Posted by: John Elliott | October 8, 2008

India’s “Warren Buffet” backs the country’s banks as stock market slides

Rakesh Jhunjhunwala

Rakesh Jhunjhunwala

MUMBAI:  As Britain was lining up with the US and other countries yesterday to semi-nationalise its banks (imagine what would have been said if this had been floated as a serious policy objective by the UK Labour government just a month ago!), I went to see Rakesh Jhunjhunwala, Mumbai’s most famous one-man market mover and punter, to see how he was facing up to the crisis.

He said the world markets’ prospects were “gloomy, gloomy” but sprang to the defence of Indian banks.

“I don’t think any India bank is vulnerable – they are well funded and have no problems,” he said, puffing on his customary large cigar as he surveyed a bank of computer screens and scribbled into his blackberry. “Don’t forget that we have a very pro-active banking regulator here (the Reserve Bank of India) so Indian banks look very clean”.

He then added (though I wasn’t sure how serious he was) that maybe Indian banks would buy some foreign banks, naming private sector HDFC and government-owned SBI (State Bank of India) as possible players. But he didn’t think that ICICI, India’s leading private sector bank, would go buying – it had “enough commitments” already.

That reference to ICICI’s “commitments” led me to ask him who had been behind the run on the bank’s stock in the past week or two. He didn’t like the suggestion of a “run” and did not think it a serious problem. Other Mumbai market watchers however suggest one or two of ICICI’s rivals, envious of its rapid growth in recent years, may have tried to slow it down.

While I was talking to Mr Jhunjhunwala, the Bombay Stock Exchange (BSE) Sensex 30-stock index was falling below 12,000 to finish the day at around 11,600 – and now, as I am writing this post, it has fallen below 11,000.

That’s a dramatic change from eleven months ago when I last went to see him and the index made its biggest ever single-day gain of 893 points to finish at 19,977. That brought it almost back to the 20,000 mark that it had crossed last October  after a sudden bull run.

That’s “all history now” he said, adding: “Markets are like the weather – you can’t argue, you have to bear it”. I missed an opportunity there to ask whether there was a weather-like “climate change” sweeping across the worlds’ markets. I guess he would have shrugged and chewed on his paan leaf.

Last November he correctly observed, with some understatement, that there was “a lot of uncertainty ahead with a US economic slowdown, troubles in the US credit markets that will affect the world settlement-wise, and some signs of a slowdown in India’s industrial growth.”

Yesterday he said (and he’s right) that India’s fundamentals of skills, demography, democracy and entrepreneurship have not changed, but he thought it would take time for the markets to recover. “It will consolidate rather than go much further down,” he said, lacking I felt a slight sense of conviction.

Sometimes dubbed “India’s Warren Buffet”, Mr Jhunjhunwala is admired by fund managers for being a successful day trader, constantly buying and selling stocks, as well as making long term investments. “That’s a rare skill to be able to do both at the same time,” said a market player who knows him well.

So what’s he recommending now? “The stronger stocks are the Indian banks and anything that is India centric”.


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