Why does digitalization remain India’s most potent theme?

The consumer spending frenzy might be disrupted if interest rates and inflation both rise. We could be in for a dangerous period in which growth is hampered and inflation persists, leading to a rate hike followed by a rate cut. Isn’t this the most serious threat?
This is a source of volatility, rather than being a source of danger. I predict a 25-50 basis point increase in interest rates, but not a substantial rate hike in India. This holds true throughout the world. Despite this, policymakers believe that low interest rates are the greatest approach to stimulate the economy.

Fortunately, India’s economy, as well as Indian households and families, are not yet excessively leveraged. House loan interest rates are currently ranging from 6.5 to 7.5%. Will a person or a family be discouraged from applying for a home loan to purchase their next home if rates rise to 7-7.25%? No, I’m not convinced.

Furthermore, I believe that revenge shopping, revenge travel, and pent-up demand still exist, so I do not believe that a moderate rate hike would have a significant negative impact on the overall economy. If there is a rate hike, I continue to believe it will be minor, and we will continue to benefit from the low-interest rate and high-liquidity environment.

So you’re basically arguing that unlock trade is safe in terms of vengeance shopping, revenge vacations, and revenge dining outs. When we last spoke, you said that you had taken a chance and started owning platform companies. Since then, a lot has happened, and the IRCTC stock has corrected. Paytm’s first public offering was a case in point. What would you do if you found yourself in such situation?

Digitalization, I continue to believe, is the most important or impactful theme. In the rest of the world’s markets, such as the United States and China, it has performed well. This is a scenario that will also play out in India. It has started to take shape, but we believe it is only the beginning.

It’s crucial to remember, though, that public markets are forgiving of companies reporting losses. In my perspective, the next couple of quarters will be really interesting. Strong public markets continue to help loss-making platforms. The good news is that platform companies and new age businesses presently provide a wide range of options. There are lucrative businesses and businesses that are losing money. So far, we’ve only invested in profitable companies that can fund their growth with cash flow.

We haven’t yet put money into enterprises that are still losing money, but you never know. The market is heating up, and these companies are all speculating on a big TAM (Total Addressable Market). Apart from TAM, we as investors must also examine MAT (Money after Transactions) to guarantee that margins and profitability are maintained. So TAM and the MAT will be in a fascinating conflict, and we’ll have to keep a watch on it.

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