[Music] welcome back uh 100 points higher on the Nifty and uh you know we are basically making new Milestones so let's uh talk to somebody who's seen many Milestones I mean you know yesterday I was saying that I when I started reporting on markets the sensex was at 5,000 uh levels you know we 16x uh from that point on uh but I think we have somebody who's uh seen I think markets since pretty much Inception in the current modern format we have Ram Agarwal chairman and co-founder at m r Financial Services right here in our Studios Ram great to have you with us here thank you very much for your time very good morning for it is a very good morning right every day is a good morning nowadays 8,300 last uh you know couple of years back he told us SX 1 lakh and we are at 80,000 we bried the Gap yeah so we need a bigger Target when you when you come up closer you need a bigger number so you give me longer longer way is half 10 years I'll give you much bigger number so you know it's just a compounding see I started my career when it was 100 yeah so 1980 only I bought my first stock and that time SX got it started at 100 today is 80,000 do you know what is the rate of compounding in 44 years guess 20 no this is what this is what is all about compounding it's 16.4% yeah year after year for 44 years I have seen this Market growing at I I I didn't know that is 16% I thought it is 15% this is a 15% country India is a 15% country so I have seen I me like every 5 years doubles like from 40,000 to 80,000 it has become in 5 years exact so it's about 15% and uh longer term is also 15 16% so there is no reason to believe that going forward will be anything significant different it will be it might become 14 it might become 16 so if you go at 15 I let's keep the base at 15 uh in 5 years flat 2029 you'll be 1ak 60,000 you know is that a big big enough number or we should double it again I want to just uh you know so you take a slightly longer sweep of uh time and that's the way to do it you even out and iron out a lot of the fluctuation and volatility and I think you put that out beautifully with that uh example but slightly uh near term this is also the fastest 10,000 Point move yeah now of course I mean you know from going from 70 to 80 in percentage terms is very different from going to 10 to 20 I mean so having but having said that this is com in about 13040 days this last 10,000 points yeah so is it just your you can have a deep correction of 2 3,000 points and then it will get nullified in the sense that see you what happens is the base effect comes see first 10,000 to from say from 10,000 20,000 is a doubler correct obviously it will take 5 years but 70 to 80,000 is just about 14% 14 15% yes so 14% And 100% it is going to take different times yeah no but but but the the other aspect' been discussing this is is this whole liquidity gush right this massive tap of domestic liquidity which is why this is a very different Market from you know where we were maybe 10 years ago or 15 years ago uh does does this worry you that there's so much money chasing stocks is that in itself maybe a risk that people don't want to look at no why worry you it's the happiest situation in my 40 Years of career okay yeah it is a happiest situation when actually retail which is see in 1.4 billion people at least we have half a billion people in the market we still have only 160 billion or 100 billion so this journey of uh uh uh inclusive development of the markets because the risk capital is going to come from uh not from uh uh the top end of the population risk Capital will come in a truly distributed way from across the country and that is the revolution which is on say 3,000 rupes sa 5,000 rupes so the guy who is giving say my household servant or somebody he or she doesn't realize I mean for her also it is very small say she's contributing say something like 30 35,000 rup a year if that goes down by 20 30% I don't think she's aware of it and she it really uh matters to her but that 30,000 all collected in the Sip becoming 2022 ,000 CR per month means about 240,000 crores 2 and half lakh crores per year this entire thing is available to our enters actually the average sip size I think is about under 3,000 rupees yeah some very very small yeah yeah so what I'm saying is risk is distributed in the the best thing to happen in any Equity market is when the risk is distributed the whole concept of Jo St company came as a to distribute the risk so this is the ultimate form of distribution of risk and that's how our quality of equity cap which is available to my uh entrepreneurs finally the corporates is very high quality but that's that's at a much broader sort of thematic level and I couldn't agree with you more it is a revolution that we're witnessing right here in our lifetimes but just in the near term in the short term given the pace of money coming in mutual funds and the fact that the the spectrum of stocks and also there are definitions and regulations right the spectrum of stocks your basket is pretty much the same so is that a challenge no you are you are seeing lot of supplies coming in uh from uh existing promoters and fis fis have been supplying for last one one and half two years now they also seem to be tired now it is all for the new companies which are not listed so 100% owned unlisted company they are uh they coming with the IPO almost every day there's one or two IPOs I think it'll be a record year of maybe 200 IPOs or at least 160 170 IPOs almost every other day you'll close one IPO and there is no season in the sense that entire 365 days it is open which which is a very different uh uh change so supply line is building up the good thing about the market uh India is that there are 34,000 companies listed already and they all can use lot of money as the demand builds up for their respective products and services so I think there's a lot of demand and then on top of it the owners are there who are sitting on 50 52% of of the ownership so they would mind uh selling out 10% of their holding to the retail public now 10% means our see today market cap of the market is about 440 lakh cres 10% means 44 lakhs my flow is just about 6 lakh CR so if entire thing has to come from existing uh what do you call if you if you raise the prices too much the existing owners of the companies they will supply you 10% which is good enough for next 5 years so there is no death of Supply Samsung will come government of Singapore will come GI will come H is coming hindai is coming everybody will come there is see if you if you sell a rupee stuff for 1 rupe 20 P 125 or 150 Supply will come you should you should have that faith that somewhere it will come in what form it will come existing new old and it has a tremendous impact on the private Equity Venture Capital the Apper 5 unlisted Apper for unlisted is so high and that is where the money is going into the startup of a new companies you know uh and uh unhard of cities you know you go to tier three tier 4 there's so much of excitement about uh becoming corporate uh getting organized wanting to do private Equity wanting to do uh you know kind of public issue which is what is the Revolution and not so much about the 80,000 and all that is a what is a reflection and fun for us uh but uh actually what is the second order effect of uh really it's like a water Genji water coming to Desert of Rajasthan see immediately it might create flood but eventually 10 years henceforth entire Rajan would become wow that's the effect which this will have good to see you when you know I'm just doing the back of the envelope calculation 80,000 150,000 in the next 10 years when my kids go to high school it'll be at around 3 lakhs I'm quite pleased with that thought but I wanted to ask you this given the kind of participation you're seeing and the revolution that we're seeing do you think it's time that we see some kind of participation in either House of the parliament you know from either The Brokerage Community the stock uh stock market Community because the participation is there we're going through a revolution do you think that's the time has come I think we should have at least one state cabinet minister for Capital markets you know reporting to the main FM there should be a one dedicated and he should have office in Mumbai rather than Delhi you know it is very important that his office is open I think SE is doing that job more or less but still I mean at a political level because uh sebi also reports into I think president or something like that but uh at political base also there should be somebody who is fully dedicated listening to the voice and concerns ideas opportunities because see Capital Market the uh Capital Market opportunities is amazing only us has this very vibrant Capital Market and that's why us is what US is so India today with $5 trillion plus kind of market cap we we can be in 5 years flat see your market cap index grows at 15% but market cap grows at about 17 18% because of new and all so 18% means in four years flat you'll be $10 trillion just think of $10 trillion market and the entire Market fortunately unfortunately is just in South Bombay south of Bombay south of bandra so you imagine what kind of intensive activity you're going to see in the city and I'll tell you I mean I was talking to a gentleman who heads a large portfolio at a large bank and he travels and meets companies and tier 2 tier three cities Etc the everyone wants to raise money yeah everyone is thinking of doing an equity issuance and it's an incredible P companies we've never heard of you know these are uh you know the you know small size small size 100 200 300 500 crores up to th000 crores essentially but uh it's it's a big pipeline of companies which we will see uh over the next couple of years although R sometimes you know having seen markets a long time wonder is this is this really happening in this size and scale and I think that is natural to wonder sometimes yeah for me also it's first time in the sense that that uh we have seen the markets going up and down it doesn't go down now yeah see every time like in 2000 see I think real fun was 20032 after 911 collapse in 2001 uh it was kind of depressed we M also incur loss for 2 three months so that was a bit of a you know uh cautionary time but after that from 2003 to 2007 was amazing time but there a global boom you know you go to us you go to China I mean when I used to go to Hong Kong and used to open the newspaper I said like the headlines were so different we were growing at 15 20% they going 40 50% now they going at 5 10% we are going 25 30% so this is truly India decade we got to play very very cautiously I'm telling you particularly the Capital Market card yeah because it is not understood properly and let's talk let's talk about that and I think at that time retail investors were not I mean they were nowhere maybe you know what the size it was completely fi with our sips and our first funds I remember back then they will go to Gold I'm telling you or they'll go to Real Estate which is again a mess all the savings must come here so what do you mean by that when you say you got to play it carefully in terms of I think what you mean is regulations Etc yeah no they see our Regulators have done amazing job I'm telling you this boom is bigger than 92 boom just that in '92 there was no se so today we have SE we have RBI we have digital tracking we have everything perfect but just that you know because uh unless something is broken don't fix it my sense is that something is so so so what is your what is your fear let's let's approach it from the other side my fear is that they should not do anything uh you know which can disturb this uh tempo of shift of savings from uh say now it is happening from Bank deposits to uh say mutual funds there's a wonderful thing now they should not do anything whereby the other asset class like gold which is unproductive uh you know people should not become people should they by by mistake they should not make gold or real estate investing or some cash cash based uh assets buying more attractive compared to uh stocks and who's the day are you referring to Regulators or the government I mean power that be I mean I'm not pointing out anybody because lot of people have lot of powers RBI had own power CB has another Power government of course has lot of making Powers I mean all that fiscal measures like your capital gains and all those kind of stuff then this side monor there then see they have done so far they only have brought it here so all the credit to them but having got it here don't get scared of what you designed for when they coming yeah see you designed for the inclusive development of the Capital Market that's truly happening till till the complaint comes from the from the consumers themselves you know I mean uh so so before we start the talking markets here and now just to complete this point you tell us about the budget we're talking about not fixing what isn't what isn't broken right that's what you're saying I would conf from a capital Market perspective because that's one big fear there'll be some tax change there'll be some capital gains change yeah so that's where so what's your wish list when you when you you know want to I I have no change is the best thing no change is the best thing but actually they should make it even more attractive for uh for the people not for me I don't want any tax concession for sure but the masses I mean whatever wherever it pays say like uh say PMS people are doing so PMS you know the the uh I mean that's not a budget issue uh I mean that is all for the maybe CB or somebody to reform but wherever little little points are there uh in terms of fraction with the I mean uh with the development of Capital Market you know say taxation issue this taxation is always a big pain point you know like like say pass through first they say this is a pass through this particular category is pass through and then later on they say 10 years back it was pass through but as for this is not pass through and hence you get into litigation and that litigation never gets over so you know one is that of course some mistake could be committed by the intermediaries but I think there should be a extremely good settlement system out of the Court settlement system okay we we go and accept this happened but looking back it is a mistake but uh today okay let's sit across and pay some fine or something and settle it and done and dusted types you know so that we can move on otherwise there are two Char accounts consultants and people are busy you keep issuing notices so I think it must be made very very fraction free the Capital Market should be the most friendliest Capital Market in the world should be India so complet so completing the loop on the budget you say no changes the mean don't taxation perspective changing we are in a very good equilibrium yeah so any anything uh just to complete that thing on the budget anything else you are you are expecting not just Capital Market from a budget will it be a big one because this is the first time we will hear about them talking about yeah I would expect that there should be some boost to the consumption see you want private cap government is doing all the bits of its you see the GST number of this month it is 7.7% growth if this trend continues and it goes to 6% and 5% then you have a problem in the because your GDP is growing at 10 12% your GST is growing at 7% it means only first month so so let's not because it was at the middle of the election and heat super heat W it should recover hopefully next month itself but if it doesn't recover there is a problem with the consumption so you have to address to the consumption they will have all the high frequency data not with me and they have all the super Economist they will say how to build this up because the moment consumption is there Indian interpreters are so smart you want burgers people will supply thousand types of Burg you want cars people will you see you don't have to tell anybody all kinds of cars are coming here so you have to just give indication where the consumption is and uh investment will come okay because infrastructure is something which only government can do so some income tax relief from for the something like that on I mean should you saying that should there are two ways one is that put more money in the hands of the poor guys or not poor salary peopleurban tax paying people tax paying people you put more money the guys who are not paying tax in any case you have no control the guys who are paying tax you can reduce that like I would say up to 12 lakhs no tax I'm a farmer no tax till 12 lakhs he should not know where is the income tax office like 12 lakh rupes means a lak rup you know this is a first this is the first time I'm hearing someone who's a veteran of the capital markets saying it'll be okay if you go to that dramatic extent saying no income tax and full income tax dep filled with all these cases millions of cases going so income tax officer has relationship only with the guys who are earning actually 12 L plus this mindset changed sir because usually the moment something like this would happen the market would fall saying oh this is a very populist measure it's a very populist government Market you cannot build budget for Market yeah Market has its own mind yeah okay so forget about the market you can't run it for the market you have to run it for what is good for the country absolutely you know R similar time exactly 1 month ago we were speaking with the market was 3,000 points lower from here shows the kind kind of recovery that we' have seen in the market and the power of retail as well but since you briefly mentioned Mass I wanted your take on the mass segment are we coming to the end of the K shape recovery that we saw and there's plenty of demand for stocks but are we seeing demand now for shoes for soaps is that coming back is there recovery on the cars or not yet no in fact it's slowing down what I see I keep getting bits and pieces of news but today morning I was talking to one or two businessmen they are saying that like one shoe shoe maker has gone half he has retained half of the staff because there's no demand for the good quality shoes so maybe it is going to some foreign brand or something but per say there's no I mean 8% GDP growth for 2 years and still there's no boom in h nesle and Maro and britania people should be they should not be able to punch enough biscuits for 8% growth economy now uh let's run through a few other things Capital Market plays it's been a long-standing theme of yours does it it stays absolutely Rock Sol it becomes even bigger bigger Ian let's see budget what all the transaction charges and all that what happened recently passing see there nobody is trying authorities are not touching the customers they are making only the wrong incentive which is there there for for the intermediaries to expand the volumes big time so that they can get their credits they have simply stopped the credit so now intermediat will respond in in whatever possible way maybe they will they will increase the charges or so it'll get through it'll be tided over it's just a part development process okay private financials uh what What's the view now I mean because that's private financials private Banks Banks actually financials You' been a big bull and HDFC bank I mean there's a bit of a trigger there as well yeah what's the view from here my sense is they're going to do very well because this is the best time for the banking what is happening with so much of equity coming to the corporate world the quality of credit given to the entire corporate world has significantly improved and the prepayments and the quality of corporates uh corporate cash flow is so good that Banks don't have to worry about the corporate book which is almost 50% of any Bank msme J it might work out 65 70% so that portion of the lending which is BU of the lending for banks is fantastic and it it is the quality is improving day by day you know so uh so clearly banks are in very good shape the only problem they have is the liability issue in the sense that if you have 15 16 17% credit growth you need that much growth in the LA uh deposits also and deposit growth is very calibrated I'm 11 12% so their cost of deposits are going up so uh so I don't know how RBA is clearly on top of it and they're they they have lot of tools to provide as much liquidity they want so I'm sure uh they'll T another sector I wanted to because there's a fund the defense fund uh the mual oal defense fun what's has it started uh yeah I think yesterday it started trading stocks are higher today I'm just saying see they're done I think uh yesterday was the first day so I don't know whether fully it is done but uh but it gets LED but but you know how do you view this space some of these stocks are up 10 15 times so one school of thought would be now it's you know we are starting for the next 5 10 years because it's got a tremendous Runway the other school of thought will be like the stocks already went up so much so give us the rational I mean on a space leg defense which has done so well and now you'll come up with an nfo yeah so see all the psus they were discarded for I would say 10 to 12 years or maybe 15 years they literally Came To Zero Performance uh 3 years back in our weth study and so it is making up for the uh last 15 years of lost valuation I mean uh things came from say 12 13 15 P multiple to 2 3 4 I mean low single digit P multiples like Quia I don't know even now it must single digit yeah eight and half yeah so it was this is despite doubling so it was 3 4p multiple your HPB is still at about 5 6p multiple or 7p multiple so clearly uh the psus were depressed Beyond anybody's imagination and now under this government I think the PSU profit performance is also very good all the PSU Banks which were in dire States absolutely uh till covid they postco they have come back they cleaned up the book in covid and now they are into they're as profitable as private sector if I got the number right I think the entire PSU basket you're getting 15 lakh CR which has gone to around 70 lakh CR but the good news is the profitability as well has gone up as much so on a PE basis that's that's not CH area is power r g power as a space utilities and Equipment makers and financiers do you do you do you like that space as a as a fund house or you think it's bit bit overdone now there's a lot of choice but uh yeah I mean see it all depends on the stock see I'm not I'm not anymore picking stocks you know and uh so I'm not at Liberty to talk to you about indivual stocks but uh the opportunity is there for any company which can which has a solid business model and uh the desire to grow you know I mean uh some of the PSU financing companies there all the private power sector Capital exp which is coming up lot of it will go from their books you know but on On a related note because of this kind of expansion if you look at the industrial space overall which has worked so well right it's become a high it used to be a value play now it's like the high momentum play in the market where stocks like ABB and seans they're trading at 80 times 90 times 100 times forward multiples how should investors approach it I mean thematically yes we understand but when you see these prices yeah there will always be some segment of Market which which is which you don't understand or I don't understand if you don't understand don't bother about them because they're enough to play some other place but but overall when you talk capex Industrials what's so they are the highest quality capex companies cens ABB and all because they have very long-term franchise okay it's not you know one season here and there they are the guys who have first thing is they're not very Capital intensive they are much more software driven Services driven they have IPR what they do nobody else can do it so uh second uh as see as India goes from say 4 trillion to 8 trillion your size of the capex boom will be 3x not 2x so who are the guys there's nobody no substitute coming for them so they are going to get more complex bigger orders in their books so and then Ro is very high their margins are now from 8 9% they are at 14 15% so everything is going well for them and even globally now the parent company if you if you see the these companies European companies this total uh uh what you call setup India is the only place from where they are getting this 25 30% growth and now it has become significant in size and more than the operations market cap has become significant their size a lot of people they are selling here to buy back in their parent organizations so now they cannot ignore because this is a what do you call India has a Powerhouse you know this is a decade for India and it will be on the back of lot of these capex which will be helping them big time all right r just one final word uh you know we have spoken about consumption about kex the other C is cement and You' have spoken about this in the past as well the consolidation Drive is picking up steam and I've got my year to the ground I believe there's a couple of assets that'll get gobbled up in the next 6 8 months or so you have spoken about this in the past how do you approach that theme if the large are getting larger the smaller ones are getting a better parentage so how do you approach that because clearly this is a space that is seeing plenty of Interest a new player coming in there and you seen plenty of consolidation yeah so this is a very funny situation where consolidation is on and yet new players are entering so there's no dirth of supply of the capacity you know so there has to be genuine shortage of cement which is not happening and this we are counting for last 24 years that uh demand is going to go up at this Pace Supply is going to be constant like this and hence there is going to be a big bang uh price increase yeah so that has not happened and I don't see it happening in near future so how do you approach the theme then yeah so it's St me if if it is if the stock is available at replacement cost replacement cost of below $100 buy if it is $150 $200 sell well that's uh straightforward Ru great to have you with us here really appreciate it so 1 lakh 6,76 by 20 29 29 5 years years that's the formula 2034 we a 3 l all right I'm just I'm just kidding but uh wonderful chat as always thank you very much for being with us here uh so that's r M for financial services with his thoughts on the market it's a wrap on this edition of Bazar and that special conversation we are back with chartbusters of the other side station [Music]