Bigger bull run yet to come: Rakesh Jhunjhunwala

Here is a verbatim transcript of Investor and Trader, Rakesh Jhunjhunwala's exclusive interview with Mitali Mukherjee on CNBC TV18's Wealth Creators show.

Rakesh Jhunjhunwala is India’s most successful investors; one of the stock market’s most successful stories. The sometimes maverick, often mercurial but always a respected voice. He is a wealth creator and a man who anyone who enters the stock market wants to be.

Q: You are the first Individual Wealth Creator we are chronicling. I am curious to know, what does the term mean to you?
A: I don't know when I started on in life, I had some ambitions. My parents never liked the idea that I should go to the stock market. I started life financially with just USD 100 or only Rs 5000 and my first thought was that when I went to the markets, I had just come from Chartered Accountancy; used to earn Rs 150 a month. So my first concept in life was that I should be financially independent. I never started with the idea that I will be a great wealth creator and I will have some great wealth or anybody will know me. I thought I must be able to earn my daily bread. I loved the markets. I thought India was in a very initial stage and this would be one of the places which will develop and the opportunity would be huge.

Q: Do you also find it odious sometimes because you are a wealth creator in your own right and I don't think you have taken on the mantle of leading a lot of people with you. But you get that. A stock that you would pick up will be picked up by others. They would want to know why Rakesh bought it - why he is buying so much or why he wants to buy more?
A: I think these are all misconceptions. When you buy stocks, you should be ensured that other people will buy stocks. Then only you should buy the stocks. I have a different concept in life. If a stock is beautiful, the suitor will come. If a girl is beautiful a suitor will come. If a stock is beautiful, a suitor will come. So I don't search for suitors when I buy the stock.

Q: Tell me where you have to be the most patient with the market?
A: I think my greatest patience with the market was in 2001 September to April 2003. That was because I was a lone bull. I wrote an article in the Economic Times in June 2002 that India is on the threshold of a structural secular bull market and people said, he has bought stocks and he is caught and now he is asking us also to come into the cage. People didn’t just believe what I thought or what my opinion was. That was a testing period.
Checkout: Rakesh Jhunjhunwala's Latest Portfolio-September 2008

Q: Did it bring confidence down to its knees for you?
A: You have your conviction and I always staked what I could afford. So say, when markets went down in August 2002, I had no problems there. In spite of my opinion, I did not stake so much that if markets did not go up in the manner that I thought, I would be on the roads. I was well-off absolutely. So you know it was a trying time. But then there was a great dividend; the kind of bull market we had - 3000 to 21000.

Q: And you really rode it didn’t you? There are so many terms people use about you - The young tiger, pin up boy of the bull market, India’s Warren Buffet. Do you find it pointless? Do you find it flattering? How do you take it?
A: I don't know. I have learnt two things about the press and wives. When they say something – don’t react.

Q: Are you the same guy that you were? Are you the same guy you were 15-years back?
A: Why are you asking me? Ask my friends, if I have changed in any way.

Peer View:
N Jayakumar, CEO, Prime Securitie says, “As earthy as it comes, he is as raw as it can be and he is as direct as it can hurt. He is all of this and I think at the end of the day it is not because he is a wealth creator, he is all of this, but he has been that since the time I have known him and he has just remained much of the same.”

Q: Is It tough to be tight with people from the same community - the stock markets? Can you be close to some one who is part of the same?
A: I am close to a lot of people from the stock market. Actually, my best friend and whom I consider my guru, Mr. Radhakrishna Damani - he is from the stock market. Actually he has taught me so much in life and we are the best of friends. We can discuss anything. We go on holidays together. We’ve done so many things together and my other friends - they are from the stock market. Also let me not pretend. I don't have much interest in life other than the stock market.

Did you know:
The name of Rakesh’s organisation is actually a combination of his initials and his wife’s initials. So, Rakesh plus Rekha equals RARE Enterprises. As Rakesh says, she is the only one he likes being answerable to.

Rakesh Jhunjhunwala's View On Indian Stock Market

Peer View:

Samir Arora, Helios Capital says, ” I am very impressed with Rakesh not because he has done so well in the stock market which itself is very impressive but to have done that without raising any controversy, without creating enemies, which is a problem in India for successful people.”

Q: You are very much into the individual behind the business. Who runs it and how well it is run. Tell me how carefully you look at that when you look at a business that you wanted to be a part of?
A: I look at the situation. I look at the possible outcomes and then I think what could be the outcome? For example, when I invested in Titan, my thinking was, can Titan become India’s largest specialist retailer? That was the question I asked myself. Will it always occupy a 50-60% share in branded jewellery? Will it always remain a leader in Indian watch industry? Will it enter into other areas of retailing? I asked myself all these questions and the answer I thought was yes.

So this is the basic analysis I did. Then I went to the office - Titan office was like a young advertising agency. So I thought marketing is in their blood. I met their management team including their Managing Director. I was thoroughly impressed by them. I took the decision. I put my life behind it.

Q: What impressed you?
A: Their sheer approach. The Managing Director told me that the task is difficult. But we'll overcome it. We have to suck the capital and increase the profits and that's what they have done. So, when I take a decision there are three-four matters that I consider - opportunity. I am from the investment thought which says nobody can be bigger than the opportunity. Second, I look at the competitive ability. In a capitalist society, you cannot deliver product and make a profit unless you do it in a competitive manner and competitive does not mean the most expensive. Then I look at scalability. Scalability is very important. When I invested in Pantaloons, the biggest idea was can ten stores become five-hundred? It was written behind a Maruti -- when I grow will I be a Mercedes?Great are the challenges of scalability.

Then what I look at is valuation. It’s important what you buy. It is more important what price you buy. Somebody bought Hindustan Lever at an Index of 2900 - the price was Rs 320. When the Index was 7000 - the price was Rs 145. You bought Hindustan Lever - best quality company, best pedigree and everything and I made lot of money by buying United Breweries and McDowell’s at a valuation of Rs 200 crore. There was no corporate governance. People told you you’re down the drain. I made five-times my money in two-years.

Q: Sometimes there are tough lessons to learn as well? Just on the subject of valuations, you would be watching the media space and there are a couple of howlers over there by way of stock performance, for example, MiD DAY (Multimedia) - have there been more tough lessons to learn?
A: Every mistake teaches you a lesson. There is always a risk in investing in midcap stocks because if they succeed, the gains are huge. If they don't succeed and scalability does not come, then the losses are also huge. I don't regret having invested in MiD DAY because I always allocate my assets and I don't do it in a planned manner. I don't put more than a certain percentage of my wealth in incomplete situations. So, I might have made a mistake. The decision is tough, but okay, the good comes with the bad.

Peer View:

Atul Suri, Rare Enterprise says,”I have known Rakeshji for over five-years and I have traded on his behalf. I use technical analyses but not once has he interfered in a single trade of mine and that is very special. For a very accomplished trader to see a different approach in trading and not interfere with him and that really comes from the basic thing I have noticed in him is that he respects other disciplines also to the markets.”

Q: You're very patient, though?
A: What is the choice?

Q: The choice is to book out.
A: Well, its not that I’m not booking out because I’m afraid to take a loss. I’m not booking out because I still think there is reason to believe that things can change.

Q: Were you surprised Rakesh - could anybody have seen where we are right now in January this year?
A: I have made presentations to show in October, that this is going to be an unprecedented fall. And I have reasoned out how much is the lending to subprime, and that this problem cannot be stopped by reducing interest rates. The American bull market has come to an end. It may be a long correction.

I’ve made these presentations in writing. I have them on record. I don't say I foresaw the failure of any particular organisation but I thought it'll be very tough and I didn't rule out in my mind that some organisations can fail.

Q: Is there any question in your mind that we as well are in a bear market?
A: In India?

Q: Yes.
A: What is a bear market, what is a bull market, I don't know. Numerically - surely, since we have broken the last lows that we had in August 2007, we'll have to term it as a bear market. But I don't think the long-term Indian stock bull market has ended. I think it’s in interruption mode.

This bull market is based on two factors. One is economic growth of India, which I think is based on factors that are irreversible, whether democracy, whether skills, whether demographics, whether cultural factors. They are irreversible. I think India’s economic growth will always trend upwards.

Then it is based on the platforms that we have created to attract money into the Indian markets -- the trading strategies, the regulation and the under-exposure of Indians to equity. I will surely say that it’s an interruption. How long? Nobody knows.

Q: You've been cautious, though, Rakesh, right till since last Samvat you've been striking a cautious note?
A: If the Index instead of going from 3,000 to 21,000 had gone from 3,000 to 13,000, and then back to 11,000 - would that not have been a bull market? Then it would have been termed a bull market correction. So at levels, where you saw the participation, the valuations, you saw what was coming in the Western world, you saw the sheer corporate greed in India; you saw the senselessness with which people in India just wanted to buy anything. They were all indicators - so what is wrong in being cautious?

Q: Are you feeling better about all those indicators? Do you think things have cooled down now?
A: I think now we've begun to reverse slowly. Now things will be overdone but that’s the way markets are. As I told you, markets are like the weather. Whether you like it or not, you have to bear it.

Q: There is courage of conviction as well, to be a wealth creator? If someone were to sit you down and ask you, do you think that over the next five years, Indian equities is still the place where you'll see the most significant wealth creation, would you say yes?
A: I would think so, as far as Indian assets are concerned. I don't have much knowledge about global assets. My good friend Mr. Shankar Sharma has said, equity has one quality - it is always an asset which trends upwards. India will remain in a phase of very good economic growth for the next 30 years.

Q: Do you feel we will have to be a lot more patient with it though, this time around?
A: As I told you markets are like women, you have to be patient.

Q: No, but you know we've had a fantastic run. We've had the mother of all bull runs in the past three years.
A: I disagree with you.

Q: You do?
A: The mother of bull runs is still to come

Q: Really?
A: In my opinion, yes. But it could start after one-year. It could start after eighteen-months or after six-months. But the next high and the next bull market will be far bigger and have far more participation and far more excesses than we had in the last one-year.

Peer View:

Ramesh Damani, Member, BSE says, “He is so free with his information. He will willingly share with you his ideas. He will willingly share with you his investment style or his thought processes with the market and there is almost leisurely number of young men or Turtles as we call them on the street who’ve benefited enormously and handsomely from his advice including myself. Earlier in my career he really helped open my eyes, showed me how to dream and allowed me how to take position with the market. So above all, we respect that – the ability to share that information in a business that is so secretive - he is an open book, always willing to help.”
Q: Do you see a lot of people who are part of the stock market, returning back some of the wealth creation? I know that you have a Jhunjhunwala Foundation. You're actually actively part of a lot of NGOs and you donate significantly amounts over there. Is that an important part of being a wealth creator for you - to spread it as well?
A: I cannot forget my late father, who has never asked me ever that what is your wealth? The only thing that he would ask is how much charity have you done this year, and are you going to continue it or not? So, I’m making my own efforts towards some good social cause that I’m supporting. I’ve built a Home for 400 boys in New Bombay. God has given me one daughter and I’m going up 400 children. I cannot give them absolutely what I’ve given my daughter but I’ll send them to English medium schools. I’ll see that they have all the needs of life and I want to bring them to a stage where they can get good jobs and they can contribute back to the Home.I think the greatest wealth is giving the person ability to learn. Then I’m supporting lots of causes with children like girls' education. I'm supporting other small causes for street children. We're building a temple in Lonavala. It is my target in life. This year by budget is Rs 10 crore, next year it should be Rs 12.5 crore and on my twenty-fifth wedding anniversary, which is on February 21, 2012, the gift I want to give my wife is - I’m going to give Rs 500 crore to her foundation.Q: Is this a bigger high than being part of the stock market?A: I don't think it is a high. It is a duty. To donate and to help others are very good attributes.

Urmila Jhunjhunwala, Rakesh Jhunjhunwala’s Mother says,” When he was a little boy, whenever our friends used to come, he used to tell them which shares are good to buy.

Rekha Jhunjhunwala, Rakesh Jhunjhunwala’s Wife, says, “I think the market is only first priority for him. His first wife is only market. When he started, he had nothing, absolutely nothing. Everyone used to say, what will you do in stock market? But he wanted to do that only.”

Q: What's your biggest faith?

A: Myself. I am confident of myself and I don’t rely on anybody.

Q: What's the big dream for Rakesh Jhunjhunwala - the wealth creator because we have had entrepreneurs who say I want my business to go to XYZ level, I want my turnover to double, triple, four-times?

A: I have two-three dreams in life. The first dream is that when I die and only truth of life is death, how many people come to my funeral and say, a good man has died. That is the greatest ambition in my life. Second thing is I want to earn the greatest wealth of the world in the most legitimate manner; practical legitimate manner and leave the largest part of it to charity.

Rapid Fire:

Q: Favourite trade – long or short?

A: Long.

Q: Rank the following companies on a scale of 1 to 10:

Q: Reliance.

A: I would rank it 2.

Q: Infosys

A: 1.


A: 9.

Q: Titan.

A: 8.

Q: Answer the following questions with just bullish or bearish:

Q: Crude.

A: Bearish.

Q: Gold.

A: Neutral.

Q: The S&P 500.

A: Bearish.

Q: The Indian bond market.

A: I expect the yields to go down. I am bullish on the bond market.

Q: The Nifty 50

A: I am bullish.

Q: If you weren’t a man of the market, what would you be?

A: I never think about it because being man of the market is so good and exciting.

Q: The worst advice someone has ever given you about the market.

A: You can never earn money in the market. You will go bankrupt.

Q: And the best advice someone has ever given you about the market.

A: Be careful. Be responsible. It’s fire.

Q: You have told me what you want to be remembered as. But what's the one piece of advice you would give someone who wants to get into the stock market?

A: First advice is respect the market. Have an open mind. Know what to stake. Know when to take a loss. Be responsible.