job if they can't adapt you know there are lots of benefits to take care of them but the new generation will
• 20:00 - 20:30 adapt new generation will benefit from that so companies adapt very fast so I think everybody will adapt in my opinion now people who don't adapt they will anyway die and they have always died you know they always suffered i mean we have seen whether it is companies or individuals who don't refuse to adapt they will suffer from that so I think it's a lot more fear than realities of course you should be mindful how my business will get changed every company should think about it but not from a fear perspective but from a
• 20:30 - 21:00 understanding and how it can change in in our industry I think lot of technology has been used whether it is screeners creating crushing data using algorithm you know it's been going on for a very long time by the way that's true that's true now how in AI also there are layers genai you know there so so I think in my opinion there's a lot more fear than than I think reality we will change we will benefit uh you know human life will become far more easier of course it can go now there are theories
• 21:00 - 21:30 I'm not expert that it can go all the way to take control of humans also but who knows that that I can't get there because I don't understand the full implications of that but uh we will live with the future as it has always adapted as it has always adapted yeah you know viewers I must say you know this year for example a lot of fear around Indian IT right Vikas and and what could happen to job loss or job prospects is there will they lose jobs etc if you walk down and I refer to the ve because a lot of
• 21:30 - 22:00 global companies come there the prominard was dominated by Indian companies and from a infosces to a whipro to an tech everybody was advertising this that yes AI is the buzzword if you know how to use AI well for your organization please come to us because we will help you do that so I think it ties in with the point that you were earlier making that Indian might do it interesting last couple of questions Vicas one is uh because a lot of people one one is on on
• 22:00 - 22:30 on selection process methodology especially during tough times right so let's assume you are a person who is not having an annual consumer customer inflow of capital coming in every month or whatever your fund individual investor right you've seen your portfolio get eroded by 20 30 40 50% as the case may in the month of February peak February I'm talking about right how do you then
• 22:30 - 23:00 uh uh think about what to do in the market at that point of time because trading finger the mind is scared right portfolios are bled and therefore you can't sell in order to invest somewhere else so what would a vikas kani do in such a scenario the mental model I think first of all manage your mental uh situation you know don't let it impact ed your judgment uh very often i think when you see this kind of fall people lose balance people lose uh the
• 23:00 - 23:30 objectivity uh you know and you know they'll start you know blaming everything what is not getting right and you know you know I have seen these days everybody calling out for long-term tech capital gain should be tax zero and all those things kind of advice and those kind of things starts happening in my opinion you know start make some government blame some government blame some corporates and all I mean this is in my opinion so control your mind you know don't I think if you made bad decision you know correct it Even if it is a loss get into a good decision right
• 23:30 - 24:00 but if you you think you made a good decision business is doing well companies are doing well stay put if you have more money average it out i can tell you I have had many companies in last 20 years in my career which are 20 beggar to 100 beggars and each of them have seen between 30 to 50% correction many time over many time over not once but if you in any of those many time over 30 to 50% correction you buckled in you know then you will lose the entire
• 24:00 - 24:30 big upside so the key thing is that do you know your investment well have you bought it on tips or do you know it with research do you know your company well do you know your investment well if you know your company management investment well your ability to stay put through thick and thin will be very high and that is where I think job of a research job of a qualified investment comes into unfortunately a lot of retail people end up buying on tips buying on you you know you know news flows and all those things and they are the ones who suffer the
• 24:30 - 25:00 most unfortunately sad realities of life is this uh because of you know again many you know influencers to a lot of people there are all kinds of people in the market unfortunate reality is that that you know people suffer from that so I would always say that know what you're doing well if you know what you're doing well your ability to stay put through thick and thin is very well and actually investing is this real successful outcome in investing comes in your ability to stay put through thick and thin because there will be bad periods
• 25:00 - 25:30 there will be bad in market there will be bad periods reason could be anything I don't know any cycle like as 22 we had 20 we had I've been all around bullish but you will so if you are bullish over 10 years there'll be at least four or five periods where you will have 20 to 40% correction now if you don't live through that you will go back to cash or you will do something so that's the only advice I can give okay great okay Vicas lovely talking to you it's one of the one of the best conversations that I have had with you really enjoyed it
• 25:30 - 26:00 thank you so much for joining us on the podcast i always love doing that yeah and viewers thanks for tuning in to Talking Point Unfiltered [Music]