The Director of Elixir Equities, Dipan Mehta, was quoted as saying, “look at the kind of festive season preparation that is taking place. Retailers, whether they specialise in consumer electronics or consumer goods or even some of the other consumer industries, are gearing up to have a fantastic holiday season as well, despite the fact that a below-average monsoon might put a slight damper on their plans. But in general, we can anticipate a frenetic pace of spending for the next three months, all the way up until December.
On Zomato, we have already reached the Rs 100 mark. From the R 40 odd lows, the market has obviously risen roughly 60% odd higher year-to-date, as seen by the market’s movement. If you like the tale even a little bit, do you think it’s still a good idea to invest in Zomato?
Undoubtedly, we like the narrative, and it is quite evident that the leadership is carrying out their strategy. The food aggregator business has unquestionably gone positive in terms of EBITDA, which is a very outstanding development. Additionally, moving forward, this specific division is going to move steadily into the black. It’s just that I have some lingering doubts about the company’s big commerce operation, the Blinkit segment that they recently purchased. It’s possible that they won’t be profitable for a few more quarters, or maybe even a few more years or so. That is a business that is obviously going to be far bigger than the food aggregation industry, but it is also going to be something that will have a longer gestation time than the food aggregation business.
As a result of this, I have little choice but to proceed with some degree of caution at these levels. The stock price has increased by a considerable amount, and purchasing Zomato now might make more sense after it experiences a pullback. This is also true for a significant number of midcap equities. A good number of these equities have gained between 30 and 40 percent, and several of them have even doubled in price during the past few months or so. Therefore, from the point of view of the margin of safety as well as the risk-return profile, it is preferable to just wait and watch and refrain from making at least fresh purchases at these levels because there is a possibility that you could get caught on the wrong foot.
I would just like to make a note of caution over here that although the short-term, medium-term, and long-term tendencies of the stock market look amazing, it is possible that the market has become little overheated at some point in time, particularly in the mid-cap area. I say this because I would like to stress the importance of looking at the big picture.
Are you going to throw away the others or are you going to keep them? We have talked about Paytm, and you have referred to it as a company seeing rapid expansion. Is Paytm a stock that you should wait for a decrease in the price of or should you take some profits off the table now that it is closer to Rs. 1,000?
If you have a trading attitude, then undoubtedly these are good levels to take some profit off the table. However, if you are looking at this as a longer-term investment, then you should not make any fresh acquisitions in any stock at this time. Even if I have cash in my portfolio, I do not want to purchase at these levels; I simply want to wait for a more substantial downturn, where at least you get stock to be 15% to 20% lower or so. That is the type of mantra that I am just thinking about at this moment in time. Even if I have cash in my portfolio, I do not want to buy at these levels.
That would give you a certain amount of cushion for error because the worst thing that can happen over here is that you buy at these levels and then you have to see a 10% to 15% correction in the stock counter that you have bought, which can be very disheartening. In any event, we consider ourselves to be investors who are more or less totally invested in their portfolios. Even if you do not buy at these levels and miss out on potential additional gains of 5–10%, I am completely comfortable with that scenario.
The reason for this is solely due to the fact that we are attempting to determine an appropriate entry point for any new investments in the market. We want to study the situation closely and wait until there is a correction before making any attempts to adjust the entrance level. If you keep this in mind, the correction, whenever it occurs in the Nifty or the Sensex, will be more pronounced in the midcap counters. This is due to the fact that the midcap counters have risen as a result of concentrated buying, and they will fall as a result of traders in those markets trying to square up their positions. It is important to keep in mind that these midcap counters, which you see making daily gains of 10% to 15%, can experience declines of 10% to 15% in a single trading day.
