Posted by: John Elliott | November 15, 2007

India’s Warren Buffett: A bullish long-term outlook

I’m back on the road — not among the India’s manufacturing companies that I visited a two months ago (http://ridingtheelephant.blogs.fortune.cnn.com/2007/09/07/on-the-road-why-india-can-win-on-some-points-against-china/ — but talking to finance people in Mumbai where the performance of the stock market defies short-term worries.

Yesterday morning I went to see Rakesh Jhunjhunwala, the market’s leading one-man market mover and one of India’s richest men. I asked him where the market was heading. “I’d be circumspect and careful,” he said, swinging on his desk chair away from me to look at flashing lights on four screens on his desk. “There is a lot of uncertainty ahead with a US economic slowdown, troubles in the U.S. credit markets that will affect the world settlement-wise, and some signs of a slowdown in India’s industrial growth.”

That was at about 11:30 in the morning. I don’t know where he put his money for the rest of the day, but the market astounded most experts with the key Bombay Stock Exchange (BSE) Sensex 30-stock index making its biggest ever single-day gain of 893 points to finish at 19,977, almost back to the 20,000 mark that it crossed last month after a sudden bull run (http://ridingtheelephant.blogs.fortune.cnn.com/2007/10/16/rich-valuations-for-players-in-mumbai%e2%80%99s-bull-market/). Today there has been some minor adjustment down to 19,789, but not enough to disturb sentiment.

A large man in his late 40s, Jhunjhunwala was described earlier this year in a magazine as the “pin-up boy of the current bull run”, and he is always in the news when times are good. Sometimes dubbed “India’s Warren Buffet,” he is a chartered accountant who had a “childhood love of stocks.” He started as a trader and investor in 1983 and now runs his Rare Enterprises company from smart offices in Mumbai’s teeming but scruffy Nariman Point business district. “Buy right and hold tight” is one of the mottoes in his office.

Yesterday Forbes rated him as India’s 51st richest man with wealth of $1.1 billion, far below the $49 billion held by Reliance Industries’ Mukesh Ambani, but not far behind Nandan Nilekani, one of the founders of the Infosys software company (INFY), who came in at number 45 with $1.26 billion.

Jhunjhunwala says he is “well invested” in key growth areas such as banking, retailing and infrastructure, all of which are based on India’s domestic performance. His private equity interests, which he said make up 20% of his investments, offer more detail — education (private schools in Mumbai), hospitals and health care, a security company, pharmaceuticals, and dredging.

“What did he say?” people asked me when I said I’d met him. “Long-term optimistic, short-term cautious” was how I summed it up — and it’s his long-term optimism that’s significant. “The factors driving the Indian bull market and economic growth are very much alive and kicking, but these are testing times in the short term,” he said.

When I asked him what factors, he briefly mentioned the usual list of a young population, liberalisation and skills, but then quickly broadened the conversation — a friend had told me he was a thinker, not just a punter. “It’s the culture in terms of society — we are a tolerant people — the world needs people (like Indians) who anticipate change and benefit from it,” he said. “Everything in India is bottom up, not top down — it is chaos, but growth comes out of chaos”.

Yes, I thought, understand that, and you understand the country!


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