Trading has changed a lot in me, says................ A chartered accountant, Mr Junjunwala is a firm believer in equity and that too, direct exposure to equity. "Since 1985, when I bought my first share, this has been my full-time business. Today, I do not have a single paisa which has not come from the stock market,'' he says proudly.
Asked if the market has given him good returns, he responds, first with a broad smile, and then: "Well, I am Mumbai's highest tax-payer in the individual category... of course, that was earlier and not now.''
He believes that being a chartered accountant has helped him understand the capital market. "For investing in stocks you have to understand the business of that company and the laws it has to follow. Being a chartered accountant allows you to understand all these things, including annual reports.''
His investment strategy is very clear: A part of his money goes into long-term investment and that portfolio gets churned rarely. But the part he invests in trading is being reviewed and churned constantly. The advantage of trading is "that it has given me the capital for my long-term investment.'' Though at any given moment he might be invested in the same scrip, both for trading and for the long haul, the strategy he adopts is to make a clear demarcation between the two. "Trading and investment are two distinct activities requiring different thought strategies and approaches,'' he says.
"For instance, in trading, the immediate moment or the immediate week is important; but in investment, even the immediate year is not important. I have been a shareholder of Apollo Hospitals for seven-nine years now. I bought it at Rs 20; and I sold at least six lakh shares at about Rs 350.''
The first share he bought in 1985 was Tata Tea. It doubled in three months and he sold it.
So, should investors get out when a share has given good or expected returns?
"Not necessarily. Investors should not have any set targets. We can only invest in the realm of possibility and the possibilities change with circumstances and times. So, we must re-evaluate our strategies periodically.''
Explaining why an investor should not have set targets, Mr Junjunwala says, "Take a shareholder of Infosys. An investment of Rs 1,000 today might have become Rs 10 lakh. If the investor had set a set target, what kind of returns would he have made from this scrip? Would he ever have imagined it would give so many bonuses or that it would touch a high of Rs16,000?''
A good strategy to sell a share would be getting out when you have lost 25 per cent of your notional gain. "Suppose you had bought Wipro at Rs1,000 and it goes up to Rs10,000. If it starts falling and comes down to Rs 7,500, you should sell it. Along with that, apply your judgment on the status of the market. Supposing the market is very bullish and people are very gung ho, that is the time to get out. Another cardinal principle you should learn from the market is never expect to buy at the bottom and sell at the top because you cannot catch either,'' he says.
Interestingly, he did not buy Infosys "and that will be one of the biggest regrets of my career and I have decided to get that written on my grave... that I missed buying Infosys.''
Returning to timing one's exit, which can make a big difference between winning or losing at the bourses, he says:
"There are various considerations which you have to take into account. You might decide to get out from one share because you feel there are better alternative investments. Otherwise, it might not make sense to sell a share that might give you even better returns. So, I would again stress, investors should not have pre-set notions.''
Elaborating, Mr Junjunwala says that basically an average Indian saves for "three purposes; to buy a house, for the children's education and marriage and for old age.
So, depending on the age profile of a person and his family responsibilities, I would say that he should have between 25-75 per cent of his wealth in stocks. I would put the average exposure of an individual to equity at 50 per cent.''
And he believes that this will be a sound strategy to follow at any age. When you look surprised, he responds thus.
"I advocate this because in India, it is not possible for ordinary people to invest in real estate; the prices are too high. After you have got a house and have, say, Rs 4-5 lakh to invest, I would advise 50 per cent in stocks — either directly or through mutual funds.''
But he himself does not believe in mutual funds and has no exposure in MFs. "I sit here, day after day, doing actively what the mutual funds are doing. Mutual funds are for people who do not have the time to track their investments.''
Today, Mr Junjunwala is invested in about 40-50 scrips spread across sectors and that give him a feeling of safety. His strategy is not necessarily to go to the top companies of any sector; if a well-managed company is available at an attractive valuation, he buys it.
He has an interesting response to what 15 years' exposure to the stock market has taught him.
"Several things. It has made me dynamic, but then it has also humbled me. I was once one of the most dogmatic men. But the market has taught me that I can often be wrong. It has also reinforced my views of a capitalist society. It has taught me that ultimately the stock market does recognise and respond to reality.
You can create aberrations in the market; but those aberrations do not last. It is in recognition of those aberrations that our opportunities come in life. But then greed becomes a problem.
Today, if you get 9-10 per cent from bank or fixed deposit, and if the market can give you 20 per cent return, through dividend or price appreciation, still people are not happy. People's expectations from the market are much higher.''
Mr Junjunwala adds, "You asked me about how and why I missed buying Infosys.
That is yet another lesson the market has taught me. "Make mistakes, but do not keep repeating the same mistakes over and over again. And do not regret. Learn from mistakes, but do not regret.''
But though he missed the Infosys boom, other technology shares have given him rich returns. BFL Software is one. "I bought this stock at Rs 70 and sold at Rs1,400; PSI Data I bought at Rs 10 and sold at Rs1,100. I have made money in CMC too; but then there have been counters where I have lost money too.''
Another stock that has been a huge winner for him is Sesa Goa which he bought at Rs 30 and sold around Rs 1,500, after keeping it for three years.
Surprisingly, Mr Junjunwala has not invested in bluechips of the yore, such as an ITC or Cadbury.
Not too forthcoming on how he picks his stocks, he says breezily, "Investment and trading are something which cannot be taught. They have to be learnt; by watching, by making mistakes and by experience. Also, I do not believe that successful investment is mere intelligence or research; it is wisdom.'' But he is quick to point out that he is not an epitome of wisdom. "I have made and continue to make lots and lots of mistakes.''
At the moment, Mr Junjunwala is bullish on the stock market; if the Sensex goes to 3,200 and remains there, it will be a "good time for investors.''
As for the sector of his preference, he is bullish about technology and the PSU sector because "these stocks are undervalued and divestment is inevitable. As inevitable as death.''
Right on cue, his phone rings, his advice is sought, and BHEL is recommended.
On the present rally lasting he has an interesting point to make. "As long as there is doubt in people's minds... and I can see only doubt... the market will go up.''
His advice to small investors is never to "fall in love with your stocks. Also, a common mistake investors make is that just because something has gone down, they buy it. Or because something has gone up, they sell it. This should never be done; either in investment or trading. Another advice I would like to give is: Do not be sticky about the brokerage, go to brokers who can give you right advice, even if they charge a little more.''
