Markets could hit all-time high at the end of FY11: Kirti Doshi and Anish Jhaveri, Antique Stock Broking

Kirti Doshi and Anish Jhaveri – Director and CEO, respectively, of Antique Stock Broking - in a chat with ET Now talk about markets, economy and about their company.

Tell us about Antique. 10 years, you started as a boutique brokerage firm. Today you have one of the finest securities firm in India. Tell us about the evolution process of the company.

Kirti Doshi: 10 years ago I started this with the thoughts that whatever the relations I have, whatever the understanding of the market I have, if I will translate that into the broking businesses, it can be a win-win situation as a client on the other side and as an organisation which I was to think of starting.

So I started with that. Slowly gradually we started in a smaller manner but within a 3 to 4 years - because of the economy was growing, because India was doing well – growth became faster than what I thought. From the 4-people team, we moved to 10 within an year and within 3 years, we were 25-people team. Thereafter in 2007, another 2 friends of mine - who were running their businesses in the individual capabilities - met together and decided to come together to do all different businesses in a one company called Antique. In 2007 December, I met Anish and we proposed him to come together and think about something bigger and better that we all can do together.



Anish, what prompted you to associate yourself with a small boutique firm that time?

Anish Jhaveri: There were two principal reasons. One was been there, done it all syndrome - now what you have done some of the largest deals in your life. The idea is very clear - are you the brand or you can create a brand and the answer was very clear that you need to create a brand.

The second reason was if you are smart enough, have you worked with smarter people than yourself or not? The answer was very clearly yes and in my partners, I found some of the smartest people in the market, Kirti being one of them. The trust was very clear. Answer from the heart was yes, go ahead and do it. If not now, when and the bet was on India. The larger bet was that if you have bet so many years that India would do well, why not bet on yourself, your capabilities and work with someone who is much smarter than you are and whom the market recognises as someone who has been way ahead of his time. So Kirti and my other partners were very clear choice.

Kirti, he is your better half but do you actually think that you are smarter than him?

Kirti Doshi: If this moment I will tell then I may risk him thinking something else again.



You were vehemently bullish on India. Vehemently, when everybody was recommending their clients to unwind, you were telling your clients to leverage and buyout. Anish, what prompted you to take such a big bullish call on India?

Anish Jhaveri: The change came when you had the elections results coming in. When we saw signs of stability and UPA II being much more stable than UPA I, we were very clear that this is the term when UPA leadership led by Dr Manmohan Singh will herald the next set of changes which he was not allowed to make in UPA I.

The day elections were announced, we were saying oil sector would be one of the first ones to be deregulated. It is matter of time, not matter of events why India will not deregulate oil and few other big term reforms which would be heralded. We were probably slightly early than what we should have been because politics has its own timeline but we were there, we were the first ones and we continue to believe so.

Is this just the beginning for oil marketing companies Anish and do you think oil marketing companies or these stocks have a long way to go?

The result of this announcement is reflected already in the price, there is no second thought on that. But yes, we are at cusp of a beginning of a new chapter for all these oil marketing companies as well as the upstream companies as well.

Kirti, which funds do you like in this space and this oil marketing cluster?

Kirti Doshi: HPCL can be the large winner in coming days in next 1-1.5.

Any reason why HPCL and why not BPCL or IOC?

Kirti Doshi: In HPCL, the strength of distribution is much bigger than the other two. Further, I believe that HPCL’s new Bathinda refinery which may be starting also can realise the large potential revenue vis-à-vis the profit.

Anish what are the new or unobvious themes, ideas of the businesses that you are betting on as the house?

Anish Jhaveri: We are clearly betting on domestic consumption story.

Is not that well known, well discovered theme because fund managers and brokerages, all of them are bullish on domestic consumption?

Anish Jhaveri: You have got to probably grain out the ones which are obvious but still have value in them. For example, we started betting on Mahindra & Mahindra as a domestic consumption story way ahead and we still continue to have it as the top pick across all sectors and the stock of the year. So very clearly people judge particular stocks but they get out also. We are saying that no, here is the story, hang on, there is much more money to be made.

So anything which is domestic oriented and good management is something which we are betting really big. Basically the call is India and that is what Antique has been advocating up to now.

But you call them real estate which has worked for you. Real estate is also associated with India. How come you do not like real estate Kirti?

Kirti Doshi: Because of the supply, supply of the paper, supply of the land which is going to be available. In Bombay and within the south Bombay, if you see some projects which have been announced, their total sum can be Rs 50,000 crore. So there is a huge supply not only of the paper of the real estate companies but as well as the real estate as a percentage square feet which is going to be available which was not till 2005.

So Kirti, are real estate stocks a sell on every uptick?

Kirti Doshi: I would not buy certainly.

Anish, now you both represent two different verticals of Antique. What is your experience telling you Kirti? Are we at 2007 when Indian economy was a well discovered story but the real explosion happened in 2008 and then later on or we are perhaps approaching 2008, the dangerous part now?

We are at 2007 levels because still, there is too much non-belief. If you go and ask anybody, look, this is what is really looking good, they are more worried about other neighbouring countries’ economy rather than the Indian economy.

Anish, would you bet to differ because institutional money this year - so far - has been extremely strong, at least from some of our overseas friends?

Anish Jhaveri: India is coming in a zone where it is coming out of the doubt and it always gets into slightly higher on the valuations and that is where investors start debating. The time to debate has gone. Here is a very decisive call. You got to be in India even before China probably. Which stocks, which sectors you pick up and which you will be underweight on is a different question but decisive call in favour of India, that has been made already.

Then what explains the flat YTD performance, Anish? About $10 billion plus of fresh inflows have come this year but I am afraid, there is nothing in Sensex and Nifty.

The reasons are disbelief and secondly the world scenario where we find ourselves in a very odd situation where fiscal is responsibility, is the call of the day. Here is a country which is moving very quickly towards fiscal consolidation. If you just look at 3 months back, $85 billion of projected fiscal deficit has been reduced by $22.5 billion by the telecom inflows that have come in. Because of oil deregulation, another $5 billion is gone and another $10 billion of divestment is possible.

So suddenly in this $1 trillion economy, you are looking at less than 5% fiscal deficit. Tell me which of the countries can have this kind of fiscal consolidation, fiscal discipline that is happening in India. So the call has been made. No second thought whatsoever.

Kirti, we can make a case for a very strong macro India but historically if you look at global markets, you can outperform global markets but you cannot grow in tandem, you cannot really go in the opposite direction. Is it possible that we will continue to grow and continue to go up?

It depends which country you are really looking at in the same proportion. Now if you remember, 10 years before people used to compare with Japan. Now nobody is talking about Japan. Japan is where it is from last 15 years plus -10%. But the fact of the matter is that in the last 10 years, we have moved up from 2500 Sensex to 21000.

Now we are looking at what has happened in the European countries. But the fact of the matter is that till 2006-2007, there were really people who were comparing the other parts of the world and putting their money into India because of the allocation which is required to put. Now look at the GDP growth, it is 7.5% for more than 5 years. People are coming not with a compulsion but with a choice. So that is the way I look at India rather than looking at other parts of the world.

So Anish, Indian markets so far - first 6 months - have not done anything. Can we see a decisive breakout, a big breakout in the second half?

Anish Jhaveri: Two things are to be kept in mind. Firstly, monsoon progressing reasonably well is a great thing for India. Second and the most important point is possibility of large reforms over the next 3 sessions of parliament.

Can we then say till December?

Anish Jhaveri: Till December and you have couple of elections but they are not of consequence to the ruling Congress at least for sure. That is a wind of opportunity. If caught properly, India can move to the next level and very decisively. So an all time high at the end of this fiscal, why not and they are sustainable too.

So Kirti, would you endorse what Anish just flagged off that 21000 plus why not and if we stay above that, yes, we could?

Kirti Doshi: I will endorse and I will endorse in a manner that why a fiscal year, why cannot be a calendar year.

You are sounding very bullish to me. Is your bullishness purely derived because of liquidity or you think earnings can surprise us, Kirti?

Kirti Doshi: Earnings will surprise everybody. The way the corporate numbers are coming, the way the individual sector wise the numbers are coming, that will surprise the people.

How about price to perfection phase we often use, Anish - auto stocks, PE multiples of 15 plus? Sensex itself is trading at a PE multiple of 17-18 times.

Anish Jhaveri: Growth is a differentiating point. Wherever we will see growth, those are the stocks which would be chased. Wherever we will see quality performance, quality management, those are being chased. Just to get the stocks which are hitting lifetime high and we are in Nifty, we are nowhere near lifetime. Those are the leading indicators which we are looking at. So it is a call but very clearly, it is not a call out of thin air. This is fundamental decisive call that we are making.



Kirti, could you give us 3 small cap or midcap names?

Kirti Doshi: I will continue with my earlier call which I have given - SKNL. Then second one is Maytas Infra because last time when we met and we talked, there was no Bin Laden Group which got associated. So after that, there is more reason to be going in and jumping to the stock. The third one is Mahindra Satyam. Once it is balanced, it will get clear I am sure. The stock will again surprise the people in the upside in next 1-1.5.

So how much upside do you expect in the 3 stocks you mentioned Kirti?

Kirti Doshi: At least 75% to 100% plus.

What about your ideas Anish - ideas which institutional investors are currently buying or chasing?

Anish Jhaveri: We have been consistent with our calls. In the large caps, we are seeing State Bank of India underperform but its time has come. Then we see a big move up on that one. We also have Mahindra & Mahindra, Bajaj Auto. These 3 very clearly are our picks but I would not be surprised by say a JP Associates. That is one which probably large cap, is under owned and doing the right things. Investor perception is changing and it can be a scale changer in the time to come. So we like that as well.

As far as midcaps are concerned, again consumption stories are the best. We like Jyothy Laboratories. We like power, so naturally we like power equipment manufacturers and BGR Energy is the one which I would bet on. These are couple of stocks which I like extremely.

Kirti, put your thumb on one idea and we will call that as Kirti’s big idea for the near 2010.

Kirti Doshi: Large cap, HPCL, that can be a stock which will surprise in a year time.

I thought you are giving us 3 ideas, 1 large cap, 1 midcap, 1 small cap.

In small cap I would say Auto Corporation of Goa, which is a very small company with a160 crore market cap. There is a huge potential being a Tata Group company. They are the largest bus chassis and require the bodies of the bus and all that. That can be a large winner in the small cap. In midcap, I will continue with Maytas Infra.

Anish, put your idea, your thumb on one idea and we will call that as your big idea for the year.

Anish Jhaveri: Mahindra & Mahindra is the top pick. The cum bonus price and the ex bonus price should match up. So that is a big call that we are making across the fantastic group. As far as small cap is concerned, clearly BGR Energy would be the top pick.



Anish, can telecom be a good business to buy? Is it a good business available at a bad price? Do not look at today, do not look at tomorrow but after 6 months, after 12 months, lot of fog on the windscreen could potentially fade away, isn’t it?

Anish Jhaveri: Clearly, it is a long term player, definitely. Something like Bharti Telecom is a stock to watch out for. Just wait for the first signs of consolidation and governments changing rules for consolidation. That is a time when you will see the ownership and capital returning back in the sector. So clearly, yes but you will have to wait, you will have to sweat it out, that is what I would say.

Markets are mispricing growth. They are paying high for the growth and the visible growth might not really translate into strong earnings going forward. What is your take Anish?

Anish Jhaveri: Consensus call again. Real estate is being mispriced. We do not see a reason why IPOs are getting subscribed the way they are or why they are struggling.

DLF is down 90% from its all time high, Unitech also has the same story. Except Sobha Developers or a Parsvnath, the other large real estate stocks are actually struggling. What are your views?

Anish Jhaveri: The market is clearly giving premium to the models and if you have the right execution capabilities with the model which is de-risk like Godrej Properties, market is willing to give a premium. So very clearly, market has become very smart and hence, you are not seeing the next level of IPOs coming along.

Kirti, what do you make of the government FPO and IPO drive because not 1 not 2 but you have got at least half a dozen IPOs and FPOs which are bunched up in next 3 to 6 months? What could be the impact?

Kirti Doshi: In the names which are going to be coming, Coal India, is the first time ever. So I do not have issue on Coal India at all. Second one which they are talking is Steel Authority. Maybe in the price, it can be a good issue but it will manage to go through. The third one which they are talking of the larger size is maybe one of the oil PSU companies. So I do not think that after these new deregulations there will be an issue to get sell on this because in all these oil marketing companies, the FII holdings are below 2%.

Anish, is there enough appetite to digest government paper because if you keep REC aside, none of the FPOs or IPOs actually have managed to create a lot of wealth?

Anish Jhaveri: Sure, it will be for us separate set of investors. For investors who want to flip in and out, no, these are not the IPOs. But for long term investors, pension funds of insurance companies, long term investors, these are great opportunities to buy in. There is no reason why these issues will not gone through.

Government has become extremely smart and they have realised the reason for issue to succeed. You will have to price it right and be considerate towards the external environment. I do not see a reason why government will not be smart again and they will price it right as well.

Anish, banking and technology are two other important components of the market. If both these sectors do not move Anish, markets certainly will not outperform.

Anish Jhaveri: It is a given that you will see a consistent 20-25% growth coming along in technology and I do not see a problem even if there are some risks in Europe and US. But as far as banks are concerned, the worst clearly is far behind. The next growth in credit is what we should be looking out for. The interesting part is that you are seeing domestic confidence in M&A activity coming along. That is a critical part and if agriculture does reasonably well, the credit off take is definitely round the corner.

So these are the times when the market is giving opportunity for long term investors to come and buy. These are investment times rather than looking what time should I enter. One should not press out these signals.

In the context of global adjustment, how do you see metal prices and metal stocks moving?

Anish Jhaveri: We are going through some tough times and just look at what Australia did – a country, which is one of the largest exporters of iron ore and other natural minerals, has an impact and the markets do not like these. So it is not going to be easy for metal companies. But again, you will have to pick and choose which one you want to be in. So say a JSW Steel would still be doing pretty well.

You mentioned you like the power space Anish, do you like merchant power business or you only like the ancillary companies, the transmission companies or the machinery companies?

Anish Jhaveri: We like equipment companies and hence the stock BGR but we do like power producers as well. So whether it is JSW Energy or Adani Power, those stocks are clearly giving signals. Hence we like merchant very clearly. We will see a consistent Rs 5 plus rate. That is what our call is.

Anish, what is the big disagreement that you always have with Kirti?

Anish Jhaveri: It is very difficult to pullback a raging bull and sometimes it does create a challenge for me and my team. But here is a person who is self made and working with extremely self made, extremely confident person can have its own challenges and those are challenges which I have been facing for last 3 years. Now I am coming along really well.

Kirti, what is the big agreement you always have with Anish, not disagreement but agreement?

Kirti Doshi: Honest bull phases.