D-Street Voice: True Beacon and Zerodha co-founder reveals his secret of picking winning stocks

Nikhil Kamath, Co-founder, True Beacon and Zerodha, said that his investment philosophy has revolved around playing the future theme. I like to identify stocks or sectors during their inflection point, and then go on to make bets on an individual basis. True Beacon, an alternative investment fund has grown to over Rs 1,300 cr fund within a span of two years. Nikhil Kamath along his elder brother Nithin Kamath founded True Beacon while they were already running a successful, stock-brokering firm, Zerodha. In an interview with Zeebiz's Kshitij Anand, Kamath said he has a bearish view to this market and would advise market participants to not have a vanilla long-only portfolio. Edited Excerpts: 
 

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Q) How will the US Fed outlook impact equity, currency markets? Even though clarity has emerged, can lead to reversal of funds from FIIs? 
 
A) The US Fed’s comments indicate that taper is likely to begin soon. Equity markets might feel the jitter, wherein we could see specific markets both in the developed and developing regions, reacting more than others. 
 
About currency, the taper would naturally act as a stimulus to the USD, curtailing the excess supply. 
 
Domestic currencies might underperform in the short-term. Even though some of the FII inflow surge may revert, the newfound interest in the emerging markets is likely to stay higher.       
 
Q) The market is giving plenty of opportunities to investors to make money, but how should one avoid losing money in this market? 
 
A) By not over-allocating their money in a single stock or a sector. I have a bearish view to this market and would say that market participants should just not have a vanilla long-only portfolio. Perhaps, they should have a couple of short bets too. 
 
Q) What is your investment philosophy? Has your holding in cash increased amid the recent run-up in prices? 
 
A) My investment philosophy has revolved around playing the future theme. I like to identify stocks or sectors during their inflection point, and then go on to make bets on an individual basis. 
 
Also, it’s important to know what to buy within a sector. Just because a sector is performing well, doesn’t mean that everything under that would do good. I tend to have a mix between the long and short calls. 
 
Q) You have recently launched True Beacon II. What is the kind of response you are getting from institutional investors? 
 
A) The response to True Beacon II has been encouraging. Our thought process behind launching this scheme was the relevance of a hybrid product in these market conditions. 
 
With equities at the peak, toning your exposure down with low volatile alternative investments alongside debt is a balanced way to go about investing.   
 
Q) How is the asset management space shaping up here in India vis-à-vis the globe? 
 
A) A positive that I have drawn from this pandemic is the way people have understood the importance of financial health or good asset management. 
 
In India, it’s no longer an apprehension to approach financial advisors for help, and more people in our country are opting for this route. The potential seems to be huge, with the retail crowd inclining towards the industry too.   
 
Q) How are FIIs looking at India? They have turned net buyers after 5 consecutive months of being net sellers at least in the cash segment of the Indian equity markets. 
 
A) The recent run-up that Indian equities have gone through has instilled confidence among foreign investors. 
 
Emerging markets tend to pique their interest. FIIs will continue to be overweight in India, as it’s structurally looking better than its peers. 
 
Q) Which sectors will take Nifty50 from 18000-20000 in near future? 
 
A) It’s difficult to predict in such market conditions, however, we are seeing sector rotation playing out for a while now. IT sector might be the front runner along with clean energy and electric automobiles. 
 
Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.