When did you start your journey in the stock market? Do you recall your initial years in the market?
I started my journey in the early ’90s when I was in college. It was fascinating to see how stock prices moved and how easy it appeared to make money in the stock market.
What was the first thing you learnt in your initial years in the market?
The first thing was the lack of transparency – those were days of physical exchanges. You get to know about your trade at the end of the day, and invariably when you are buying, your purchase is closer to the highest traded price for the day, and when you want to sell, it is closer to the lowest traded price for the day. Similarly, very little is known about the companies. Please remember there was no Google, no Internet, companies didn’t have websites. Your only source of information was newspapers and published annual reports and results. News itself was scarce; forget about analysis. But to be consistently successful, one needed to do deep study and analysis. We needed to get more authentic information.
Which was the first bad phase in the market that you remember clearly? How did you navigate it?
Market correction from 5,000 levels in January 2000 to 2,800 levels by September 2001 was one of the difficult periods as investment portfolio suffered massively and everything looked so bleak. However, faith in the Indian economy helped me to navigate this.
Can you tell us one mistake that you remember clearly from your initial years? What were your learnings from that mistake?
There were many learnings, first is portfolio diversification or controlled exposure to small caps instead of a predominantly small cap-oriented portfolio. The second is to focus on balance sheet strength, quality of management, and valuations rather than getting carried away by promising future outlook.
Were there any bad phases that made you lose your nerve? How did you navigate it?
Market lows of 2001, 2008 and 2013 were quite tricky as the future looked very challenging. Though I was convinced about the long-term prospects of the Indian economy but accepted that we could have a few bad years, and growth can’t be taken for granted. Markets are part of the economy and will move in cycles; one must accept it. Second is the importance of diversification. The third is that life is much more than markets; diversification of pursuits is as necessary for balancing life as diversification of stocks is for balancing portfolios; this philosophical approach helped me navigate markets better.
How do you see today’s market in context of your own journey?
I am cautious on markets in the near term. We have seen a large number of new investors who entered markets and made good returns. Considering this positive bias, we are witnessing steady inflows into stock markets and mutual funds despite the worsening economic outlook in the near term. Though I am bullish on the medium to long term prospects of the Indian economy and equity as a superior asset class, there can be serious pain in the short term considering the multiple headwinds including, tightening of liquidity and inflation.
If there is one thing that you would want young investors to learn from your experience, what would it be?
It’s a fact that young investors are smarter and use technology much better, but fundamental tenets of investing remain the same. For example, the prospects of a company’s business and the price you are paying are the two most important factors while investing. If we remember this, we will not have bubbles caused by what I like to think of as ‘asset’ fads.