Infosys issue: Market veteran Madhu Kela bats for clear guidelines on whistleblowing

Edited excerpts from the interview:

I think feeling much better because two months back there was so much nervousness in the market, every day you were only hearing that this guy will collapse, that guy will collapse, at least those things are going away one by one, even resolution seems to be happening. So, you feel much better. I feel the markets are always ahead, people who are looking at the economy are still very nervous but going by our past experience of last 25-30 years, markets are always ahead and when the economy will improve market will be in a very different zone. So, I am hoping that things on the economic front also should be much better than where they are 6 months from now.

They are proving two things. One, the guys who have survived or who have done well in this bear market, they will continue to garner market share, they will continue to have pricing power and which is what we are saying that these companies will continue to do well. Therefore, in the case of both these banks the results are definitely better than what even the market was expecting and I think things should definitely improve from here. If you take one-and-a-half or two-year view on some of these banks, my feeling is that things will definitely improve from here.

If not immediately this disparity cannot be there that you have personal income tax at 43 percent and companies getting taxed at 17 percent. On a lighter note, everyone will convert themselves into company. So I think eventually it will happen.

Therefore, what I want to point out is India had a strong balance sheet; our problem is P&L. If the government can utilise the balance sheet then they have as much space as they want. Once you gain pointing the same thing, if you start doing strategic disinvestments then what kind of money can the government raise, at this point of time it is unthinkable. So once they decide that they want to improve the economy and they need the resources, I do not think they lack resources; just making sure that those resources are being raised.

It will happen gradually. My sense is that not everyone will come back but market will start to reconcile with; there were so many companies 20 years back, some of them were even in index but they have gone away; market moves on, so whoever will survive. So I do not think it is earthshattering from a market perspective that there are so many other institutions which have to fall. I do not see that happening. So from a market perspective…

Absolutely and that is what the market is telling us, at least at this point of time. However, let me say that this recovery in the real economy is going to be very gradual. So we have to be still cautiously optimistic. We cannot thump the table and say everything is sorted out and we are in for a really big-big bull run on the economic front.

I wish that the regulator comes with strong guideline for whistleblower thing. I do not subscribe to this at all that anyone can write anything and this is whistleblowing in a country like this; today I write anything against Anuj. Is it whistleblowing? What I am saying is that is what is left out to. So there should definitely be a name of the person and why it should be made public. What happened in the case of MCX; there was some whistleblowing which happened, the stock fell down and then it recovered. Therefore, I am sure Infosys as a company – they are the torchbearer of corporate governance in India and I am sure they will do everything which is possible to make sure that all the facts are put out but investors have lost 15 percent. What happens if nothing comes out in this whistleblowing? I for one very strongly feel we require solid steps from the regulator and from everyone concerned that anyone who is wanting to say that there is a problem, there should be an official complaint in the name of that person and then only it should be taken up. So we will know that there is authenticity and you can inform the regulator that this is a complaint which has come in this particular name and it should be only made public once the investigation is over.

That’s precisely what I am saying and anyone who has got such a big thing to say that there is such a big problem in such a large company, he should be willing to say that in his name.

It is not about sectors anymore. It is about bottom-up stock picking because you have seen in the same, let’s say NBFC has been a troubled sector but a few of them have been doing well even through bear turf. So you say you have identified a sector – that is not good enough. I think identifying a real company which has all investment credentials, which has governance, which can pass through these times and make the most out it.

For instance, I love my favourite sector, pharma. If you see so many companies have fallen apart and if you saw the last quarter result; results have been a positive surprise, even a lot of small companies.

I wouldn’t like to hazard a guess but I would only say that small investors who want to do allocation of capital, there should be some allocation in gold as well because that is like if things go really wrong at least that portion of money is saved and that is still liquid that you can encash it anytime you want.

I do not know about one year but at least in the next 3 years we should compound anywhere between 12-15 percent. I am more inclined towards investing in midcap companies rather than in indices at this point of time.