Money Talks – An Interview with Mr. Ashwani Gujral
You’re a famous personality in the investment and the stock-market world now. How did you make the transition from studying engineering at MIT to money management?
There was no transition. Anybody who studies to be an engineer need not pursue hardcore engineering. Engineering gives you an analytical frame of mind where you’re encouraged to question things and your curiosity grows. When I went to the US, it was the right place for asset management and investment management. While I was there, I read a book called ‘One Up on Wall Street’ by Peter Lynch and realized I wanted to be an entrepreneur, and that something like this can be done back in India. I never wanted to stay in the US. When I came back, it was very difficult to even get an annual report from the ROC (Registrar of Companies) – there was no Internet. You had to pay a bribe to get an annual report. So, I focused on the technical aspects of the market which is looking at stock prices and chart prices. They say ‘fortune favors the brave’, our markets were transitioning at the time; they were becoming more and more sophisticated. We got ‘Futures and Options’ introduced in 2000. Since India was an emerging market, the general interest in speculative instruments was much greater. Technical analysis became a rage. Along with technical analysis, I have written a couple of books that are best sellers. We also run a SEBI registered firm – SEBI is the official regulator – which offers money management and trading advisory services. Whether you’re a ten-year investor or you’re a five-day trader, we help all kinds of people. Engineering gave me an analytical ability, business skills, and life skills.
MIT makes you mentally strong. It gives you a pan-India perspective and good people-reading ability. All of that is important too; it’s not just what you read in books. It has brought me a long way in terms of how I present my material. When it comes to appearing in media channels, having studied at MIT and interacting with people from all over India, I am able to add colour to my commentary. That widens the audience. Someone else might give you a dry type of commentary, but I have added my own style to it like Siddhu does in cricket.
The thing with investment is that India is moving towards financial savings, that is where most countries move. Earlier, people used to invest in real estate but now (with demonetization) you have to invest in stocks. In a way, I saw this coming fifteen years ago. A general interest in entrepreneurship and an interest in the investment-world made me construct this sort of a business.
People, sometimes, find the stock market to be risky and highly unpredictable. As someone who has worked as a portfolio manager, how would you convince a client of your ideas?
In the consulting world – it could be law, chartered accountancy or medicine – if I come to you and merely tell you that I’m a good doctor, you will not seek my consultation. The correct way of doing it is to build a profile. I appear on television, I have written bestselling books, and my comments appear in newspapers so I’m already soft-selling it to the audience.
People watch me on television for five or six months before they decide to approach me. To become an expert, you have to be present on all kinds of media. You can’t simply cold-call to obtain clients. Once you’re established as an expert, people are willing to pay you you’re quote. No business can be run by putting out advertisements. Advertisements can build a brand. It can’t get you you’re business. That’s the whole idea of consultation. People are not buying what you sell, they’re buying what you stand for. I stand for financial freedom and to live my life on my own terms.
Following up on that, while there may be some clients or viewers who benefit from your investment advice, there may be others who lose out and consequentially blame it all on you. How do you handle such instances?
I have delegated the task of listening to angry customers. I have three people in my office whose only job is to pick up the phone and when a customer is angry, hear them out as well as understand that the customer is abusing me – not them. I keep negative feedback away because I understand that trading or investment is like a sport. You will have good times and bad times. There’s one person who gives constructive feedback, there’s another person who just wants to abuse so I keep the abusive one at a distance. I also believe that if people are abusing me, then I’m doing something right.
What is your philosophy when it comes to investment in the stock market, if you were to tell it to a layman?
Anybody who understands business can invest in the stock market. I have three broad philosophies: I want the company to have common people as customers like a consumer business. It could be an electric fan company or a company that sells soap. The customer shouldn’t be the government because that is where the problem lies. One should have strong balance sheet. I like a company which has a debt-to-equity ratio of 0.5, not more than that. Why? Because even if the company is not profitable today but it has a strong balance sheet, it will not go down. When times improve, you know that things will pick up. The third philosophy is that I would buy bad sentiment. When demonetization occurred, the market fell by ten percent and that is the time you dive in. You never buy good sentiment because good sentiment is high price. Most engineers want to join L&T. I don’t want to invest in L&T because of heavy capex. Your project can get delayed. What’s the point? I’d much rather invest in Domino’s Pizza. All the construction companies, they don’t do well. Companies like GVK and GMR build huge airports but their stock is at seven rupees or ten rupees.
That’s the whole idea of consultation. People are not buying what you sell, they’re buying what you stand for. I stand for financial freedom and to live my life on my own terms.
You’ve been a panelist at CNBC TV-18 for quite some time now. What role do you see the media portraying when it comes to informing the public about economic affairs? Keeping in mind the 2008 economic crisis, one of the primary causes was that people were not able to understand what they were signing up for. How could the media have helped here?
Media has a limited role in this regard. The bigger role is of the regulator. What happened in 2008 was that in the US investment banks or housing companies, they started giving loans to homeless people. People who didn’t have any income, who couldn’t make any down payments. What happened? They assumed that they will be able to flip that home at a ten to twenty percent higher price and then make some money to return the loan. Here, I don’t think there can be such a situation because our banks do their due diligence. Here, people like you and me are not defaulting. Who’s defaulting? Adani, Ambani, and all the big names are defaulting. Here, housing finance is the safest asset because we pay our EMIs.
The problem arises when the regulator is not strong and things go out of hand. What will happen is, when a bank starts giving out more loans they will have more profit today, but five years from now when the loans don’t come back they’ll get into trouble. RBI is very strong regulator. The banking or financial crisis over here is unlikely but it rarely happens because of stupidity or inadequate research. People get into timber-farm type businesses or they’ll get into some sort of ‘chitfund’. If the product is not regulated by a regulator then you are signing up for something that is not authorized. If you buy a ticket in the black market or do unauthorized things yourself, how can you blame the regulator or the media? The media didn’t ask you to invest in that company.
The media can inform and the media does inform but, finally, the decision maker is not the media. Sahara collected five hundred and thousand rupee bills from poor people telling them that they’ll be buying real estate. Did anybody check their papers? If I come to take money from you, will you not ask me if I’m regulated? Do you have any authorization to take it? It has to be an agreement based system. If one says that they are uneducated or know nothing, then please don’t invest.
You will be addressing students on ‘How Brand MIT grooms Entrepreneurs’. While there has been a surge of startups especially in cities like Bangalore, a lot of sources say that the startup bubble in India is bound to burst. Do you agree?
You’re talking of only one type of startup which is e-commerce. There are other types of startups as well. E-commerce has no business model. The business model they have is purchasing something for one-hundred rupees and selling it for fifty rupees. And they seem to think that as long as they have many people buying, somehow they will become profitable by the end of the year. That model is crashing. What I am talking about is, you acquire any kind of skill like technical analysis and build a business around it. You can get a skill in dry cleaning and have chain of dry cleaning stores. Just learn any skill. It can be engineering or non-engineering, and create a business around it. My whole point is that MIT – because of its ecosystem – prepares you very well for business. Mostly because you can see so much business happening around you.
Can you tell our readers what’s looking good this week in the stock market?
For that, you’ll have to watch my show (laughs). Although, I can give you an insight. This is a capital-starved country and capital is very expensive. Companies that are lending and are lending to common people like us should be your focus. Companies like Capital First, in housing finance you have LIC Housing, Edelweiss etc. Anybody who’s giving out capital to common folks is making money. Anybody who is taking capital (the capital guzzler) like the highway-maker or the flyover-maker is down. So, the lenders of capital is what you should be looking at.