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The long-run bull market is intact

PALAK SHAH/K Ram Kumar/Thomas K Thomas | Updated on January 27, 2019

India's richest stock market investor, Rakesh Jhunjhunwala, got candid with Palak Shah, K Ram Kumar and Thomas K Thomas, and spoke about his big bets, politics and market expectations for 2019. Excerpts:

You’ve seen markets in India evolve for three decades. How has trading changed?

Trading is vadhare vadhare, levanu; ghatade ghatade, vechvanu (buy more if it’s going up; sell if it’s going down). That can never change.

The principles of trading are the same as they were three decades ago - or even during Tulipmania. SEBI’s advent has improved the market. Markets are well-regulated - maybe over-regulated in some areas, but that’s part of the learning curve.

Has your trading style changed overtime?

I don’t have any particular trading style. Trading involves no style. Very few people make money in trading. When you make a mistake, you’ll say the market is an ass, instead of realising that you are an ass. One should just have an idea of the broad market direction. There are only two horses here: teji or mandi (bull and bear). Never time stocks. Know what to stake (manage risk). In trading, only make mistakes you can afford to. You may die a 1,000 deaths in trading, but never make it an ego battle.

Isthe cost of trading too high compared to earlier?

I’ve paid 1.5 per cent brokerage for trading; now, I pay a measly 7 paise. I’ve borrowed money at 30 per cent interest to trade; now it’s available at 9 per cent. The cost of trading is the lowest, which is partly due to regulatory changes. Dividend distribution tax is too high and cumbersome. Also, having securities transaction tax and long-term capital gains tax together is unjustifiable. There is scope for rationalisation.

How has your stock-picking evolved?

My stock-picking is based not on any research or analysis, but on my instincts and judgment. We invest in the future, which is uncertain, so valuations too depend on how the future will pan out. I have never tried to predict CRISIL’s result but just examined the factors that will help it ride growth. If research was everything, analysts would be the richest. Luck also pays sometimes.

Your thoughts on reforms under the Congress and the BJP?

Things are going right ,but way too slow. Helping the poor and social welfare should be to the extent they are affordable. The aim should be to teach people to fish. There is no reason for the government to own banks or an airline company. Why should we not have flexible labour laws? What is the purpose of fertilizer subsidy? Direct cash to farmers would be better, no? India’s growth rate has risen during every decade post-Independence, but it could have been much higher. Government divestment from public sector companies will be good.

Have equity markets peaked?

You think India’s growth has peaked? Sometimes markets will be negative, but the long-run bull market is intact. When I came in 1985, the Sensex was a few hundred points. Small players should leave investing to professionals. I see good gains in 2019. NPAs have peaked and we have had sub-par capital investment for a few years, consumption has been good. A new government typically brings cheer. Interest rates will moderate and corporate profits will grow 15-20 per cent. Currently, there is no excitement and the sentiment is not bullish. All this is a good foundation for good growth ahead.

Given India’s debt-to-GDP ratio, where will growth come from?

India’s debt to GDP, at 90 per cent, is far lower than others’. China’s is 292 per cent. Consumer debt in India is the lowest, at 10 per cent. Government debt is high, but we are a moderately indebted society. Certain sectors like OMCs and PSU banks are not doing well. In 2020, we should expect 15-17 per cent and later even 20 per cent corporate earnings growth. I am bullish on banking and pharma. Software and infra too will do well.

Markets have done well during coalition governments. Will that happen in 2019?

I’m a BJP supporter: I would like Mr Modi to be PM. But India is greater than personalities. Elections will be forgotten in a month or two. If Modi comes, very good... I’m no political analyst, but I think Modi is the only national leader today, and his government has done good.

Do you follow AI for trading?

I’m poor in using technology. Maybe they have some method, but it is not my cup of tea. I will use my intelligence. Besides, computers can’t assess for 5-7 years and they are just following price movements without accounting for long-term possibilities. I’m not investing in equities for 30 per cent compounded return. I feel like a king if I make 15 per cent and a big emperor with 18 per cent. Equity has given me best returns in all competitive possibilities.

Do you see any risks due to higher global debt?

American debt is high, but look at Japan (where it’s been high for decades). China and Europe are big risks due to their debt levels. Euro is inherently unstable as there is no fixed monitory policy in Europe. The US Fed may slow down rate hikes in 2019. I expect the RBI to lower rates by least 50 bps.

Will you train your children to invest in the stock market?

My children are too young; I can’t train them now. Besides, learning about markets require passion. I don’t necessarily want them to follow into this business as it’s the community norm to make money.

Published on January 27, 2019

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