Market veteran Basant Maheshwari has a simple advice for investors struggling to construct the right portfolios. A bulk of the portfolio should comprise of companies that generate stable earnings, but there must be a small exposure to companies with very high earnings potential, he told NDTV Profit. (Watch)
Citing the example of Kolkata Knight Riders’ explosive batsman Yusuf Pathan, Mr Maheshwari said, “The top-end should be predictable companies. And bottom-end should be Yusuf Pathan-types – on their day they can hit 40-ball hundred and then push you through.”
Mr Maheshwari, who’s made riches in stocks such as Page Industries and Hawkins, cautioned against taking too much exposure to companies that have very high earnings potential.
“These types of the companies should always be at the bottoming end of the portfolio. And they should be allowed to expand in weightage on their own by stock price going up, not by putting incremental amount into that,” he said.
He also cautioned investors who try to time the market, citing the example of the market rebound from February lows.
“Many people threw in the towel and they said we have had enough of it. They said let us just save 60-80 per cent of what we have and we will come back when things are good… Money will be made by people who had their demat accounts filled for consecutive period of 15 years. Markets never give an invitation to come back,” he said.
Mr Maheshwari says companies from the ISMAC space (internet of things, social media, mobility, analytics and cloud computing) have the potential to generate very strong earnings growth.
“The ISMAC space could become huge in 3-7 years. You have to balance it out with stable growing companies.”
Market Outlook and Sectoral Picks
Mr Maheshwari is more optimistic on Indian markets than he was six months ago. He is positive on private financials and IPOs. He remains bullish on pharma companies that are focused on B2B or business to business space. Pharma companies in B2C space are very difficult to understand, he said.
He also likes housing finance companies backed by public sector banks. Mr Maheshwari sees emergence of new opportunities in niche areas of private NBFC space such as microfinance. “Some high growth companies are likely to come up in this space.”
Though Mr Maheshwari likes the infrastructure space, he says execution remains a key risk in the segment. Investors can look at taking some exposure to suppliers to infrastructure companies, rather than directly owning infra companies, he said.