Ramesh Damanis Advice To Investors Amid Retail Frenzy, Key Bets And More

Ramesh Damani has learnt one thing from investing in the stock markets in the last three decades: "Buy a good-quality business, remain invested and enjoy the fruits of compounding.”

“If you buy a good-quality business and are fairly patient, there is a proverbial pot of gold at the end of the day," Damani told BloombergQuint’s Niraj Shah in an interview. And that’s why he advises his son to keep faith.

“I have seen the 1992 bull market, the 2003 bull market, the 2008 bull market and the current one. Each bull market must make you richer, stronger and wiser,” the market veteran said. “It’s not good to make a lot of money in a bull market and lose it in a bear market. A lot of those who have kept the faith and invested in Indian equities have grown richer, wiser and stronger at the end of every bull market.”

Damani’s advice underscoring the virtues of patience comes when the market is driven by frenzied buying and selling by retail investors hunting for quick return on everything from stocks to initial public offerings. And while India’s benchmark indices broke new records, volatility overshadowed the sentiment towards the end of 2021. The U.S. market appears to be nearing its peak, the breadth is narrowing and the Federal Reserve is on the verge of tightening.

Still, Damani sees “a very virtuous cycle” for India. The fact that the domestic markets have outperformed despite consistent foreign outflows makes him optimistic that India has a chance to do well. The tech prowess, higher salaries and a consumption boom as well as concurrent public and private capex cycles are likely to aid earnings, according to Damani. And further reforms by the government may help the economy and the investing sentiment, he said.

What gives him confidence is that the government revenues have improved. And also the likelihood that the central bank action won’t be more hawkish than expected as global inflation is not as bad as feared. Already, supply-chain issues are getting sorted, the stimulus benefits are coming to an end and commodities starting to cool.

Key Bets

Damani suggests that 25-30% of the portfolio should be in technology stocks. While new-age platforms are available, he is sticking with IT services companies citing valuations. The starting point on a valuation ladder should be palatable and there should be a margin of safety, something that is absent in the platform business, he said. Instead, digitised businesses like brokerages are better plays, he said.

“One has to go through a lot of pyrotechnics to be able to command the kind of stratospheric valuations that one of the largest edtech players might have,” he said.

Damani sees a high probability of a strong capex cycle, providing opportunity in a lot of stocks. And if the assumption on the capex cycle turns wrong, then even the market won’t remain bullish as capex is expected to be a key pillar for economic growth, he said.

Damani is most bullish on public sector companies which, he said, are “very attractively d”.