Rakesh Jhunjhunwala Speaks

From Hindubusiness line 26-Dec-2006.

`2007 will be year of consolidation and rise for the Indian markets'

Bangalore , Dec. 25

"Market is always right. Markets cannot be taught, they have to be learnt.

"We must have an attitude where we must balance fear and greed," was the hot tip by Mr Rakesh Jhunjhunwala, India's high-profile investor and President of Rare Enterprises, when he spoke at a seminar on `Wealth creation through equity investments' organised by Welingkar Institute of Management here on Friday.

Mr Jhunjhunwala spoke about his convictions that made a case for sustaining the India growth story.

Equities, because of their efficiency in allocating capital and ability to leverage, generated superior returns when compared to other assets over the long term, he said.
Since 1979, the Sensex has delivered 21 per cent returns compounded annual growth rate, which compares well with returns on funds managed by the legendary global investor Warren Buffet, he added.

Opportunities
Mr Jhunjhunwala said that enormous wealth was created over the last five years because opportunities in India have been manifold.

There is a strong case for investing in equities considering its under-penetration today.
He predicts the proportion of household savings to equity to rise to 15 per cent in 2011 from 4.5 per cent now as a result of which about $45 billion would flow into equity markets as against $6 billion now.

He expects 2007 to be a year of consolidation and rise for the Indian markets. According to him, the Sensex may have a floor at 12,500 and a peak at 16,500 in 2007.
Admitting that gains were going to be moderate in future unlike the manifold rise over the last few years, he advised investors to be realistic in their expectations.

He said that markets were unlikely to peak unless they were trading at a multiple of 25-30 times forward earnings. They are currently trading at about 16 times their earnings for financial year 2008.

Growth momentum
Speaking on the strength in India's fundamentals, he elaborated on forces that would sustain the growth momentum.

According to him, growth enablers (such as favourable demographics, higher base of skilled people and education base), liberalisation catalysts (such as competition), fall in interest rates, multiplier effect (on account of reforms), structural changes in quality of corporate earnings and micro trends (such as change in mindset of companies who are aspiring to become global) are likely to drive India's growth story to a higher level.

He, however, cautioned that investors should not forget the four-letter word `Risk' while making investment decisions.

"Patience may be tested, but conviction will be rewarded," he said. Mr K. Rajagopal, CIO, Reliance Capital Asset Management, and Mr Joseph Massey, Deputy Managing Director, MCX, were among other speakers on the occasion.

Best stock market analyst

- Kuppusamy Chellamuthu

Posting some of the mail discussions from 'india_next' yahoo group.

First:
I have been trading in stocks for the last three years and losing money (yearly 2.5 lakhs on an average). I have tried everything from trading on my own intuition to getting tips from experts. There havent been a single three months streak where I have made money. Now what should I do? Do somebody have any idea who is the best analyst in India so that using his tips we can also make money? I dont care if he is a technical analyst or a fundamental analyst. I am ready to daytrade, invest or scalp. Who is the best out there? Please send me a mail if somebody has an opinion. Please do not mix business with this and do not send business advertisements.

Second:
I have a seasoned investor friend who often says, "Trading is one of the most sophisticated suicidal methods".

When you do day-trading your odds of gaining and losing are evenly poised, leaving apart the money you have to make up for brokerage and taxes. When a person comes with an intention of trading, his chance of winning is 0.50 (50%). He can either go broke or get the money enabling him to go ahead to the next day. His chance of gaining on the end of second day is 0.50 (for the previous day) X 0.50 (for second day) = 0.25. His chance of winning is reduced to 25% and to 12.5% on the third day. This has been proven by history. People who go great money in stocks were not addicted traders.

You did not need to beat the index by a substantial margin. But, had you stayed invested in sensex companies, your money would have grown decently during the past 3 years, which has been the best time for Indian stock market. Unless you are a broker, you don't need to advocate trading.

And...As our motive in operating stock market is to make money, seeking day-trading tips is nothing but a quick solution to the question 'how to make money in a day?' I am completely convinced that any person who has an answer for this question won't need to make money by selling his 'tips'.

Aa such, I don't detest trading. But, want to be sure on what I am trading. Otherwise better prefer flying to Los Vegas to try my luck.

Regret if your question did not get answer. I also believe that no other member of this group am not knows any such 'tipsters' who can facilitate us make money.

And finally, you are lucky enough to learn things at the expense of three years and 2.5 lakhs. There are people who paid much more for some trivial lessons.