Pied Piper of Indian bourses: Rakesh Jhunjhunwala

rakesh_jhunjhunwala1By Avish Ahlawat

He’s the called the pin-up boy of the current Bull Run.

Touted as the Indian Warren Buffet, if Indian stock market is a religion, he’s God of the Indian stock market. The person being talked about is Rakesh Jhunjhunwala , born and brought up in Mumbai, he graduated from Bombay University and is a qualified Chartered Accountant.

His story though simple is an interesting one, which lucidly elucidates the wonders of an analytical mind. He started his investing journey in 1989. He persuaded a lady,who was getting 10% interest in bank deposits, to lend him 2.5 lakhs for his first investment and offered her an 18% interest. She asked for security but in return was just an assurity to return the money within 15 days. So finally, he managed to get Rs.2.5 lakhs from the lady.

In 1989, he bought 500 shares of Tata Power at Rs.150 because yield was higher than interest and benefit of Electricity Act. He made money in the stock. Then one of his friends introduced him to Sesa Goa. He bought 2.5 lakh shares at Rs.27 and then another 2.5 lakh shares at 36-37, which he sold off at Rs.65.

On 1992 budget day, he went long, at the same time he was short on certain scripts. He doubled his positions after the budget. Everyone was bearish except RJ. He sold ACC at 3500 which went all the way till 10,000. That’s where he realised that psychology plays an important role in investing.

Here are a few excerpts from some renowned personalities and from the horse’s mouth itself.

“Rakesh is a classic bottom-up stock-picker, who gets into companies with strong managements and/or compelling long-term stories and then holds them through market cycles,” says Shankar Sharma, the managing director of First Global, who has been seen as the bear to Mr Jhunjhunwala’s bull; “I can’t see too many flaws in his make-up as a long-term investor.”

For Mr Jhunjhunwala , his fascination with balance sheets began young. “I had a childhood love for stocks,” he says. “My father used to invest a bit and I used to talk about it with him in the evening. I was a very curious child, so I was always quizzing my dad. He said, ‘Instead of quizzing me all the time, why don’t you find out yourself ?”

This enchantment with profit-and-loss figures continued into his studies as a chartered accountant at Mumbai’s main business school, Sydenham College. He always knew he wanted to be in the market, although it was a business frowned upon by his family.

When Mr Jhunjhunwala invests, it is generally in unloved small and mid-cap stocks, such as Geometric, Zen Technologies and Aptech in the software sector, consumer goods companies such as Agrotech Foods and Titan watches, and service companies such as Tops Securities and a school management firm. None is really a household name.

He believes in diversification within concentration. He increases his holdings after reviewing the situation. He is influenced most by Dr.Marc Faber, Buffet. He says his investing qualities are similar to that of Faber.

When asked about the value of his portfolio holdings, he said,” If you can count the money you have, you don’t have enough”.

Well if we look at this deeply what comes up is pretty basic stuff to look forward to:

  • Endorse the rule- “the trend is your friend”.

  • Go by the investment philosophy- “Buy right and hold tight”.

  • An investor should be like a chameleon.

  • Markets are temples of capitalism and they are the ultimate arbiters. Keep this in mind, always!

  • Try to base your trades, in part, on the business model of a company, its growth potential, and its potential for longevity. A crude investor factors in heavily the competitive ability, scalability and management quality of the enterprise.

The entrepreneur, according to Jhunjhunwala, makes an invaluable difference to his expected investment returns. According to Jhunjhunwala, believing in the vision and the beliefs of the entrepreneur and evaluating risks that may not be perceived by the entrepreneur are key success factors for a trader. And if you learn these lessons from Wizard of Dalal Street, then you are ready to charge in the market and create a fortune for yourself.

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