MUMBAI: Ace investor Rakesh Jhunjhunwala is unfazed by concerns that the recent sharp run-up may have made the stock market ready for a correction. The ‘Big Bull’ believes the bull market is very much alive, and, in fact, the rally will broaden from here.
“The bull market is very much alive,” Jhunjhunwala said in a fireside chat at CMT 2020 India Virtual Sumit. “Market is going to fall, it is going to pause, and that making a narrow range, doesn’t mean the bull market has come to a halt,” he said.
With the recent leg of the market rally being led by large cap stocks such as Reliance Industries, Tata Consultancy Services (TCS) and Infosys, the market cap of BSE-listed companies has scaled to an all-time high of Rs 160.68 trillion. Jhunjhunwala has been making his mark on Dalal Street ever since 1985, when the BSE Sensex was ruling at 150 level.
“When you are in a bull market, the base will broaden. It is going to be a relay race, everyone is going to participate by turns,” he said, pointing that even as the market was on an uptrend, the good thing was that leverage was not building up.
Advice for Robinhoods
When asked what would be his words of wisdom to a newcomer in the market, he said he would advise them to steer clear of trading to start with, and trust professionals with their investment advice. “Don’t trade. Mathematically, it is against you. If you want to trade, have a broad idea of direction. It is all about attitude. It is a full-time profession. Please give your money to professionals,” he advised.
While Jhunjhunwala believes there was a need for more stimulus, he said long-term policy changes carried more weight. “I think we need stimulus, but we need to be careful. We don’t need a blind stimulus. I am more concerned about longer-term policy changes, than the near-term stimulus,” he said adding that he believes Narendra Modi’s continuation as Prime Minister was very important, so that he could act on what he has envisaged.
“What worries me is Pakistan’s nuclear bomb, nothing else. The unknowns are always there, what can we do worrying about it,” he said.
The ace stock picker believes India is on the verge of a new economic cycle and that makes him very bullish on the market. “I won’t say that we are exactly at 2003 – We are somewhere at that. Technically, the market surely is. Corporate profits to GDP (ratio) in India are at the lowest level,” he pointed out.
Jhunjhunwala believes the Indian economy will grow by 10 per cent by 2024. “What we have to do is create ease of doing business,” he said adding that it is a journey and not a destination, and is improving every day.
He was of the view that people were underestimating the potential benefits from reforms of Jan Dhan Yojana, GST, RERA, IBC, labour and agriculture reforms. “Capital will just pour into our country. If we can ensure 8 per cent return on capital, sovereign funds are ready to put any kind of money,” he asserted.
“No journey is linear, there are going to be hiccups. My feeling is we will get there,” he added.
On technical analysis, Jhunjhunwala said past price formation indicates future, but he doesn’t get trapped in the precise prediction of charts. “I look at them on a broad basis, I look at breadth — if anything rises, by how much it has risen. I look at behavioral science”.
His advice to chartists is “do not get too precise”.
“Anyone who tries to be precise about the market, I do not trust them,” he said.
There is a strict no-no for algorithms for him. “I don’t believe in any algorithms and systems. Investing and trading is an art, and not a science. Algorithms do not read the past differently. I have never used them and will never use them,” he added.
Jhunjunwala, who is often dubbed as India’s Warren Buffet, said he does not have a very well-developed risk management system, but had basic rules governing it. “The basic principle is no creditor should ever call me asking for his money, and if he does, I should be able to pay him immediately,” he said.
“I have sold many shares to reduce my leverage. The key is to book losses. The first loss is the best loss,” he added.
He was all praise for his mentor billionaire and ace stock picker Radhakishan Damani, and said he learnt a lot from him including the latter’s conviction in India as a bull market apart from lessons in investing and trading. “I can’t list down what I have learnt from him, I can list down what I have not learnt,” he said.
Beyond stock market
Jhunjhunwala steered clear of the new-age crypto currencies saying that the asset class has displayed extreme volatility. The price of Bitcoin has nearly halved since its late-2017 high of around $20,000.
However, he was bullish on the traditional yellow metal, citing the low interest rate regime.
While he has invested in a couple of startups so far, he doesn’t plan to pursue such investments going ahead. “I have invested in two startups – but now I don’t do any startup investments. There are a lot of emotions involved. You need to nurture it. I don’t have the time for it,” he said.
Jhunjhunwala shrugged off concerns around the current Covid-19 pandemic, and said one needs to learn to live with it. “Once it is treatable, it is like any other flu. It is a flu and not cancer. Market is going up, even though people were so depressed about the pandemic, but consequences are not as severe,” he said.
“We will learn to live with it, just like any other flu. With every day, we also learn to treat it better,” he added.
Credit: Stocks-Markets-Economic Times