Market Guru in talk with RJ Salil Acharya of Radio City: Buy Zomato if it is available in a range of 100-115

Anil Singhvi, Managing Editor, Zee Business, says, the mutual fund is the best option for those who do not have time as well as understanding and those who want to buy shares from the equity market should start with IPOs. During a candid radio chat with RJ Salil Acharya, Radio City, 91.1 FM, Mumbai. Mr Singhvi said people can invest in Zomato if it is available in the range of Rs 100 to 115 and it will happen only if the market weakens.

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RJ Salil started the podcast by talking about the bumper listing of Zomato, listing gains and profit-booking by many investors. Adding to it, he asked what next? As it is a company that does not have any proven track record of profitability, in fact, it was a loss-making company and is a high-risk stock. He also asked can one can enter into the stock at these levels at least when we have missed the party of listing? To which Mr Singhvi said, it is for high risk-taking investors, either a lot of money will be made or it will remain half. So, I think, still, you can buy the stock, if you get it a bit lower at around Rs 100 to 115 per share. It will come down only if the market weakens; if the market continues to be strong then it is very difficult for Zomato to come down because plenty of funds have interest in the stock and are sitting to buy it. If Nifty falls to the 7,500 level then there will be a decline in every stock but it is not possible. But otherwise, the market likes this business model and such a theme and it has been proved. So, I think, keeping aside the risk of the market, if you look at it, then you can buy it. I think, eventually, the stock can make a journey up to Rs 200 but it will take time for it. So you can buy it accordingly.

Continuing the discussion about Zomato, RJ Salil said, discussions are happening in both directions and they are the future is bright but it is a loss-making company, so, should we invest in it as traditionally we think that if the company is in losses then why it is bringing an IPO and making people invest in it. What is your take on this? Mr SInghvi said just think about America, they have Alphabet, Facebook, NetFlix and many others such companies are listed and we think hopefully these companies would have ever been in our country.

Now, the problem is that you should have a track record of a minimum of three years of profit and dividend to bring an IPO. Now, these start-ups and the new type of businesses like MobiKwik, PayTM and Zomato and if you have a look at them then by the time it will be in profit it will be too late. So, the government has made a new rule in which the IPOs of these start-ups can come with some relaxation. Now, you will think that it is a loss-making company but are taking a hefty amount but these are different type of IPOs, they are start-ups and unicorns.

So, the investors investing in these stocks must understand that these stocks are high-risk high return stocks. The risk is that these companies have not started making money yet but will make money at some point. If a return is made then it can be a big one and if the business does not runs well then there is a possibility of losses. And, if a big competitor comes on the way that can create troubles for them then it can create difficulties for it. These are high-risk high return IPOs. So, several new types of IPOs are almost ready to be launched and at least five to six such IPOs will come in the next six months, so you should invest some money in those by being careful. Taste them, if being into a good restaurant and will not taste a new dish then how will you get to know that it is good or bad. So, invest small amounts, i.e. you can invest for one lot as there is no problem in investing Rs 15,000, if you are at a loss then how big the loss will be but if it works then a good wealth will be created.

In his next question, RJ Salil said, but the biggest question that people have is that in the case of tax people usually sell things in a hurry and say that 10% short-term capital gains (STCG) is applied to us but when they are at a loss then why we do not get any profit of discount in the tax on that front. Even, when I started investing then I had a thought that when we earn then we are supposed to pay but when we are at a loss then why any discount is not offered. Was such a rule ever made?

Mr Singhvi in his reply said if you have faced a short-term capital loss and going forward, if you make small-term capital gains then you can take a set-off in it and there is no problem in that. You can take its benefit for the next 8 years. So, if you have faced a loss then you get a benefit from it. Earlier, it was not available because the long-term capital tax was zero and if you are not being taxed then how you will get a tax benefit. There is a 15% tax on the short-term capital gains and if you make a loss any year. But it is sure that you have been at a profit in the past years and made a loss this year then you can’t say that you can make refunds from the taxes that were paid from the past gains. Work hard in the coming years and then set off the losses and you will not be taxed on it.

After this, RJ Salil said people are a bit afraid of the stock market so they move to another method of investment like SIP and mutual fund but still they have a fight that do they get similar profits in the mutual funds or not. What would you like to say to those people when they decide, direct equity or mutual fund? To which Mr Singhvi said, first of all, you will have to decide that do you want to invest in equity or not when you make a mind to invest in equity then in the second step, you have to decide about how much should be invested. Actually, the problem is that either people will invest their entire savings in the equity or some people have decided to not look towards the equity as the share market is not a tea of their cup because it is quite volatile. So, they don’t like to move in that direction. So, both of them are wrong. Putting entire savings inequity is wrong and those who do not invest even a penny are also wrong. So, you should create a balanced portfolio as per your risk and age. Generally, we say that there is a formula in which you should expect that you will live for 100 years and then deduct the age that you have at present from it – for instance, if you are 35 then deduct this 35 from 100 and the resultant is 65, so, 65% of your saving should move to equity.

This is a thumb rule. It can be different for everyone. So, when you have decided to put some money in equity then in the next step you should find how you can invest. In the process, if you wish you can buy the shares directly, invest some amount in IPOs and the third process is that you can invest through mutual funds. So, I believe that mutual funds are better for those who cannot give time, have less understanding and are afraid because they are professional fund managers and they perform the same work across the day.

They will take some fees from you but will manage your money. Those who have the passion of buying shares in the equity market should start with IPO, start by investing in the public issue, and gradually you will understand the process and you will learn the way shares move and then study and understand things after which you can start buying shares directly. So, if you don’t have time and understanding of the same then the mutual fund is best for you and if you can do it yourself then there is nothing great than it.

In his next question, RJ Salil asked about the IPO of Zomato, which has had a bumper listing. A stock of Rs 76 which was allocated to those who were lucky was listed with 60-80% gains. So is it a new stock market and can retail investors will be a part of every big party and will all the listings will come with massive gains in the current market scenario? Mr Singhvi said, the times are changing and we will also have to change along with it.

There was a time when before investing in any company you were supposed to look forward at the plant and machinery it has and what it is manufacturing, i.e. cement and steel, such things that you can see. The more assets, the better is the company and the more dividends it provides, the more attractive it was. Now, it is a time, when people have an interest in those companies maybe it makes a profit or not but has a huge market share and have new ideas.

In fact, the one with the least assets is the better company, i.e. the asset-light business model and instead of being in brick and mortar are going digital, Facebook, Instagram, NetFlix, Google are such companies that do not have assets but is a business model with a market share that is liked by people. So, there are different themes, times are different and are stocks of the new era and are getting a similar response.