Prashant Jain, the CIO of HDFC Mutual Fund, has been following a set routine for the past several years. When the market cracks to a significant extent and the average Raju investor runs away scared, it is Prashant’s job to calm his nerves and get him to come back and continue investing in stocks.
In May 2012, Prashant Jain was drawn to the end of his tether. Things were so gloomy that nobody was interested in stocks. In desperation, Prashant penned a piece titled “Its tomorrow that matters” in which he pulled out all the stops. Apart from copious reference to the scriptures (Kabir’s Doha), Prashant referred to three occasions when the stock markets had cracked – October 2001 (the 9/11 attack), June 2004 (defeat of the BJP) and November 2008 (sub-prime crises) – and pointed out that if one had closed his senses to the sights and sounds around him and blindly bought stocks, he would be staring at a great fortune today.
| Performance of investments made in adverse times | |||||
| Time | Sensex Level | 1 yr forward P/E |
Main news / reasons | Total Returns after 3 years |
Total Returns after 5 years |
| Oct-01 | 2989 | 11 | 9/11 attack on WTC, global markets collapse | 91% | 334% |
| June-04 | 4795 | 10 | Unexpected defeat of BJP in general elections | 206% | 202% |
| Nov-08 | 9093 | 11 | Sub-prime crisis – Lehman collapse | 77% | N.A. |
| Source: HDFC MF’s note | |||||
Prashant Jain’s message was/is clear and unmistakable. If you buy stocks when the markets are down and there is great pessimism, you are guaranteed to make big money in the medium and the long-term.
Prashant Jain has been forced back to the drawing board because yesterday’s savage crash of 1625 points (5.02%) on the Sensex has sent shock waves across the investing community. The average Raju is again wondering whether investing in equities is such a good idea after all.
In his latest talk, Prashant Jain once again took investors on a history lesson, emphasizing that whether it was 2001, 2008 or 2013, whenever Indian markets have been trading at a reasonable value and have come off sharply because of global factors, it has always been a good opportunity to buy.
His words of advice require to be etched in stone:
“… one should focus on the local fundamentals because that is a driver of market medium to long-term. And one has observed that whenever market has fallen despite good fundamentals locally, due to global factors, these have proven to be very good times to invest in the medium to long-term view. So, I feel the same that the Indian economy is on the path to recovery, our current account is in very good shape, India has great growth prospects, our interest rates should come off as inflation has fallen much more than what was expected. So, all macro-economic indicators are green and we should do quite well over time.
……
I have seen that whether it was 2001, whether it was 2008, whether it was 2013, whenever Indian market have been trading at reasonable valuations and have come off sharply because of global factors. However, stock markets are indeed driven by sentiment over short periods of time and that is what we have seen on each of these occasions. But if the local fundamentals are good after three months, after one year, these things pass and with the benefit of hindsight, you realise that it was actually a good opportunity. Nothing was wrong with the country. It is just that stock market moved down because of weak sentiment towards equities globally.”
Now, the million dollar question is whether the average Raju is listening and whether he is inclined to follow Prashant Jain’s golden words of wisdom.
Mr Parshant Jain advice is good.But his mutual fund scheme are no longer fareing good and his top schemes like HDFC top 200 and HDFC Equity are no more darling of market.Returns are below average and ratings are single or two star out of maximum five star.It seems Mr Jain himself need some advice to improve his schemes performance.
Dear prasant
in my expirance that fund managers are shooting on others Shoulder,if succeed than keep colurs up we are fund managers otherwise …….manegers and nav dubbed in deep sea
In a probabilistic field like investing a good process may lead to bad short term results and vice versa. Only results over a very long term period can differentiate between a good and bad process.
MR Jain’s Advise is good but which stock one is suppose to buy at these levels when all the major performing stocks are low eg Wipro which was doing good in IT Sector are posting losses from past 2 quarters same is the case with Auto Sector which was doing good due to the MAKE IN INDIA program a clear eg is Amtek Auto I have just cited few examples now from this level one has to worry about investing in stock and also which sector one has to invest from hereon that is the main point
Investing in equities is a no brainier. You WILL make money. It is a guarantee. Invest in stock with good fundamentals, and better management. There is a sea of money to be made. Suven Life sciences, Suprajit Engineering, Dai Ichi Karkaria, my goodness. These stocks are primed for guaranteed returns. If you just invest and hold for a year. All have new plants coming up,meanings are visible in the near future. There are many more such gems out there. But the key is so simple it has become unbelievable to the average investor. Here is what you need to do. Buy today, hold for 1-2 years then sell. You will make money. It is ridiculous, it is this simple. If you need to know about any other stock, then you can ask me and I will give the truth about them.
Here in his above table – “Performance of investments made in adverse times” Mr jain has taken the Sensex bottom to calculate the 3 yr & 5 yr return.
for eg : Lehman crisis happened in Oct 2007 and then major crash happened in Jan 2008 wherein the sensex crashed from 21000 levels and made a bottom of ~8700 in Nov 2008.
who would have predicted that the bottom is placed at 8700..
for a investor, post jan 2008 fall, he would be accumulating since jan 2008 and the amrket kept falling.
very good point. you are too smart to waste your time on boards like these that like to talk up stock prices. suddenly no discussion of performance of daljeet singh and ashish kacholia. so arjun what is up with prices of kitex, pokarna, shreyas etc.?
mr prashant jain was good fund manager but what has happened to his expertise that hdfc prudence fund and many others managed by him has negative alpha, which speak of his performance in the last year.