Get inspired from Mr. Raamdeo Agrawal's candid speech with optimism on Indian Equity Markets & GDP growth potential of 9% to 10% post Covid-19 – Portfolio Management Services Webinar on – “Economy and Market Outlook & the Way Forward”
43 days into the pandemic-triggered lock down, every equity investor has a fair idea about Covid-19, its first and second-order impact on the economy and consequently the businesses. Indian equities, after falling over 30% from their peak, have seen a small rebound in recent days although the air is clearly poisoned with anxiety. Those playing it safe are smartly announcing that nobody knows what is going to happen. This fear of the unknown can grip even the courageous sailor. A ship is safe at the port, but that is not where ships are meant to be.
In these unprecedented times, it pays to listen to masters. In an exclusive 45-minute session with PMSBazaar, the sadhguru of Indian stocks, Raamdeo Agrawal revealed his thoughts on the past, the present and the future. In over 3 decades, the investing legend has seen many occasions where Indian markets plunged 50% or more. Yet Raamdeo says he is at peace amid the unending storm brought on by the deadly coronavirus. Read on to know more.
Crisis Not Over, But India Doing Well
The novel coronavirus disease crisis is still unfolding for India. As the lockdown is slowly opening up, cases rise. But, Raamdeo is clear that India has done extremely well under trying conditions. At a time when nations like the USA, UK, France, Germany, and Russia are reeling under hundreds of thousands of cases, the 52,000 number for India looks decent. "Covid has come, and it will go. This is the optimism that I have," Raamdeo says.
The expert is a believer in human intellect. In India alone there are 55 sites working on finding a vaccine. Globally, there will be at least 1000 labs working on finding a breakthrough. Till they find something meaningful, damage will continue, admits Raamdeo.
India has the potential to grow at 9 to 10% per year, he added, indicating his optimism about the current BJP government which has unleashed a plethora of economic reform initiatives in the last few years.
Tracking Buffett the Indian Way
If there is one global guru that Raamdeo swears by, it is Warren Buffett. A regular at the Berkshire Hathaway AGM event for more than a decade now, it is almost like a pilgrimage for Raamdeo. So when Buffett a few days ago shared his nuggets of knowledge, Raamdeo was all ears. "Buffett is collecting money...he sold his airline stocks and is sitting on cash...he is amassing money to invest," the homegrown stock market legend says.
Yet, Raamdeo advises investors not to follow anyone blindly. Buffett, for example, operates in developed markets with billions of dollars while even storied domestic investors have a few thousand of crores at disposal in an emerging market. “Do what suits you best”.
Since Buffet is saying risk can come from any direction, Raamdeo wonders what can happen to equities if something happens like it did with WTI crude oil futures. "This is not the time to be speculative," he says with conviction. Ahead -of-the-curve monetary and fiscal initiatives from all governments will ensure a playing field where good businesses will survive. Cost of borrowing money is almost zero.
"The strong businesses will weather the storm, but weak hands will suffer," is his sage advice. Raamdeo cites the examples of ITC and HUL who can be hit and their profits may drop, but the impact will be limited to P&L only.
Recovery Plays, Diversification Trump Card
When things settle down, good businesses will come back faster is what Raamdeo thinks. His magic potion consists of sticking to companies he knows well and having a diversified portfolio. "First time investors should not go into markets alone because it's like being in a jungle. You can fall by the wayside or be hit from any direction. Have a coach, advisor, portfolio manager hold your hand," is Raamdeo's priceless suggestion.
When asked about the bottom for the market, Raamdeo said he personally thinks the bottom is still some distance away. He recounts his over three decade experience where history shows that it takes 10-12 months to hit the bottom.
"Buy into quality stocks. There is a case for investing 15-20% of your money upfront, but dont come into markets without a 5 year horizon," the noted expert cautioned. The reason is simple: even after buying great stocks, they may still go down. Raamdeo expects logistics companies, food firms, telecom sector, pharmaceutical companies and technology players to rebound first.
FDs For 5% Return, Bank on Equity For Higher Gains
Many investors who came into PMS investing less than 2 years ago are a disappointed lot. The temporary market setback has forced them to consider their decision. Are bank FDs better now? In his characteristic honest style, Raamdeo says: "You have to pay tuition fee for equity investing. If you want 10-12% return, you have to take some risk. FDs are for 5-6% without any effort. I have seen 3 occasions of 50% falls in Sensex, in 1992, 2000, 2008." But those stuck on had their money double, he adds.
For those wishing the market falls further to buy, the chairman of Motilal Oswal Financial Services warns against market timing. “Selling at the peak and buying at the bottom will make you a trillionaire in a year’s time! You will not need my advice. The problem is you cannot go to 0% equity allocation. If you are sitting at 15% cash in your portfolio, will you wish the market to go down further because you want to buy more, or will you wish the market to go up because your 85% is invested?,” he quipped.
Financials have taken a mighty hit in the Covid-19 downturn. Every other day there is some news about shaky balance sheets and anticipated NPAs. What does Raamdeo think of the lenders? Weak lenders have weak borrowers, he says, adding that the problem will be hitting the weak lenders a lot more.
"Mind you that strong banks will also be hit but they will survive. Well-managed lenders will grapple with the situation and come out victorious. In the future, the economy will need more credit. As weak hands vanish, the opportunity size for remaining lenders will be big, and net margin could be higher too," Raamdeo notes.
One sector that could surprise is autos, currently reeling under zero sales. "What could be worse? But remember in India cars are 1st time purchases. I feel (once the lockdown is over), there could be revenge buying because cars allow social distancing and fuel is cheaper too. The worst (news) is already out," Raamdeo says.
Peace In Books
Despite his personal portfolio going through ups and downs. Raamdeo Agrawal sleeps peacefully at night. He is 100% invested in Indian equities broadly. He remains fully invested but is still peaceful. "Whenever I think markets will go down, they go up. Whenever I think markets will rise, they fall. So, I have stopped thinking about where markets will go. I buy into businesses. I am peaceful," is the advice he has for everybody.
Investing is not about buying alone. Everyone can buy stocks. “When you're right, anyone can handle it. What counts is how you handle it when you are wrong. What is good in good times may not be good in bad times,” Raamdeo strikes a philosophical note.
For those wanting to find some peace in books, here is Raamdeo's curated list. Start with reading the pages of the latest Buffett 2020 AGM transcript. Buffett's letters from 1965 to 2019 are also a good place to start. The next recommendation is Peter Lynch's ‘One Up On Wall Street: How To Use What You Already Know To Make Money In The Market'.
Raamdeo also mentions 'Common Stocks and Uncommon Profits and Other Writings' by Philip A Fisher. Two books that helped Raamdeo personally are 'Competitive Strategy' by Michael E Porter and John Burr Williams's 'The Theory of Investment Value'. Mr. Raamdeo Agrawal concluded the webinar with advice of reading through the Motilal Oswal's Wealth Creation studies done annually for the past 24 years, which can give deep insights about Indian stocks.
Warren Buffet's Berkshire Hathaway letters link : https://www.berkshirehathaway.com/letters/letters.html
Motilal Oswal's Wealth Creation Studies link: https://www.motilaloswal.com/stock-market-research/Wealth-Creation-Study.aspx
Those who missed the opportunity to hear from the Veteran directly can listen to the entire session through the appended link;
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