There is a very good reason why we should listen to, and implement, the precious advice given by enlightened people like Rakesh Jhunjhunwala, the Badshah of Dalal Street.
On 3rd October 2012, when the markets were absolutely in the doldrums, the Badshah sent out the clarion call to all his disciples to buy stocks because the “Mother Of All Bull Markets” is coming. In giving this advice, the Badshah had reiterated an earlier advice that he had given in June 2011, when the markets were in an even worse form.
At that stage, I had correctly predicted that “Rakesh Jhunjhunwala’s words have the unmistakable reality of the Gospel truth. You can see from the shine in his eyes, the confidence in his voice and the clarity in his thinking that the Badshah of Dalal Street knows what he is talking about”.
If you study both interviews of Rakesh Jhunjhunwala in detail, you will find that he is not just dishing out advice, but he is giving convincing reasons why he feels that the markets are headed upwards.
Obviously, all of that has come true now.
Anyway, now, in May 2014, Rakesh Jhunjhunwala has again given an interview which requires to be studied carefully. The advice has to be understood and implemented by all of us.
The key aspect of the interview is Rakesh Jhunjhunwala’s advice that we should not focus obsessively on the election results or on what the new Government will, or will not do. Instead, he says that as long-term investors, we should focus on picking stocks with great fundamentals.
Even if the market plunges in the short-term, we should not worry, the Badshah added by stating that if there was a massive sell-off (by the FIIs), the rupee would plunge (owing to the outflow of billions of dollars) which would be great news for exporters like pharmaceutical and software companies. “They are good quality companies who have nothing to do with what happens in the Indian administration” the Badshah emphasized.
The Badshah also gently reminded us to keep faith in the Indian economy with the prophetic saying that “India has got great scope to grow; Indian people have great skills, only what you needed is confidence and the ability of decision making and process simplification”.
At this stage, we must also remind ourselves of the inspiring advice given by Bharat Shah of ASK. Bharat Shah has given superb advice on why investors should focus on businesses which are of high quality, represented by superior return on capital employed, with clean balance sheets and have managements whose governance and competence one can believe in.
Speaking for myself, I am religiously implementing the advices given by Rakesh Jhunjhunwala & Bharat Shah. First, I have a basket of about 20 top-quality stocks that score well on all investment parameters such as high ROE, low debt, strong brand, quality management etc, etc. These are powerhouse stocks that are able to overpower the competition and do well even in adverse circumstances. Second, I am systematically deploying my funds into these stocks in a slow and steady manner. This way, I am able to take advantage of dips in prices to buy more. By implementing this technique, I have been able to build a robust portfolio.