Interview with Raamdeo Agrawal of Motilal Oswal | Value Research Raamdeo Agrawal, Chairman & Co-founder, Motilal Oswal Financial Services, tells us about his investment experience and what he thinks of the current market conditions

'The best time to buy is when you have the money'

Raamdeo Agrawal, Chairman & Co-founder, Motilal Oswal Financial Services, tells us about his investment experience and what he thinks of the current market conditions

Raamdeo Agrawal has decades of experience in the stock market and is widely followed across the investment community for his wisdom and ideas. We speak with him to understand how he grew as an investor, who his role models have been and what his investment framework is. We also speak with him about his greatest investing lessons and takeaways for investors. Given the brilliant insights of this interview, it should find a permanent place in your stock-market toolkit.

Please share with our readers your journey in the investment field. What made you interested in it?
I completed my chartered accountancy in 1983. I have always been a voracious reader - of first newspapers and then magazines and fiction. In the 80s, I started reading fiction on high finance. I was also auditing several big companies. That expanded my mind and I got excited about entrepreneurship. When I passed out, I had no capital of my own. So, I did equity research for two years and that became my building block for coming to the stock market. I realised that just working as an analyst won't help, so I took the plunge into becoming a sub-broker. I had many contacts and knew everything about the market; only that I didn't have capital. So, I had to find a business model where you don't need capital. And it should be a seller's market, meaning that you are needed. So, even if you don't have a name, people will take your services. We were among the few professional CAs in the market at that point in time. There were a lot of questionable practices in the market, so we brought a professional set-up. We started giving research; we started serving the clients round the clock. So, that's how we started. It took me four-five years to learn the ropes.

Motilal Oswal (chairman and MD of Motilal Oswal Financial Services) and I used to buy stocks against the brokerage. So, as we had a certain amount earned in brokerage, we would buy stocks for that. In fact, we did broking for generating investment corpus. This is how we built a portfolio of Rs 10-15 lakh in the 1990s. This we liquidated to buy the stock-exchange membership. So, again we started from zero in 1990. After we had bought the membership, the Harshad Mehta bull run happened. The index went up from 600-700 to 4,200 in 19 months. I think this must be the history in any meaningful market anywhere in the world at any point in time - seven times in less than two years. This momentum surely brought us brokerage but the reinvestment gave me a Rs 30 crore portfolio from zero. The market fell by 60-70 per cent and my portfolio also fell by that much.

Then the economy started opening up. The markets also started growing. At that time, there were no books or magazines; newspapers were very thin. Results used to come up once a year. The balance sheet used to come after 18 months. There was paper-based trading, so the buy-sell mismatch was very frequent. By 1995, I had 225 shares in my portfolio.

Then the NSE trading started in 1994 and there you could sell exactly what you wanted to sell. Then I heard about Buffett and read his annual report and realised that till now I had been wandering in a jungle, knowing nothing - absolutely directionless. Though I was very passionate and self-confident and had technical knowledge of, say, reading a balance sheet, what was missing was the actual wisdom. When I read Buffett's annual report, I realised that we need to do some structured thinking about investing. I read all his annual letters and reports. Then books started coming after liberalisation; I read Peter Lynch, Benjamin Graham. That was very steep learning for me. We started writing the wealth-creation study. Till now, it is on. That wealth-creation study became my step towards learning about the stock market deeper and deeper. I started going to the US every year to listen to Buffett. In the process, I was interacting with Wall Street managers. That's how we kept on learning.

I had got hooked onto IT companies in 1997. We made tonnes of money in companies like Infosys, NIIT, Mastek. Eighty per cent of my portfolio became IT companies. And again, it collapsed when the dotcom bubble burst.

Year 2002-03 was very bad. We wondered what we should do next. We decided to start managing people's money and started the PMS service. But it's in the darkest hour that the best bull run starts. The P/B of the entire market at that time was just one; Reliance was available at a P/E of just seven. It was a crazy market. I have never seen markets cheaper than in 2003. We were investing continuously the brokerage that we earned. Then the market again collapsed amid the Global Financial Crisis. In 2020 again, it culminated into some sort of a bust due to COVID.

I have developed a few philosophies of my own:

  • The best time to buy is when you have the money; whenever you have money, just keep buying the stocks you think are best.
  • The best time to sell is when you need the money.
  • We never time the market; we didn't time the market even before we heard about Buffett. From day one, we have never timed the market and never speculated.
  • We never wanted quick money in the market. There is no quick money in the market at a portfolio level. There could be stocks that can become 10x, 20x but they would be just a fraction of your portfolio.
  • When something is not working or you find a better idea, sell the stock. You can churn the portfolio but don't go away from the market; stay in the market. Your stake in the market should be permanent and growing.

What would you say about market overvaluation, as is the case currently? Would you suggest going into cash for some part of the portfolio?
It doesn't work. By the time you realise it is overvalued, the market has already done the job. The market might be overvalued at some level, but what you have may be grossly undervalued. It's very difficult to keep developing insights regarding overvaluation/ undervaluation. In my lifetime, I have seen the Sensex grow from 100 to 62,000 in the last 40 years. There is a massive tailwind in the market. You don't have to fight it. That's not going to be rewarding. You cannot predict the market.

This interview was conducted in January 2022

There is more to the interview:

'One will always commit mistakes in the market'

'Conviction on your own investment philosophy is the key'

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