Rajeev Thakkar and Parag Parikh Flexi Cap Fund don't need introduction. Most mutual fund investors can't stop talking about the PPFAS Flexi Cap Fund and the fabulous returns it has been offering to investors in the last few years. Shivani Bazaz of ETMutualFunds spoke to Rajiv Thakkar to get his perspective on the current volatility in the market. “The current market is nothing special or different and one has to rely on fundamental principles of investing in terms of investing with good promoters / managers in businesses which have good economic characteristics, and which do not borrow too much and at a price that is attractive for investment,” says Thakkar. Edited interview.
Do you recall your initial years in the stock market?
My professional journey in the financial markets started in 1994 when I joined a financial firm in their merchant banking division as a trainee. This was a period when the markets were putting behind the securities scam of 1992 and were finding their feet again. There were a lot of companies that were approaching the markets for raising money via IPOs and there was optimism again. Our merchant banking division had a lot of work given that so many companies were coming out with IPOs.
This was a period a few years before the tech boom and it was a period where almost all major corporates were setting up their own financial firms doing NBFC activities, merchant banking, stock brokerage and so on.
What was the first thing you learnt in your initial years in the market?
The first learning ironically was to be wary of IPOs. Being in the merchant banking division, I could see that many new promoters would raise money from the equity markets and a few years down the line the performance was nowhere close to the rosy picture portrayed at the time of listing.
Which was the first bad phase in the market that you remember clearly? How did you navigate it?
By early September of 1994, the BSE Sensex had crossed the earlier Harshad Mehta bull run peak. Post that the equity indices fell almost 40% over the next year and half. This was the first tough phase in the markets that I experienced professionally.
Navigating this phase was a challenge. As a qualified Chartered Accountant, I had moved over to the financial markets rather than doing audit and taxation. My experience in the initial years was that of merchant banking. As readers may have guessed, investors were not too excited to buy IPOs when the market had fallen about 40%. There was no work from people who could draft prospectuses and conduct due diligence. I was transferred from Merchant Banking to Corporate Finance and later on to the br ..
Can you tell us one mistake that you remember clearly from your initial years? What did you learn from that mistake?
From 1994 to 2003, I was not managing investments professionally and hence there was no investing mistake that I could make. The learnings in that period were from other people's mistakes.
Apart from the general malaise affecting the equity markets in the mid 90s, the company that I was working for was in trouble on account of leveraged equity investments. The borrowings would continue to accrue interest and needed to be paid in full (principal plus interest) whereas the equity investments were losing value falling by half.
If equity investments are leveraged, the lenders force the investors to exit when the markets are down on account of lack of adequate margin. Further, liquid investments get sold first and the illiquid investments left need to be sold at huge discounts.
Source Name:-Economic Times