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VALIANT COMM -Update
December 24, 2015

Philosophy of Top 20 Successful Indian Investors

Chandresh Nigam
Courtesy : Forbes India Magazine

“Rule no 1: Never lose money; Rule No 2:
Don’t forget rule No 1.” There is no better way to set the tone for this
‘investor-pedia’ than by recalling this succinct advice from the
mightiest investor of them all—Warren Buffett. You could respond with:
Easier said than done. And he would nod sympathetically. The times,
after all, have been turbulent. And wisdom has been pouring in from all
quarters—every television set, newspaper, and even your neighbourhood
uncle.

We picked fund managers, individual
investors and academicians who are all trailblazers in their own right.
Take Chandrakant Sampat: The man who made money by investing in FMCG way
back in the ’50s. Bharat Shah and Samir Arora garnered huge fan
followings amongst investors during the dotcom boom of the ’90s. The
infrastructure wave belonged to Sunil Singhania who refused new money
for Reliance Growth Fund in 2006 because he thought the market had
heated up. Then there is Motilal Oswal’s Raamdeo Agrawal who picked Hero
Honda very early. Professor Aswath Damodaran, who teaches corporate
finance and valuation at the Stern School of Business in New York
University, has worked in the US markets since he moved out of India in
1979. However, his teachings are a byword for fund managers across the
world.

Our Wealth Wizards are not infallible either. They admit
to failures even as they take pride in their successes. They are also
optimists who have a long-term faith in equity investing. Many have
followed the Buffett style of value investing but, at the same time,
have created rules of their own —and these are as significant a
checklist on investing approaches as you can get.

Like any other
skill, investing should be learnt from the best. However, it is also a
personal thing, they say. Carve out your own rules and follow them
strictly. And that, perhaps, is the biggest lesson from this exercise.

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Chandresh Nigam, 46 Managing Director-CEO, Axis Mutual Fund, Axis Asset Management Company

The
investor community first noticed Chandresh Nigam when he, along with
two other fund managers, took the spectacular call of selling the IT
stocks in their portfolios in the late 1990s, much before the market
crash of 2000. He was with Zurich Mutual Fund at the time. This wisdom
of selling, recalls Nigam, stemmed from the fact that the fund had fared
poorly in the mid-90s when the market was going through a rough phase.
Their bibles included One up on Wall Street by Peter Lynch.

“Stock
prices may fluctuate but underlying businesses should be very solid.
Companies which can sustain their business performance over the medium
to long term are what one has to focus on,” says Nigam, now managing
director, Axis Mutual Fund. His mantra for building wealth is simple:
Superior cash flows, high ROEs that are growing over a period of time.

He
speaks from experience. In 1995, Nigam was with 20th Century Mutual
Fund and came across an IPO from Sun Pharma. His team saw significant
potential in promoter Dilip Shanghvi. But the stock did not move for
almost four years. But when it did, the returns were manifold. Therein
lies the key to smart investment: Patience in equity markets to create
long-term wealth. And, often, it is the most difficult part. His how-to
guide is crisp: “At an individual stock level, look for long-term,
sustainable and solid performances while at a portfolio level, control
the risk. Create a portfolio in such a manner that you can control the
downturn risk in bad market.”

Image: Joshua Navalkar  

—Pravin Palande & Debojyoti Ghosh     

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Chaitanya Dalmia, 40
CIO, Renaissance Group

A
conversation with Chaitanya Dalmia is likely to be peppered with quotes
from Benjamin Graham’s book The Intelligent Investor. Graham is
considered the father of “value investing”, an approach Dalmia has
followed for the last 15 years.

Value investing is the strategy
of investing in stocks that the market has undervalued. Given this
philosophy, Chaitanya, chief investment officer of his family-owned
proprietary investment firm Renaissance Group, has learnt to look beyond
the fundamentals of a stock. “In a bull market, the fair value of a
stock makes little sense. Let us say a stock is worth Rs 100 and I buy
it at Rs 70 and sell when it hits Rs 100. But, in a bull market, this
stock can go up to Rs 150 or more. We lose out on the gains if we stick
to fundamentals alone,” he says. Dalmia looks at the technical factors
of a stock as well before deciding on exiting it.

His investment
story is one of consistent success. Chaitanya had made outsized returns
in PSU banks in 2002-2006. More recently, he enjoyed supernormal
returns from the engineering/EPC space through companies such as
Engineers India and KNR Constructions. Both were stock market
investments; the family members together were the largest
non-institutional shareholders in the former, and had a significant
stake in the latter.

His advice for the retail investor:  “Keep
SIP-ing in funds managed by credible and competent managers, and there
is a decent chance of earning the best return adjusted for taxes,
liquidity, risks, hassles and inflation over any 5-year period,” he
says.

Image: Amit Verma

—Shabana Hussain

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Raamdeo Agrawal, 58
Joint MD & co-founder, Motilal Oswal Financial Services Limited

Raamdeo
Agrawal’s decision to buy the Hero Honda stock in 1997, when the
company was valued at Rs 1,000 crore, is the stuff of legends. Hero
MotoCorp, as it is now known, is at a market cap of Rs 50,862 crore (as
on June 19). This call, he says, stemmed from his strategy that hinges
on QGLB: Quality, growth, longevity and bargain value of a company. He
began cultivating this skill early in his 35-year career.

His
reading includes One Up on Wall Street by Peter Lynch, The Intelligent
Investor by Benjamin Graham, and works by Philip Fischer and Warren
Buffett. But he is most excited by Michael Porter’s ideas on competitive
structure. “In a vada pav business, you can make a lot of money, but in
a sophisticated airline business, you can lose money. Why? Because of
competition,” says Agrawal. “When you go to buy vada pav, you don’t even
ask the price, you don’t check the change. But there are 10 guys
offering you an airline ticket, and you look for the cheapest option.”

However,
he is worried about a trend in Indian equities over the past 15 years: A
buying culture driven by speculation, not the underlying quality of a
business for the long term. “The government, Sebi, everybody, is out to
make this market speculative. Nobody will listen because it’s easy
money.”

Agrawal urges investors not to be driven solely by
market trends: “If you’re sure the company is making Rs 100 crore and
will make Rs 1,000 crore in the next seven to eight years, just buy it.
Don’t bother about the market at all.”

Image: Mexy Xavier

—Shravan Bhat

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Chandrakant Sampat, 87
Individual investor

In
the 1950s, Chandrakant Sampat began investing in the capital markets.
Back then, the Bombay Stock Exchange, though still an association of
brokers, was a functional bourse. “I got into the markets because it was
relatively simple. All you needed was a cheque book and a pen. I
identified opportunities out of listed issues,” says Sampat, recounting a
time when the Controller of Capital Issues fixed the price at which the
public should get shares of listed companies.

Sampat is an
autodidact who has spent decades honing the art of evaluating the
actions, not the intent, of corporate houses. It’s little wonder, then,
that Sampat, now 86, is one of the country’s oldest and most respected
investors.

In the ’70s, he began betting on companies such as
Hindustan Unilever (then Hindustan Lever) and Indian Shaving Products
(now Gillette India) before they became investor favourites. He still
swears by consumer goods firms. His advice is grounded in a heavy dose
of reality and common sense: Investors should look for companies with
the least capital expenditure, where the return on capital employed
should not be less than 25 percent. “It is also important to look for
companies that distribute high dividends,” he says. He suggests that
investors keep their expenses down, invest in just six to eight
companies and have faith in the power of compounding.

Sampat
fears the impact of economic expansion on the earth’s depleting natural
resources. “We have become clever, but the wisdom is missing.”

Image: Mexy Xavier

—Salil Panchal

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Parag Parikh, 61
Chairman & CEO, PPFAS

Everything
about Parag Parikh is old school, from his trademark suspenders to his
investing approach. He’s a money manager who sticks to his principles
even when the market whispers otherwise. And his mantras are simple: Buy
good businesses that you understand, bet long-term and, most
importantly, buy cheap. “Today you get so many tips from the market.
Many people will be able to talk about value investing. The challenge is
walking the talk,” he says.

He set up Parag Parikh Financial
Advisory Services (PPFAS) in 1983, and runs it on strict value investing
principles where the biggest condition is to not invest in businesses
it doesn’t understand. For instance, during the dotcom bubble of the
’90s, some of Parikh’s clients left him because he didn’t snap up
dazzling, often confusing, tech companies. This even led to some
self-doubt. But then, a course in behavioural finance at Harvard
University offered him clarity. Also, the ensuing crash gave him
conviction. “What is required is control over your own emotions. You
have to develop discipline and think long-term. We believe in the law of
the farm: You cannot sow something today and reap tomorrow.”

Inevitably,
he laments the change in the financial markets. “The only ethos is ‘How
do I get money from this guy’s pocket?’ Every innovation in the
financial market is always against the interest of the user,” he says.
And everyone is in a race for more assets under management. “If you
really like infra or real estate, there are so many schemes
available—why don’t you invest in them?” he asks. ‘Slow and steady’ may
be old school but it still works for Parikh.

Image: Mexy Xavier

—Shravan Bhat

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Ashish Dhawan, 46
Director, ChrysCapital Investment Advisors

Having
cut his teeth in the US investment sector, Ashish Dhawan returned to
India in 1999 to start ChrysCapital. It manages $2.5 billion across six
funds and has made over 60 investments—it is among the few PE firms to
make 100-times-plus returns.

It is all about getting the sector
call right and being prepared to stay invested for the long term, he
says. Consider how, in 2002-03, he invested 40 percent of his fund’s
capital in financial services. “We believed in the long-term dynamics [5
to 15 years] of financial services and knew that the market was
becoming conducive,” says Dhawan. “For the next five years, I am bullish
on financial services again. The sector got affected in the last few
years due to bad loans, slowing growth, etc.”

Dhawan’s strategy:
Investing in businesses he understands, taking a contrarian approach,
having a disciplined risk aversion and diversification theme, and
focusing on long-term fundamentals. “When we invest, we have a context
on the sector—its growth rate, market share, losses and gains,
regulatory changes. Historical perspective is equally important.” Dhawan
took such a call in 2008 when ChrysCapital invested $180 million for 5
percent in HCL Technologies. “In 2007 to mid-2008, everyone loved
domestic companies. We invested in HCL Technologies betting on the fact
that one of its largest verticals was infrastructure management
services. No one saw that. HCL was the best in that business.” In
end-2013, ChrysCapital offloaded nearly 2 percent of its HCL stake for
$500 million.

Image: Amit Verma

—Deepti Chaudhary

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Sanjay Bakshi, 49
Managing Partner, ValueQuest Capital LLP

As
a student at the London School of Economics, Sanjay Bakshi read an
article about Warren Buffet. He learnt that Buffett believed markets
were inefficient. This was contrary to what he was being taught. “I read
that Buffett wrote wonderful letters to his shareholders, that were
available on request,” says Bakshi. “I sent him a request and he sent me
the letters.”

It was a life-changing experience for Bakshi who
decided to return to India and practise value investing. Over the years,
he identified and invested in high-quality businesses run by solid
management teams.

He invests in companies that take on minimal
debt, and cites the example of Relaxo Footwears Limited, which began by
selling slippers, grew in market volume, and expanded its range to
include high-end footwear. Bakshi invested in Relaxo in 2011, when its
stock was trading at Rs 100. In three years, it went up to Rs 400.

“I
invest in businesses that have enduring competitive advantages and
scalable business models run by owners who are both honest and
competent.”

This strategy has seen him through a sometimes
fickle market. “You are investing in businesses that generate so much
cash they usually don’t need much debt, and there is little financial
risk.” But Bakshi too has fallen prey to ‘value traps’—stocks that are
cheap for a reason. “It could be because the promoters are crooked, or
there is no cash, or the books are cooked.”

Bakshi’s advice is to
identify high-quality businesses run by promoters who do not gamble on a
speculative bet. And “do not listen to brokers.”

Image: Amit Verma

—Shabana Hussain

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Samir Arora, 53
Founder, Helios Capital

Samir
Arora rose to prominence during the dotcom boom in the ’90s when he was
a fund manager with Alliance Capital. Over the years, he’s eschewed
financial jargon and judged a company’s worth by its fundamental
investment philosophy. Arora says it’s common for investors to get
self-righteous and blame others when they lose money. His advice is as
pared down as his investment strategy: “Stop blaming others. Learn from
your mistakes.” 

He anticipated that India’s economy would
change significantly after the liberalisation of 1991; he set up the
India Liberalization Fund in 1993. Its focus was to buy stocks of public
sector companies that were up for privatisation. It was, however, an
idea whose time had not yet come. Instead, Arora focussed on sectors
such as banking and insurance which were being opened up to private
companies. He made handsome returns on HDFC and benefited from timely
calls on banking stocks.

Apart from PSUs, he stayed ahead of the
curve by focusing on a second investment category—industries that are
“new” for India and under-penetrated even in urban markets. These
included retail, media, liquor and multiplex chains. “The intention is
to anticipate and recognise change early,” he says. He calls his third
investment category “new, new”—this currently includes technology and
pharma.

Arora is a canny investor with a knack for sniffing out
potential gems, but he is also cautious. “We learnt that looking at low
P/E stocks without considering the level of debt is risky. Many a time
the stock looks cheap on P/E, but the balance sheet must be considered
closely.”

Image: Mohd Fyrol / AFP for Forbes India

—Prince Mathews Thomas

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Saurabh Mukherjea, 39
CEO (Institutional Equities),  Ambit Capital

In
January 2011, when Infosys was trading at Rs 3,200, Ambit Capital went
against popular sentiment and recommended that investors sell their
cache of Infosys shares. Saurabh Mukherjea argued that despite a strong
management, the IT behemoth was not adapting to, and keeping pace with,
evolving technological developments. His call saved clients huge losses.

In
2000, Mukherjea founded equity research firm Clear Capital in London.
In 2004, he sold it and relocated to India. While at London School of
Economics, Mukherjea learnt to look beyond financial numbers and take
calculated risks. This gave him the confidence of making decisions that
go against the grain. He turned bullish on TVS Motor in April 2013 when
rivals such as Bajaj Auto and Hero MotoCorp were attracting more
attention. But Mukherjea’s analysis showed TVS was primed to take off. A
healthy balance sheet, a potential tie up with BMW Motorrad and a slew
of product launches were positive indicators, he says.

Mukherjea
urges investors to identify companies with a proven management track
record and clean accounting standards. He cautions against investing in a
company just because of a successful run in the past, or firms with
extensive political connectivity. “Money is not the end-all but just a
by-product of what we do,” he says. “It cannot be the goal.”

Image: Mexy Xavier

—Salil Panchal

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Anoop Bhaskar, 48
Head – Equity, UTI Mutual Fund

When
Anoop Bhaskar took a call on Unitech, it was a little-known entity.
Those who had heard of it believed that a Delhi-based real estate
company was best avoided. Bhaskar, who was heading equities at Sundaram
Select Midcap Fund at the time, had a different view. In 2005, he bought
Unitech stock and held it for a year before it moved north. But the
advances received by the company were two times its market cap—it was a
bargain. The result: Bhaskar was one of the few investors who made 100
times the money he had put in Unitech.

He has since moved on to
UTI Mutual Fund—a distance from his days as an FMCG analyst in Chennai.
He got his break in 2003, just 15 days before he was to shift to a
Mumbai brokerage firm. N Prasad, then CIO at Sundaram, offered him this:
He could become a fund manager but he would not be called one; worse,
he would have to take a 50 percent pay cut. He accepted. “I had this
overwhelming desire to be a fund manager and to test whether one’s
potential was the same as one thought,” Bhaskar says.  Then UTI came
through. And so did Bhaskar. His approach has ensured that the UTI
Opportunities Fund was ranked among the best mutual funds by Crisil in
2013.

Bhaskar insists that Indians “get bogged down by time
periods”. “Nobody looks at provident funds till they are 58 or 60 or
when they retire. Why not look at equity from that point of view? Even
if you were to give 10 percent of your salary for the next 30 years and
split it across three or four funds, the returns should exceed all
investor expectation.”

Image: Mexy Xavier

—Pravin Palande

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Kenneth Andrade, 48
Chief investment officer, IDFC Mutual Fund

Kenneth
Andrade has made a name for himself by picking small stocks that have
gone on to become household names. Take hosiery company Page Industries,
for instance. He found Page’s scale of manufacturing impressive, and
invested early in the company in 2008. Its stock has risen 15 times in
the last five years. Add Jockey (Page holds India rights for the brand)
to that, and Andrade knew he had a real winner.

Simply put, the
man, who is responsible for mutual fund investments at IDFC MF, loves
mid-caps. “They must (ideally) be single product companies, in simple
businesses that have plenty of headroom to grow,” he says. To that end,
Andrade would earlier choose companies in isolation. Today, he has an
eye on the industry. “A good company in a consolidating business (a
prime example is microfinance) is almost certainly a buy,” he points
out.

But aren’t there times when the market runs up and mid-caps
get expensive? Andrade disagrees. “I have never seen a company at a
value I wanted to buy that I couldn’t buy,” he says. From someone who
has been buying stocks for over two decades, that is a sweeping
generalisation. Surely there must have been companies that were too
expensive. “No,” he says with a cheeky smile but then hastens to add
that “stock prices always swing and always correct. If you wait long
enough you will invariably get them at the value you want”. That, and
discipline in one’s holdings, is the key to a sound investment strategy,
he says. And it has worked well for him.

Image: Mexy Xavier

—Samar Srivastava

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R Srinivasan, 46
Head (EquitIES), SBI Mutual Fund

In
2012, when R Srinivasan invested in SpiceJet, he attracted attention.
It was a small investment, but he’d bet on an airline when the aviation
sector was bleeding. Srinivasan believed that SpiceJet would be taken
over by a big airline. That didn’t happen. “The investment thesis was
risky, but it wasn’t illogical. I’m more worried about losing money in
stocks when we were logically wrong,” he says. Despite this, he has
delivered some of the best returns for SBI MF’s equity funds.

One
of his biggest successes has been SBI’s mid-cap fund Magnum Global,
which underperforms in fast-rising markets, but outperforms falling
markets. He found that the extent of outperformance outweighs that of
underperformance.

A football fan, ‘Wasan’ (to his colleagues)
was surprised when Spain lost to The Netherlands in the ongoing World
Cup. It’s a lesson that can be applied to volatile markets too, he says:
Funds that are on top of their game now may not be successful in
future.

 “On a five-year basis, our perfor-mance for the
Emerging Business Fund is amongst the top 20. But on a one-year basis,
we are at a low of 98. Why? We are doing the same thing that we were
doing five years ago.” He goes on to elucidate: “You cannot outperform
every movement. If you outperform a falling market, you cannot
outperform a rising market.”

Srinivasan also stresses upon the
role of luck in investing. “There was a time when some of our equity
funds were on top of the charts. Then they suddenly fell. It means that
either we were taking some higher risk or we were lucky during those
times.”


Image: Mexy Xavier

—Shravan Bhat

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Bharat Shah, 54
Executive Director, ASK Group

Investing
in great businesses but at reasonable valuations has been the hallmark
of Bharat Shah’s philosophy at ASK, where he heads the investment
management business for high net worth individuals, family offices and
institutions. This approach has mostly borne fruit but, in the late
1990s, his inability to disentangle himself from great businesses worked
against him. As was par for the course at the time, he bought into IT
majors such as Infosys and Wipro, and happily watched the price rise an
astounding 130 times. But then, the tech bubble burst. “There were times
when I didn’t realise that a good business had gotten so expensive that
I needed to part ways with it,” says Shah. He went on to lose as much
as a fourth of the investments he was managing.

The veteran
investor has also found that fundamentals remain the same: Avoid bad
businesses; stick to good businesses and never pay an outrageously high
price for them; consider certainty of earnings, quality of growth and
valuations as the key. In addition, Shah says, one must look at the size
of the opportunity and the quality of management. What he cautions
against is trying to fit a cheap business to your investment criteria. 

In
2008, he had bought Kaveri Seeds, a great stock that was reasonably
valued then. However, when the market fell, the company was decimated.
(The stock has since risen 30-fold.) It’s something investors will do
well to remember. “You as the investor have a duty towards your own
self: A duty to choose well, to be disciplined, to be patient and to be
foreseeing. Markets don’t have the duty to make you rich just because
you have put some money in it.”

Image: Mexy Xavier

—Samar Srivastava

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S Naren, 49
CIO, ICICI Prudential Mutual Fund

S
Naren isn’t a fan of the real estate sector. For the last two years, he
had been asking investors to choose equities over real estate but
nobody listened. He can now afford a touch of smugness. The real estate
market has gone flat and the stock market is giving handsome returns.
“The 2.5 percent rental yields were very low compared to the 11 percent
interest that the mortgaging companies were charging,” he explains.

This
wasn’t the first time his approach contradicted popular opinion. In
October 2012, when Naren had taken a call on Bharti Telecom, its stock
was down by 40 percent over the previous year while the Sensex was up 15
percent. Bharti’s Africa investments were proving to be a challenge and
domestic competition was increasing. However, the worm turned within a
few months of his investment and he made handsome returns.

Naren’s
investment philosophy is influenced by US investor Howard Marks’s
theory that when capital flows are high, it is time to think contrarian.
“When you are contrarian and valuations are in your favour—they are the
best times to invest in,” he says. “When you are contrarian, you need
to do more research to succeed.”

Stay clear of impulse, he
insists. “Force yourself to write five lines before you take a decision
on why you are buying or selling something,” he says. “The main reason
why people lose money is because they don’t follow a process before
taking decisions.”

Image: Mexy Xavier

—Pravin Palande

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Ramesh Damani, 58
Founder, Ramesh s Damani Finance Pvt Ltd

In
1989, armed with a Master’s degree from California State University at
Northridge, Ramesh Damani became a member of the Bombay Stock Exchange.
He had planned to make a living through broking. But what really excited
him was identifying potentially successful businesses, and investing in
them for the long term. Damani’s father had been successful in the
market, but he always sold the moment a stock’s price went up. “He
always created income for the family, but never wealth,” says Damani.

His
first big move in 1993 was when Infosys went public. Having briefly
worked as a coder in the US, he knew Infosys would benefit from a huge
labour arbitrage. He invested Rs 10 lakh in both Infosys and CMC. By
1999, his investment had grown hundred fold. In classic Warren Buffett
and Charlie Munger style, he’d experienced the advantage of hanging on
to a good business. “I learned that just because a stock doubles, it is
not a reason to sell it.”

In 2002-03, before the last ‘bull run’
started, Damani was bullish on the liquor industry. “It was incredible;
the entire liquour business in India was available for Rs 500-odd
crore.” His investment paid off handsomely. He also identified two
public sector companies, Bharat Electronic Ltd and Bharat Earth Movers
Ltd, and got in early. And he regrets not buying enough.

Another
regret: Not buying aggressively when the markets crashed in 2008. “I
had anticipated the fall and was 30 percent in cash. By the time I
started buying, though, the market had already run up,” he says. He
hasn’t allowed too many regrets since.

Image: Mexy Xavier

—Samar Srivastava

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Rakesh Jhunjhunwala, 54
Founder, Rare Enterprises

Trends
make the best friends, believes Rakesh Jhunjhunwala. And like a good
friend, the master investor never questions or pre-empts a trend. The
53-year-old markets maven and India’s most influential wealth creator
has identified the present trend as the “biggest bull run” and as
always, he’s put his money where his mouth is: He’s “fully invested”,
reported The Economic Times in May. After Narendra Modi came to power at
the Centre, Jhunjhunwala sold most of his stake in Praj Industries and
bought into Edelweiss Financial Services (its share price jumped by 8
percent on the day).

Throughout his 29-year-long career, he’s
backed his trendspotting with a huge appetite for risk-taking. It
started with him buying shares in Titan Industries in 1986 when others
were underestimating the potential of the company. He continues to be
invested in Titan and holds close to 9 percent of its stock, currently
worth over Rs 2,500 crore. Similarly, he bet on iron ore-miner Sesa Goa,
now Sesa Sterlite, when its share price was Rs 60 and sold them at Rs
2,200 a share in the late 1980s. While Jhunjhunwala doesn’t get into an
“analysis paralysis” before taking an investment call, the trained
chartered accountant does assess the company’s fundamentals. The
price-earnings ratio to him is the most “difficult” but also the most
“critical” part of investing.

The man is often called ‘India’s
Warren Buffet’. And like the American investor, the Indian bull is also
known for his long-term bets. At the same time, he doesn’t undermine the
importance of “trading” as it has given him the capital to place
long-term bets and become a master predator.

Image: indiatodayimages.com

—Prince Mathews Thomas

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Sunil Singhania, 47
Chief Investment Officer (Equity), Reliance Capital Asset Management

Numbers
fascinate Sunil Singhania. So do balance sheets. In 1991, when India
opened its economy to the world, Singhania channelled his love for
numbers and balance sheets to take up a new hobby—stock spotting.

He
worked as an institutional broker in the mid-1990s and moved to
Reliance Mutual Fund in 2003. He was one of the key strategists behind
the success of Reliance Growth Fund, which, in May 2014, became the
first mutual fund scheme in India to hit a net asset value of Rs 600.

One
of the biggest bets Singhania, along with colleague Madhusudan Kela,
took was on Jindal Steel & Power. In 2003, the group’s founder
chairman, the late OP Jindal, had not yet got the market recognition his
companies now enjoy. Singhania and Kela realised this gap between
reality and market perception. They picked the company when its market
capitalisation was Rs 300 crore, with a view that profits will grow four
to five times in future. The company’s market cap ballooned to about Rs
28,000 crore in 10 years.

An advocate for bottom-up investing,
Singhania has started focusing on global macro-economic factors that
have impacted Indian markets and corporate fund-raising capacities
recently. At the same time, he takes a leaf out of Ralph Wanger’s book,
Zebra in Lion Country, which talks about investing in small, rapidly
growing companies. “Zebras try and stay in the centre of the herd to
safeguard against attacks, but the zebras at the outside of the herd get
the freshest grass,” Singhania says.

Image: Mexy Xavier

—Salil Panchal and Pravin Palande

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Ridham Desai, 47
Managing Director, Morgan Stanley India
Ridham Desai hasn’t sold a single st
ock from his personal portfolio in 20
years. At Morgan Stanley India he focuses on researching market trends
rather than fund management.

A Formula One fan, Desai believes
the Indian economy has the components of a winning car. And now, it has a
driver—the government. “What happened with India’s elections is
unprecedented; the mandate is for the political class to use development
as its prime plank. I think the market will give time and the benefit
of doubt to the government,” he says.

Desai is soft-spoken, but
he minces no words. “India needs to lift productivity and ensure its
workforce is going to be educated and healthy.” The good news, he says,
is foreign investors have been bigger believers of the India story than
local investors. “In the last five years, India got $100.7 billion in
FII inflows. That is more than double of what we got during the so
called boom of 2003-2007.”

He believes investors should look at financial services. Buys such as Crisil and ITC have worked well for him.

Desai
has two copies of Edwin Lefèvre’s Reminiscences of a Stock Operator, at
home and at work. These days, he’s fascinated by thinkers like Naseem
Taleb because he believes human behaviour will challenge traditional
economic models. “The traditional view is that if a variable deviates
from a path, market forces will bring it back. But the new learning says
the variable may continue to stay off path,” he says.

Image: Mexy Xavier

—Shravan Bhat

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S Naganath, 50
President and CIO, DSP BlackRock Mutual Fund

S
Naganath sees the market as an aggregation of people. And that explains
his interest in investor psychology. “The thought process of each
individual’s mind and its coming together is what causes market
movements. I’m hoping to get some perspective by reading books on
psychology dealing with this subject,” says Naganath, who is reading
Thinking, Fast and Slow by Daniel Kahneman.

People recall a
presentation he gave more than a decade ago, where he expounded on
liquidity flows and how markets would double in two years. At the time
DSP BlackRock was a predominantly debt fund management house but, after
2002, it launched new equity schemes that were a success in India. DSP
BlackRock’s Top 100 Equity scheme has returned a 22 percent annual
growth against the BSE 100’s 17 percent.

In January 2008,
Naganath was one of the first investors in India to realise the markets
have run up; it was time to move out of cyclical stocks like banking and
into defensive stocks. This strategy helped the company’s funds sustain
long-term returns.

“Investors should have a fair idea of return
expectation, and the risk they are willing to take to achieve the
return,” he says. Every business student learns about risk-return
trade-off, but Naganath says he doesn’t know any investor who puts it
into practice. “You have to define what returns make you happy, what
risks you are ready to take to achieve the returns.” 

For Naganath, investing is a process that needs to be enjoyed.

—Pravin Palande

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Aswath Damodaran, 57
Professor of finance, Stern School of Business, New York University

“Most
actively managed funds charge you money for losing your money,” says
Aswath Damodaran. He teaches corporate finance and equity valuation at
NYU, and his fan following among students would make even Hollywood
A-listers envious.

Though he’s taught valuations all his life,
he advises people to invest in index funds. “For most investors, small
or large, the index fund route is the better choice. Most active mutual
funds and supposedly professional investors bring nothing new to the
table,” he says.

When Damodaran started working on his book, The
Dark Side of Valuation, markets were riding high on the dotcom boom.
Amazon was trading at $48 and Cisco Systems at $64.88. He found these
companies overvalued. According to his discounted cash flow model,
Amazon and Cisco were worth only $34 and $44.92 respectively. And by the
time he completed his book in 2000, the value of these companies had
fallen.

He is of the opinion that the value of a firm depends on
its capacity to generate cash flows and the uncertainty associated with
these cash flows. He respects investors who are humble and recognise
that much of their success is due to luck. “I don’t care much for those
who try to browbeat you with data, models or their technical training,”
he says.

His mantra is simple: Be yourself. “If you are an
investor, you have to make your own judgement. The key to success is not
whether you can invest like Warren Buffett, but whether you have an
investment philosophy that you are comfortable with.”

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