Rakesh Jhunjhunwala was 24×7 in the market, he used to go for his morning walk and discuss markets, come to the ring to discuss markets, have lunch and discuss markets, said his friend and renowned investor Ramesh Damani in an interview with Moneycontrol. He added that those associated with the capital markets will remember August 14, 2022, as that’s the day one of the icons who held the markets together in India passed away.
He said their common friend DMart founder R K Damani introduced him with Jhunjhunwala. “Since then or since 1989 till 2022, we’ve kept in touch as friends, have travelled together, drank together and had fun together. It’s been an extraordinarily long journey, and an extraordinarily profitable and insightful one for me.”
Rakesh Jhunjhunwala’s First Break As An Investor
Ramesh Damani said that as is commonly known, Rakesh Jhunjhunwala came into the stock market in 1987 with Rs 5,000 or $500. By the time he passed away, his worth was something like $4 billion or about Rs 28,000 crores. If you calculate the CAGR (compound annual growth rate) over the last 35 years, it comes to 54 per cent. It is extraordinary.
His big break, which moved him into the super league of investors, if you will, came in the 2003 bull market. By then he had been in the market for 15 years and had made some money in Madhu Dandavate’s (former Finance Minister with the VP Singh government) budget. Rakesh had made a bit of money in tech, though not as much as other people. Then, in 2003, to take the sports analogy further, instead of seeing a cricket ball coming at him, he saw a football coming at him.
“He realised the new bull market was coming and wrote the now famous article for The Economic Times, titled the ‘Coming Bull Market in India’. The index went up from 4,000 to 12,000 or 20,000, I think, over the next five years, his three picks at that time–Titan, CRISIL and Lupin–all became almost 100 baggers over the time. That was a defining moment,” Damani said.
Rakesh Jhunjhunwala As A Trader
Ramesh Damani said that one of the first trades he did was in Tata Power, where he realised that the cost of borrowing was less than the dividend yield. So he borrowed money, bought the shares, got the dividend, repaid the interest and the stock went up. It was a very calculated trade, which was placed on the difference between the cost of borrowing and the dividend yield.
“In his early years, he used to trade in the Calcutta Stock Exchange or the Lyons Stock Exchange, which was fairly active then and had more relaxed margin requirements. So, while a lot of his early years he spent trading in Calcutta, he’s made 90 per cent of his fortune through investing,” Damani said.
His initial money was made in trading. It was only 2000-03 that he converted to investing. To truly make wealth, he understood that you need big blocks of publicly traded stock. The initial money was made through trading, while serious money was made through investing.
Rakesh Jhunjhunwala’s Market Abilities
Damani said there were two or three things that really helped him. The first was his uncanny ability to predict when a bull market was about to begin. “I’ve seen him predict the trend in the 1989 bull market, then the bear market in 2000, 2003 and 2008. When we bottomed out at COVID-19, he told us in a concall with his friends that a new bull market is beginning and now it seems astute. How do you have the guts to say, in the middle of COVID, when people are scared of their lives, that a new bull market is here? We have all since seen how the market doubled in the next year or so.”
So, to be a trader, you have to have an extraordinary ability to understand where the market is going. I think that was a God-given ability he had.
“The second thing is that these guys are beasts of the market. Rakesh was 24×7 in the market. He’d go for his morning walk and discuss markets, he’d come to the ring to discuss markets, he would have lunch and discuss markets, he’d go for a drink and discuss markets. Trading is an obsession. It cannot be done in an intellectual manner,” Damani said.
He added that the third thing that distinguished him as a great trader was his ability to take losses. If your trade goes against you, you need to square up the trade and move on to the next one. A lot of traders cannot do that.
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