Nikhil Kamath, the co-founder of online trading platform Zerodha and alternative asset management firm TrueBeacon, says, is buying gold and lots of it. As he seeks to gamble against the escalating threat of inflation, the fund manager has already amassed gold to the tune of 15 percent of the firm’s holdings.
Kamath’s advocacy towards gold as an inflation hedge goes contrary to the existing trend of global institutional and retail investors purchasing Bitcoin to protect themselves against uncontrolled inflation. “Gold, in my mind, will become cool when cryptocurrencies become uncool. There has been a big crash in cryptos, and if that crash were to speed up I think gold will suddenly start becoming more attractive again,” Zerodha’s co-founder said in an interview with financial news website Moneycontrol.
He further said that he is actively exploring commodities and gold is really important. He has started adding a lot of gold to his portfolio in the previous six months. It now accounts for roughly 15 percent of the overall portfolio. Gold has shown to be an effective inflation hedge. He believes gold will also become cool when cryptocurrencies become uncool. There has been a significant drop in cryptos, and if that drop intensifies, gold will suddenly become more compelling.
Shares of recently listed technology startups including One97 Communications (parent of Paytm), Zomato, PB Fintech (parent of PolicyBazaar), FSN E-commerce (parent of Nykaa), among others, have plunged 20-60 percent in the last three months.
Kamath further believes the market valuations of these companies did not make sense from the very beginning. He has been suggesting for a long time that buying firms that are losing money at 1,000 and 1,500 times multiples are not practical. Even at current prices, he doesn’t see any compelling reason to invest in these equities.
Many investors were enticed to these companies at the time due to a low-interest-rate scenario, a rapid boom in the secondary market, and investor obsession with solid growth. Both retail and high-net-worth investors were among the most enthusiastic bidders of these companies’ shares during their initial public offerings.
The present government is highly opportunistic, and they have an excellent sense of timing. He wouldn’t be surprised if the union government is amending the Budget depending on how public opinion has changed in the previous two weeks. Some major changes that he believes should take place are the rationalization of the dividend distribution tax.
Kamath also stated that the government should streamline taxation on dividends, securities transactions, including equity derivatives. As a corporate today, if one is a promoter, they pay 25 percent tax on profits and then an extra 43 percent as dividend distribution tax, bringing the net tax rate to 53-54 percent. That is not good for the ecosystem, and something should be done about it.
