Sunday, August 1, 2010

Markets may hit a new high, Titan best pick: Jhunjhunwala

On July 22 when Nifty touched a 30-month high of 5442, experts and investors — both foreign and domestic, began betting high on Indian markets which has shown a remarkable recovery. With corporate India announcing generally good first quarter results, the scenario appears promising and inviting.
India’s own Warren Buffet Rakesh Jhunjhunwala is the original bull of Indian markets. His optimism is palpable when he says: "The way the market is technically rallying and if there is a good monsoon, I wouldn’t rule out 6300."
However, according to him at 5400, lots of people are left out of the rally as they are waiting at the sidelines for a buying opportunity. His acumen in picking stocks has influenced many. On turning 50, Jhunjhunwala laments on the stocks with which he is emotionally attached to and which helped him made money.

In an interview with CNBC-TV18’s Managing Editor, Udayan Mukherjee, Jhunjhunwala said that Euro is being overplayed. He said that India’s economic growth cannot be suppressed.
Following is the transcript of an interview with Rakesh Jhunjhunwala on CNBC-TV18. Excerpts:
Mukherjee: Do you think we are breaking out of this range, the one 12-15 month range that we have got stuck?
Jhunjhunwala: I think we will breakout, whether we have broken out or not, ultimately we will. And I also think that Euro is being overplayed. The manufacturing index in Europe has surprised everyone. I think whatever crises have been created by Euro and by the Chinese perception, I think that is getting reversed decisively.
I personally think that there is going to be a double dip, may not be a recession, but it will be slowing of growth. But I think it is better for India that the world grows at 1% and India grows at 8%, rather than the world grows at 2%, and India grow at 9%.
I think India’s economic growth cannot be suppressed. I think we have good government, they would do something, at least there is a will. I don’t know how much they will be able to do. So I remain the eternal bull. At the same time, I personally feel that there is going to be uncertainty maybe 12-24 months later.
Mukherjee: 12-24 months later?
Jhunjhunwala: Could be because today the problems in Greece, Portugal or in Spain are for real. Now the question is when will they blow off. See one thing is a fact, I feel personally that American growth cannot be more than 1-1.5% for the next five years for the simple reason they have to save, and they have to under leverage. But even if growth slows down, if software exports hold and if commodity prices are reasonable, what is India going to do with the world.
Mukherjee: So you think you could have a 1% US growth in the next one year and India could be heading towards a new high?
Jhunjhunwala: Absolutely, why not?
Mukherjee: Do you think it will happen?
Jhunjhunwala: I think it can happen.
Mukherjee: So when will you see signs of that?
Jhunjhunwala: We are already seeing signs today, every broker whether it’s Goldman Sachs or Credit Suisse, all have downgraded US economic growth. India is now at 24 months high, China is rebounding. I have learned in life when anything tries to outperform or go against public opinion, the initial reaction is always contempt, and people join the party only at a later stage. So I think that could be happening in India.
Mukherjee: Do you think a lot of people are left out at 5,400 plus, a lot of people are still out?
Jhunjhunwala: What do you think?
Mukherjee: I think yes. What do you think?
Jhunjhunwala: I also think the same.
Mukherjee: You sense angst when you talk to people because everybody has been waiting for a big dip to buy, still not coming?

Jhunjhunwala: Look at the call pricing. If you look at the call for a stock, it’s unbelievable. That itself is an indicator of what low expectations people have, and markets are showing absolute opposite. I think it would be a golden opportunity. We could be on the brink of something big.

Mukherjee: You think we could have a high this year also?
Jhunjhunwala: Who knows.
Mukherjee: Possible, you think?
Jhunjhunwala: Surely.
Mukherjee: 6,300, this year?
Jhunjhunwala: I don’t know 6,300. But, yes, we could have a new high, the way the market is technically and if we have good monsoon, of course there are a lot of ‘ifs’, but I wouldn’t rule it out.
Mukherjee: Do you think we have a floor at 4,700-4,800 for the Nifty now?
Jhunjhunwala: I think we have floor at 5,100.
Mukherjee: No, I said 4,700 because that’s been the floor for the last 12-15 months. You do not see going there again?
Jhunjhunwala: I do not think, unless and until something untoward happens.
Mukherjee: Do you think 5,100 is a new floor for the market?
Jhunjhunwala: I would think so.
Mukherjee: So you are superbly bullish. Why you are saying you are cautiously bullish, 10% chance of double-dip?
Jhunjhunwala: I think two opinions. One is maybe the next nine months to one year and one is maybe the period beyond that.
Mukherjee: That second view I know, you tell me about the first nine months?
Jhunjhunwala: First view, I am bullish, second view, I am cautious. I think in nine months to one year, nothing is going to happens which is very untoward in the Western world. Beyond that, I cannot say and then India will get affected, if there are major crises in banking or there is actual recession, means that there is negative growth, all that which I do not rule out.
Mukherjee: But first we will see a high and then the correction will come, not the other way round you are saying?
Jhunjhunwala: My feeling is we could see it in six-nine months. What I personally feel is that in Western world and Europe you are not going to see major problems in the next 9-12 months. Beyond that, we do not know.
Mukherjee: I want to come back to your portfolio, since we are talking 50 years, what is the best stock you have ever owned, your all time favourite stock?
Jhunjhunwala: Titan, I wear it on my hand.
Mukherjee: Just because it has made you money? There is no other emotional attachment to any other stock?
Jhunjhunwala: Look at the company.
Mukherjee: It has done superbly, phenomenally well; I thought it might be a close contest with Lupin, which is another stock, which has made you a lot of money?
Jhunjhunwala: No, I think a stock in which I have emotions is in Karur Vysya Bank.
Mukherjee: Why? What is the story?
Jhunjhunwala: Look at the sheer performance. There is 21% compounded growth in profits for the last ten years, comes from a place nobody knows called Karur. It is not a small bank now, its profitability is about USD 90 million, growing at 20-25% and I own it since 1992-1993-94.
Mukherjee: You haven’t sold anything?
Jhunjhunwala: No, I haven’t sold. I think this investment has given me I don’t know how much thousand percent return.
Mukherjee: In the listed space, one stock which really makes you angry that you bought that?
Jhunjhunwala: Infomedia18. I sold it just about six months back. But if you look at the stats, special interest publication magazine with a market in America, leadership in yellow pages and I held the stock for at least for seven-eight years.
Mukherjee: Eight years?
Jhunjhunwala: May be seven-eight years and then I sold it, maybe with some loss. Though I think good industry, good positioning, but I never made money.
(Note: Web18, which owns Moneycontrol.com and Indiaearnings.com, belongs to the Network 18 Group).
Mukherjee: You bought VIP recently, what attracted you to that story?
Jhunjhunwala: It is a no-brainer in terms of growth. In travel, it dominates. I started buying it at Rs 65. My average cost would not be more than Rs 120 or maybe less. So, it is a no-brainer, according to me.
Mukherjee: What do you think of banks? You have never spoken about that, it is a big industry, you have spoken once or twice about State Bank to me in the past, are you bullish or bearish, because it seems like the bellwether in the system right now?
Jhunjhunwala: I was very bullish on State Bank, but now I am negative on the stock because I don’t like a bank who cannot provide for its bad debts. They are under providing every quarter and they need time from RBI to make 70% provision. But one thing they may have upside and uprun now, but over a medium time period all of them will need capital, which is one thing, which will dilute returns.

Mukherjee: You were speaking about government policy, I remember you telling me about IOC some one-and-a-half years back, were you holding it from then, did it work out finally?

Jhunjhunwala: I was holding some shares but I have sold it. I did not make much money, and I made money after this decontrol. But this was inevitable, it has to happen.
Mukherjee: But you are out of it now?
Jhunjhunwala: I am out of it.
Mukherjee: You made your money and you left, you don’t think there is huge upside which has opened up after what the government did?
Jhunjhunwala: Essentially, the oil marketing companies were being paid entirely by the government. Only the payments were delayed, there was uncertainty and there was liquidity problem. But that is what will be solved, it’s not that the profit will go up. But because of the fact that it was an imperfect market, the value of their marketing networks are not being recognised. So now that will be recognised.

7 comments:

  1. rajeev desai is todays warren buffet rj is past

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  2. rajeev, i still hold YashrajContaineurs Ltd. as per your advise. Are you still positive on this stock or do you see any reasons as to why it is not moving up?

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  3. Hi Prem,
    I am seeing there is a 4 cr int outgo for June qr which is usually 1 cr .....that is why Yashraj has showed a loss and hence it is not moving.
    You can switch over to Rathi Steel which is almost at the same price.....

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  4. 知識可以傳授,智慧卻不行。每個人必須成為他自己。. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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  5. Hi Rajeev,

    Hope you are doing great. there is a small query regarding Vijay Shanti Developers. The Promoters holdings have gone down in June. Though I am bullish on the scrip but still if you have a prospective to it. Also in case you track Bio Green Industries, can you through some light on it. Surana Corp has come up with excellent results. Loyal has already given 33% from you call. Salute to you,your experience, expertise and wisdom.

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  6. Dear Rajeevji,

    Market is zoooming and hitting every day 52 weeks heigh. One of your picks, IFB is rocking and it's given almost 70% increase now from your call Rs.92. Great pick you had given on 4th April 2010. Hats off to you Sir.

    Regards,

    Jayapal

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  7. Hi Rajeev,

    Suryavanshi Mills have come up with good results. I am looking at the growth if what they said in the AGM was corect. Here is the snapshot of what they said. "Suryavanshi Spinning Mills Ltd has informed BSE that the Board of Directors of the Company at its meeting held on August 02, 2010, inter-alia, have approved and authorized Sri J. K. Agarwal, Executive Director and Sri. B. R. S. Reddy, Vice President (Corporate Affairs) & Company Secretary to issue Notice through postal ballot for seeking approval of members for amendment of other objects clause to undertake new business of generation of power, mining etc. from such date as and when the Board of Directors may deem fit. " . Similarly please comment on KIC metaliks I think its will be huge. Please give your expert view.

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