The best time to invest in India was 1991 and the second best time is today: Ramesh Damani

Fifteen years ago, in his first interview with ET Now, Ramesh Damani said that India’s best is yet to come. Thank you for that 15 years ago.
Ramesh Damani: I remember very well that 2009 was a great year. The market crashed in the first half. But we ended 2009 with an 80% gain in the Sensex; the Sensex was at a high of 17,000 at that time. Today it is close to 77,000. 2009 was also associated with the coming to power of UPA 2.

When ET Now started, UPA 2 was in power. On our fifth anniversary, well, there was another change in government. On our 15th anniversary, there is an election cycle again. How do you expect the next five years to be different from the last five years? The last five years have been affected by Covid, but have also been a hallmark of wealth creation?
Ramesh Damani: Early in my career I learnt from two greats, one of whom was Rakesh Jhunjhunwala. He always emphasised the importance of being optimistic about India and events have very nearly proved his point. In 2009, the Sensex was at a high of 17,000. Today, we are at 77,000. Reaching 77 from 17 seems like a big leap. But over a 15-year period, the CAGR on the Sensex is only 11-12%.

However, the longevity of growth and the sustainability of growth is what is creating the magic that you are seeing in the market. So, when we were young, if you remember, we all used to play a game called pass the pillow and you wanted to pass the pillow quickly because you thought the music would stop and you didn’t want to be left holding the pillow. We are doing the opposite now. The longer we hold the pillow, the better the returns and the more money we make as stock market investors.

People always ask me what is the best time to invest in India? We missed the last five years, ten years, whatever. And I always give the following answer; I say, the best time to invest in India was in 1991 when Manmohan Singh presented his liberalization budget. The second best time to invest in India is today. If you don’t play you can’t win. The market is looking up and I think it will go up over time. There will be volatility, as we saw during the election time as well, but I think over time, five years from now, on your 20th anniversary, I am very confident the market will have bounced back significantly.

The differentiating factors for Indian markets are the arrival of retail investors, SIP flows into small and mid-cap stocks and a huge leap of faith on June 4, when there was institutional panic and Indian retail investors calmed the market. What is the significance of this arrival of retail investors? Is it good? Is it bad? Because history tells us that when retail is active, it is time to watch your back.
Ramesh Damani: Not really. I think it is a good thing. I just want retail investors to do a little more long-term investing and a little less F&O investing or F&O trading if they are willing to do that. I just want them to move forward because you don’t get rich in a bull market by making 20 points on a stock. You get rich in a bull market when the stock goes up 5X, 10X. As you would have seen from the COVID lows, I can name almost dozens of stocks which are up 5X, 10X, sometimes even 20X from the lows. So, I expect retail investors to come into the long-term category rather than the trading category, which is definitely happening through the SIP route.

So, it is happening through the SIP route but individual retail investors are very excited about F&O or options trading because there are tax incentives there. I think it is probably a little short-sighted on their part but it is a fantastic development and for the first time we will see retail investors, domestic investors and foreign investors who were selling off for most of last year and now they will start entering the Indian market and if that happens we will probably melt with joy.

Ridham Desai had said some time back that this bull market still has a long way to go. Bull markets peak when there is full euphoria, bubble valuations or earnings growth. There has been no rise in market valuations. We have euphoria, but equity penetration levels are low, and we are still in the middle of an earnings expansion cycle. Can I say that we are not close to the historical benchmarks that have triggered the market boom?
Ramesh Damani: Very difficult question. I will answer it in two ways. Be honest and make sure your viewers understand how difficult it is. The market volatility on June 4 scared even a 30-40 year veteran like me. That is all I saw and in our worst case scenarios we did not think the ruling party would get 240 seats, which is what they ended up doing. So, there was a sense of panic before going into trading that day.

But as I have told you many times before, we have to distinguish between market volatility and permanent loss of capital. We have seen more cases of extreme volatility than permanent loss of capital. Many people in the market have often told you that whether there is a war going on or a change in administration, the bull market in India will continue.

I have gradually come to agree with the view that the trick is to stay invested in high quality businesses and be able to ride out the volatility that we call belly-aches. Coming to your specific question, are we seeing signs of a bull market peaking there? We possibly saw one on June 4. At least I feared that was happening. But I think on balance, that was probably a premature judgment. And I agree with Needham that the bull market probably has further to go and the top classic signs that we see in a bull market have probably not yet coalesced at this point.

You have been a PSU bull for a long time. When you started buying PSU stocks, you were in the minority. Today, buying PSU stocks is more like a collective approach. Where are PSU stocks headed? Is the leadership still intact?
Ramesh Damani: There is no question in my mind. The leadership is with PSU stocks and instead of telling me to buy them, which is good, of course, I enjoy the returns and the results that have happened and a great credit goes to the PMO because they have enhanced the corporate governance of these companies. For the first time in India, now the debate is over. Everybody including me will say, well, we like PSU stocks and we hope the government will privatise these PSUs so that value can be unlocked and national assets can generate returns on capital for us.

But we have no problem with the government owning it. At least I have no problem with it. I think the government has shown that they can extract value and deliver results year after year and that has been reflected in the performance of the PSU index. For the record, I feel good to say that a lot of your analysts who came on TV said very derogatory things about PSUs, they said, oh, it’s a race to zero or they said it’s reverse value migration. I hope they are eating humble pie. There is another principle in the market which is very, very strong which people should always remember, that everything has a price.

One could buy the best companies in India, like Infosys or Lever and not get any returns for 10 years because that was the price or you could buy those PSUs where they were practically throwing away at the Covid lows and because it’s so cheap to buy, you could make a lot of money there. So, I’m very bullish on the PSU basket here. We have rotated, we’ve rotated some of the more, we think, “expensive” stocks into cheaper stocks, like in the construction, gas business, but we remain well invested in that basket.