Long & Short of Markets: Raamdeo’s take on unicorns; realty as a contra bet & more

Bulls are in full throttle, but at the same time, a few are turning cautious. On the other hand, a few bears are remaining invested. Sounds like a paradox? It is the reality. There isn’t a better way to look at it than the retail and institutional interests seen in the public issue of the unicorn Zomato. Read more on Raamdeo Agrawal’s take on unicorns, a veteran fund manager’s advice on what to do when bulls are running amok and sectoral bets going ahead in this week’s edition of ‘Long & Short of Markets’.

A unicorn’s path to profitability
Veteran investor Raamdeo Agrawal says that a declining marginal cost is one key factor for bottom line scaling. This applies to unicorns too. After the crucial stage of blitz-scaling and revenue streams are in place, a declining marginal cost is crucial for increasing Ebitda margin, he adds. For this a positive cash flow is important.

Realty as a contrarian bet

A low-interest rate regime and tepid demand for houses look like pent-up demand in the realty sector. Nilesh Shah, MD & CEO, Envision Capital, says that in the coming quarters, a surprise could come from the construction and infrastructure space. He says home developers look undervalued now as, despite strong demand for houses in December and March quarters, overall demand still looks tepid.

Take some off the table!

Portfolio rejigs to play defensive in a bull run is like buying insurance. It may seem like a dead investment (unnecessary defensive mindset) when everything is going hunky-dory. But ask the seasoned investors their experience of previous bear markets! All it takes is one loss to realise the importance of owning insurance. Similar is hedging against a bear market when all parameters signal towards frothy valuations. Dalal Street veteran V K Vijayakumar writes what to do now when bulls are running amuck.

Manufacturing boom?
As the dominance of China as a manufacturing hub declines due to higher cost of manpower, it will likely prove to be a blessing in disguise for the Indian manufacturing sector, say Anand Shah, the head of PMS at ICICI Prudential AMC. Complementing this trend is the push from govt’s side such as– Make in India, PLI, lower tax rates for the new capex, lower corporate tax rate and now low-interest rates, add the veteran fund manager.

PSUs out of favour

India’s biggest money manager has come down heavily on the high-dividend yielding, slow-moving PSU stocks accumulated over the past year, for better businesses available in the same sectors. The rejig might also be due to offloading by passive funds on change in the composition of the benchmark indices.

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