Rakesh Jhunjhunwala, in his long and distinguished career as a billionaire investor, has seen many vicious Bear attacks and survived to tell the tale. But even he must have been shaken by the savage & barbaric manner in which the Bears have launched the present attack. The Bears have trained their guns on the portfolio and are not willing to let go even though the portfolio is bruised and bloodied.
We reported earlier how Rakesh Jhunjhunwala’s favourite stocks Bilcare, Visaka & Geometric had borne the brunt of the Bear attack and lost a large amount of his wealth (see Rakesh Jhunjhunwala’s favourite stocks fall from grace).
However, this is only a part of the story. After the shocking 20% + 20% fall by Bilcare on two successive days (despite reasonable Q2 FY 2012 results), another of his favourite stocks and latest purchase Pipavav Defence & Offshore Engineering plunged 20% on Friday and hit the lower circuit filter.
Rakesh Jhunjhunwala’s other favourite stocks VIP Industries, Autoline Inds, Orchid Chemicals and Subex also plunged between 15-28% in the past 10 days and his stocks have severely outperformed the market given that the Nifty fell only 4% since 4th November.
The Bears are adopting a tried and tested strategy to attack Rakesh Jhunjhunwala’s portfolio. They home in on the stocks that are heavily pledged and held by weak promoters. Once a stock is Bear-hammered and the stock price plunges, the lenders get panicky and call the borrower/ pledgor to provide more margin funds. If the promoter does not have the funds/ other assets to provide, the lenders have no option but to dump the stocks to recover their loans – this causes the stock price to plunge even further leading to a vicious circular effect.
The other strategy that the Bears are adopting is to spread rumors that Rakesh Jhunjhunwala is in trouble and is himself liquidating the stocks to cover up for the losses. One rumor spread by the Bears is that the Badshah has speculated heavily in Silver futures and that because the price of Silver has plunged, he has suffered huge losses. The other rumor spread by the Bears is that Jhunjhunwala speculated that the market would zoom and bought a large amount of Nifty futures. However, the reversal in the trend has caught him off guard.
The Bears are emboldened by the fact that Rakesh Jhunjhunwala keeps a dignified silence and does not attack the Bears. The Economic Times reported that the Badshah of Dalal Street kept a poker face and said “Let speculation remain speculation. People can say anything they want, I have no comments. I never talk about my trading bets.”
However, the Bears also know that they are playing with Fire in targeting Rakesh Jhunjhunwala’s portfolio because he did not become a billionaire by meekly accepting whatever the Bears throw at him. Rakesh has seen these Bear tactics several times in the past and one can be sure that he has a couple of tricks up his sleeve as well.
One should not be surprised if Rakesh Jhunjhunwala launches a blazing ‘Shock & Awe’ counter attack on the Bears and engineers a swift reversal in the stock prices. Such a strategy will catch the short-sellers unaware and in their panic to square up, they will end up buying more and more, thereby driving up the stock price and creating another vicious circle – this time in Rakesh Jhunjhunwala’s favour.
The master investor will, as usual, have the last laugh!