His predictions are dangerously accurate and lead you to believe that he has cracked the code of unpredictable market behaviour, earning him many followers amongst investors and his peers in the process. The man we are talking about is the Founder of Kejriwal Research & Investment Services, Arun Kejriwal, who feels that a direct approach and seeing everything first hand is the best methodology to tackle the intricacies of investing. Shaping fresh minds of B-school students in the equities segment is his passion. This self confessed fan of Bond movies is a maverick himself who believes adaptability and discipline have no alternative in the serious business of money making. Here he tells Mayura Shanbaug how he goes about investing successfully…
Your background?
I began my career in industry and was in marketing and administration. I joined the stock market in 1988 and have been through the various facets of the market. I started as a sub-broker, a remisier and set up shop for a Foreign Broking Housein India, and then finally set up my own advisory services. Currently my company Kejriwal Research & Investment Services Pvt Ltd does a lot of advisory work for corporates, brokers and HNI clients, but we are not brokers at any stock exchange.
At what point did you decide to make a career in the stock markets?
In my stint in Industry, I was involved in various sectors like tea, textiles, sugar, dairy products and paper and I realised that if I could sell tangible products, why could I not be able to sell ideas. It is at this point that I realised that the stock market would be a career for me.
How do you pick your trades/investments? Do you use technical analysis, or do you employ fundamental data?
At the vary outset, I am a fundamentalist and believe that money can only be made by investing in stocks and companies which have fundamentals. Technicals help in timing and for that I sure look at entry and exit points, but my stock and company selections are only based on fundamental. It may also be worth mentioning that I am not an advocate of intra-day trading
How would you describe your methodology?
I look at companies, do homework on them, meet the management and try to visit their manufacturing facilities. “Seeing is believing” is something I try to follow as far as possible and I must admit that visiting some remote locations has really widened my horizon and the learning curve. Having short listed companies, I then look at past performance and growth prospects. Investment is based on expected growth, never on today’s performance.
What appeals to you about Investing? Going short or long?
To be honest, I believe money can be made by investing and that means going long. Yes as a counter balance at times of extreme volatility, taking a contrarian view and hedging the index against the portfolio is a strategy which has helped and given rich dividends. Yes I am a born bull.
What differentiates you from other Investors?
I am not sure what differentiates me, but my clients and people from the media are quite taken aback when I say I am free during market hours. I believe that money is not made for the day and you need not be in the market every day, every hour and every minute. I believe this is the difference but whether it is a differentiator or not I am not sure?
What gives you that edge?
On this issue my experience in industry of a good 16 years, where I was in the other man’s shoes, realising problems of promoters and entrepreneurs, understanding that profits are projected on excel sheets but delivered on the shop floor, has clearly given me the edge. When you talk to senior people and you understand the process flow, machinery and when you meet people who were colleagues or from the same industry of earlier times, the respect, bonhomie and comfort increases many times over. I believe this is a big edge.
Is there any applicable lesson to investing?
You need to be disciplined and a student all your life. History repeats itself and the same happens in the market as well. I believe discipline and keeping your eyes and ears open will hold one in good stead.
How much of what you do is gut felt?
Interesting question. Yes there is an element of gut feel and this comes when the promoter shows you his creation and he talks about his vision, growth plans. Any promoter with passion and fire in his belly is capable of swaying even hardened analysts, but here the gut comes in. Experience and the meeting with the promoter and his team tell you whether to follow your gut or not.
Do you try to anticipate or follow market trends?
Trends are there for all to see. They develop over time and the mass follow. This is more for traders and I am not one. As far as trends in industry are concerned I closely follow them and sure benefit from the same. Just to give an example, a few years ago just before the global crisis of 2008-09 I spent about ten days meeting people from the textile space in South India. I met people of all types from a knitting machine owner to a textile owner and the despondency in people prompted me to believe that this sector has bottomed out. I then spoke to people in the market and people laughed. Well my clients and me made money and the sector has improved from that time.
When you put money on a trade and it goes against you, how do you decide when you're wrong?
Well this does not apply to me as I am not a trader, but my discipline would force me to keep a stop loss, square it off if it is hit, and analyse why it went wrong.
Any positions you ever lost sleep over?
Not over positions but on investments. In 2008, I had disinvested in the big fall post the Reliance Power IPO and was waiting for a fall in the market. My expectation was about 13,000 levels and I started entering the market from the 14000 level. By 12000 I was fully invested and when the markets continued to fall I did lose sleep. The reason was because I was losing more money or equal money compared to the guy who had entered at 16-17K and not sold, as I reinvested even the profits from my investments.
What would make you wary about an Investment?
If the share begins to rise immediately after I enter. I feel uncomfortable and then wary. If it falls after I have bought I am comfortable and then never cross my fingers.
Do you have a scenario about how the current bull/ bear market will end?
Where do you see the Indian markets five years down the road?
The current bearish trend which began in Diwali 2010 is likely to end in the first half of calendar year 2012. We should see improvement from there and in terms of making projections it is not only difficult but it puts extreme pressure on the person making it.
The Indian markets have been giving long term returns of about 13-15% over time and I believe that should not change. To expect a Sensex of 2200-24000, by 2015 year end should not be completely out of place. Bear in mind that markets become extreme at the fag end and depending on the mood and stage of the market at that time could be higher if the trend is to reverse.
Of the tens of thousands of investments which was your best?
Well I remember a particular stock IBP. IBP was a PSU oil marketing company and this was during the early days of divestment.
The stock was trading at some Rs 250 plus and was illiquid. I believed that this was a fit candidate for divestment and would happen comparatively easily. Reliance had set up their refinery at that time and they were quite keen on acquiring a distribution arm. In the end the company was bought over by IOC another PSU but the price at which the deal happened was Rs 1500.
Your success mantra?
Consistency and the fact that you need to change with time. My success mantra, money making is serious business and needs hard work and most important ‘DISCPLINE’
Any final words?
Tough times ahead at least for the next three months. Even if we see signs of improvement it will take its time to recover as by then the bearish phase would have been 16-17 months old. The US is giving some positive indicators and if that continues in the short term, global money will flock to the US and then profits will be diverted to other markets and asset classes. The Euro Zone is passing through a major crisis and it looks unlikely to be resolved in a hurry.
In India post the March results, industry should fare better and by that time with the market being ahead of the curve we should be improving slowly and steadily. The depreciating rupee and high interest rates would have a bearing, but with interest rates having probably peaked, things can only improve. The Rupee would take more time but probably by mid-year even that should happen. One can expect the current year to peak at or end around 17500-18000 on the Sensex.