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Kotak Mahindra AMC underweight on telecom stocks due to regulatory uncertainty

Updated : December 06, 2019 06:32 PM IST

Kotak Mahindra Asset Management Company (AMC) on Friday said the house is underweight on telecom stocks due to regulatory uncertainty

In an interview to CNBC-TV18, Nilesh Shah, managing director, said, "Clearly, there is a differentiation in the market between an optimist versus a pessimist. There is a differentiation in the market between large caps versus small caps and midcaps. There is a differentiation in the market between quality companies and not so quality companies. However, obviously the opportunity also arises when there is lots of noise when there is a lack of clarity."

"It is a battle between two differentiated thoughts, optimist versus pessimist, large caps versus midcaps, small caps, quality versus non-quality. I am a realist, my job is to explore opportunities within the information which is available. While on a top-down basis, there appears some uncertainty and there will be volatility undoubtedly in the near-term. However, today you are able to get many managements, many businesses at reasonable valuations because of those uncertainties. If you remain an optimist about future and pick up those businesses in a disciplined manner, we may not make money in next three-six months but over a period of time will we be able to make money out of them? Undoubtedly yes,” Shah said.

According to Shah, the investor has to take a call with a lot of darkness about the future cashflow when one is investing in the telecom, "Our focus is to buy into boring businesses where we have reasonable ability to predict future. By and large, we have avoided telecom stocks because of the policy unpredictability surrounding this business’ cashflow."
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