Ajay Srivastava, CEO, Dimensions Corporate, says “one big change they have made is that they have gone into a lot of capital market related companies, whether it is depositories, whether it is the AMCs, I think that is the one big addition to the portfolio. Second, they added to the aviation portfolio. It is getting more and more strengthened. The third large thing, is that the metal story has changed. From almost less than 10-15% of the portfolio, it is about 25-30% in the last three months.”Apple is now making one out of seven iPhones in India. Elon Musk is coming himself. Tesla coming to India and you are still having Wi-Fi troubles?
Ajay Srivastava: I cannot believe it. That tells you. Yes, I cannot believe it. I am so sorry for that. Yes, and you had forgotten the Ambani wedding.

Yes, of course, and the birthday thereafter.
Ajay Srivastava: Everybody is in a wedding mood now because generally speaking, it is not about equity. I think when you feel wealthy, you feel good about life, basically and that is the good part that psychologically as well people are feeling a lot more relieved with their net worth intact after the Covid. So, while we look at fundamentals, company earnings and EPS, what we forget is human psychology.

Psychology says that very clearly when you feel good, you invest. When you feel bad about life, you typically do not want to get into any market or investment mode and you want to save for the future. I think we are in that zone where people are comfortable where they are and therefore willing to carry the investment and also make more investment. So, yes, there are fundamental factors, but to me the most important is human psychology. We are feeling good today and when we feel good, we want to do things and become more expensive.

How are you enjoying this feel-good factor? Are you diversifying from equities? Are you buying real estate? How are you enjoying this feel good factor?
Ajay Srivastava: Well, okay, the feel-good factor is coming that first the money has to come to the bank and the tragedy is that there are more stories out there than the money you have. So, while you feel good, you also feel frustrated at times, but yes, what we have done is rotated some money into equities, into debt funds and partly started to move out into debt funds which will do well over time. They may get postponed, but certainly will do well over time.

Real estate, certainly land is what we have been looking at, not necessarily residential real estate and land in various hill stations of India where we are seeing demand coming over time and therefore the pricing is still very attractive – giving a multiple of five to seven times in about five years’ time. I think diversification into land in select cities in India could be a very good investment at this point of time and could be a multibagger.

Apart from weddings, there are also the elections coming up. So, in light of that, how are you looking at the market positioning? Do you believe that there are certain themes that could perhaps capitalise or benefit from this?
Ajay Srivastava: Are you seriously believing anybody is looking at elections today? I promise you not. Elections are a done deal by and large. One can argue whether the ruling coalition will get 400, 370, three-fourth majority or two-thirds, but I do not think anybody is contemplating a change of the government at this point of time, even by far and therefore one is looking at beyond the elections to say that will the PSU divestment happen?

If that divestment happens, that is going to score big on the PSU chart. We have invested a lot in PSUs over time, but now the big ticket will come in terms of the returns that are going to come from the PSU. So, people are looking forward to saying that will the PSU divestment scheme continue? I think that is the theme really speaking everybody is looking at the PSU banks. These two constitute the biggest change that we may contemplate as the new government comes in. They do not need to do anything different. It is work for them. It is not broken., they don’t need to fix it. The capex is now slowing down, hoping that private capex comes on board, which it is seemingly coming on board partly, but I do not think we should change our themes from defence, ultra-high consumption for premium products at this point of time, and into the capital goods sector.

The PSU theme remains the same. I do not think we should change anything because I doubt this government will change much of what they are doing, except maybe PSU divestment, which if it happens could be the bonanza.

What happens now? Election is a done deal, then we will move into the budget. The minute we move into the Budget, will that good old conversion over LTCG, short term, long term, equity getting a differentiation treatment start again?
Ajay Srivastava: If you talk to an average investor, even like me, I do not think that makes so much difference in terms of whether the taxation rate moves a couple of points here or there. What makes the big difference to us and investors is the fact that there is strength in the market at this point of time? Are there weaker hands still prevailing in the market? That is where the trigger comes for the investors. Let us assume long-term capital gains comes into play at 5%. There could be a short-term trigger, but that does not change the dynamics.

We saw what happened with the Gilt Fund. It did not change the dynamics of investing. So, more than this chatter, it is going to be what next this new government is going to do? Will it kind of now reign in the fiscal deficit? Because if they do that, it will be a great positive for the economy. Will they sell the PSUs and redeploy the money?

Second, will the railways land divestment take place finally and the real estate be opened up? These three things I think will dictate the market terms and lastly speaking, whether we are supporting the semiconductor industry, etc, but that is not going to impact the market in the next three years. What is going to impact the market is if there is more money in the hands of people because consumer spending is the achilles heel of the economy at this point of time. High consumer borrowings, which RBI is trying to control, would restrict consumption if there is not more money with the people.

I think the key here is that will the government take steps to give more money to the people and helprevive consumer spending? If consumer spending does not revive, the base of capex does not move up and then lots of the assumptions we have, do not come into place. We are hoping consumer income goes up, agriculture income goes up and people buy more. Therefore there is capex and the current theme of the market survives. If that theme gets disturbed, your returns could take a very sharp downswing.

Tell us a bit about your January portfolio versus April portfolio. You talked about an asset class change, but in terms of specifics, what are the three big changes you have made in the last three months?
Ajay Srivastava: I think one big change we have made is we have gone into a lot of capital market related companies, whether it is depositories, whether it is the AMCs, I think that is the one big addition to the portfolio that we have done which we did not have too much of. We had some of it, but capital market related companies are a large investment theme that we have done.

Second one that we added up is the aviation portfolio. That is getting more and more strengthened, unfortunately not many players in that and so that portfolio remains absolutely robust.

The third large thing, which has happened in our system, is that the metal story has changed as we said in the last few months. Metal prices went up and our capital allocation went up. So, from almost less than 10-15% of the portfolio, it is about 25-30% in the last three months. In these three movements, what characterised April was capital market companies, aviation, and the metal stocks.