When asked about maintaining composure in a volatile market environment, Thakkar emphasized simplicity and focus. “Stay away from the noise largely. So, when there is nothing to do, do nothing, that is what we try and do. And offices also calm, not too many stock screens around and things like that. Most of the time is spent reading understanding what is happening in the business world rather than in the day-to-day ups and downs of the financial markets,” he said.
Looking at index performance over the past year, Thakkar clarified that appearing inactive does not imply a lack of action in his funds. “It may seem like we have done nothing but that is not the case. So, while people think that we have been largely in cash in the region of 20% to 25%, and we have not been doing much, we have actually added stocks. We have sold some of them. On a net basis the result may seem like we have done nothing, but there have been activities that we have been doing. So, on both sides we have been active, buying as well as selling,” he explained.
On the rationale behind maintaining elevated cash levels, Thakkar stressed valuation discipline over global concerns. “It is nothing to do with the global events whatsoever. So, just for context when global environment was in the news March of 2020, we ran down cash from 13% to 3%. So, we deployed 10% in a single month. So, it is nothing to do with global events, not to do with Russia-Ukraine war or tariff being on or off or India-Pakistan tensions or nothing around that. It is pure and simple valuations. There are pockets which are looking attractive where we have invested, but we cannot invest beyond a point in the same set of companies or in select sectors, so that is resulting in some cash in the portfolio,” he said.
Thakkar also spoke about the auto sector, which has seen significant consumer demand growth. “Auto is a space which is going through a lot of transition elements in a sense and we had been very-very cautious in this space. We had one four-wheeler company. We had trimmed other exposures largely. So, that was all that there. The transitions that I am referring to, at one end while unit sale numbers were somewhat subdued, but that transition from small hatchbacks and sedans to the large form factor SUVs was one big trend and the bigger question was about the power trains… After a while, one thing is clear, we will not give a free reign to the foreign players, so that is very-very clear to me at least. The second thing was a lot of the domestic players actually upped the game in terms of the product launches, etc, that gave confidence and the GST cuts were a lucky happening after we bought the stock which is reviving the sales and things like that,” he observed.
On the risks associated with auto investments, including technology shifts and compressed return ratios, Thakkar remained optimistic. “There are various levers for auto companies to improve efficiencies. So, two-wheeler companies actually have been at the forefront of that where they farm out a lot of the work to ancillaries. They focus more on the branding, product design, and after sales, and things like that. So that, of course, is a lever which can be played even by four-wheeler companies… Technology, yes, it is a risk, transition and things like that. But if you look at the new power train EV, the biggest technology factor there is the battery pack and the motors, etc. Rest of the car we know how to build good quality cars, so the suspension, the seating, the windshields, and rest of the body we are more or less there. And some of the product launches have been quite good,” he said. When asked about other opportunities beyond autos, Thakkar highlighted banking as an underappreciated sector. “There are very few sectors in India which are now still under licensing and where the entry barriers are reasonably high. Banking is one of the spaces… When people go out and buy more homes, when people go out and buy more cars, the financing will come from the formal sector. A lot of attention in the last few years has been on the NBFC space but one should not ignore the banking space. I think that is one space which is looking reasonably attractive,” he concluded.
Thakkar’s approach underscores patience, a focus on fundamentals, and disciplined investing even in a market where headline volatility often dominates conversations.
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