Never mix your trading and investing pattern, says Sanjiv Bhasin

Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs, IIFL Securities, talks about the lesson that he learnt from the market, how to create money, when to invest and when to get out among others during a candid chat with Anil Singhvi, Managing Editor, Zee Business. 

Edited Excerpts: 

Q: What is the biggest lesson that you have learnt from the market in these 30 years? 

A: It's been 32 years for me in the share market because it was the only thing that I wanted to do since the beginning. This interest came from the family background as my father, grandfather and others had a bent towards it. Academically, I was very good and have entered the segment after studying from a good institution and has learnt the nuances of the domain by being over here. In the process has felt the pain several times as a trader and speculator, so the biggest suggestion that I can give is "Never Mix Your Trading and Investment Pattern". The trader should always hedge himself while being in the market. If you want to continue the journey for 30-35 years in this market then you will have to be here always. And, to keep yourself here you should always try to keep things that can lure in the market should be moderated. There is no longer-term wealth and it is not done by planning but it happens by default. 

Q: You are saying that money is created through a default. Let us know about it?

A: Default occurs in a case in which you keep a share but do not check it regularly and if it is a blue-chip and continues its momentum and you have a conviction. Warren Buffett, the biggest market Guru, has said, "You Buy the Business" and if you can see the prospects and feel that its market cap will grow with time - but you can't catch it in the inception - and stay with it when it comes to the growth pattern then you will. Investors, generally, sell-off the winners and hold on the losers and then regret it. On several occasions, I have shared certain stories with you like Honeywell and Havells among others where I was invested and they kept growing by default. 

I would like to share a story of JK Cement, now known as JK Lakshmi Cement, which was once was known as straw products and it was available at a rate of Rs8. Later it was amalgamated with a paper company and then came into cement. Interestingly, the share valued at Rs8 than, if someone has kept it for 25 years after a split is valued at Rs2,500 apiece. Thus, investment is about patience and this is the ownership with default. 

There are several reasons for slowdown and negativity but ownership in the only mantra for making money. Ownership means, you will have to pass through the cycles and it can't be done is a day, as it takes 30 years to create wealth. There are times when there is a situation where you are not sure than your decision is right or wrong but you will have to be in the market. 

Q: This means being invested in the market as your story will end as soon as you leave the place? 

A: For the purpose, you will have to understand the story of India with an example, Maruti was priced Rs63,000 in 1983, which would have forced you to think the ways to arrange the sum but today we are living in a world where an iPhone worth Rs80,000 is bought at an ease. So, Have a look at the market cap of the iPhone a Maruti, where they have reached. There are situations where we think that should we enter here or not but there is no such thing as timing the market, it is just any time when you make a mood to own equity as an asset class then you should enter because being there is the only mantra. 

Q: How do you build up the confidence to be stable in the share market?

A: The first thing is that I am a confident and positive man. By the way, life has its ups and downs and we try to manage them through our brain. Thus, brain, moon and mother let us breathe. Your mother is the first person who knows what the market has deceived you or you are feeling low because of the slowdown there. Long ago, she said to me to do what doesn't makes me worry and I remain positive always to make sure that she is not worried about me. Thus, I feel that her blessings can help me in being in this share market and there is a need to be positive so that I can help people in creating their wealth. I am at an age where I must not be worried about it but I wish that people should learn from our experience and understand that slowdown/bearishness in the market throws an opportunity to buy and remain positive. Interestingly, you can't be negative on India's demographics because despite so many imponderables we can see the where is the market right now. Things that you wouldn't have thought about 2 years back is the reality now. There is no fine time. You have to always be positive on the market as fear is always a good time to buy. 

Q: How a person can invest fearlessly under a situation to panic? 

A: Saturday is the latest example and the condition was not less than a horror show in which Dow was weak, no announcement was made on LTCG and the market has crashed. And, if you were thinking about the levels to go down then you have missed the opportunity as the market rebounded in just 3 days. That's why I say fear comes because of an event and it is a time when you will get them at expected rates. Why you can get Reliance at lower rates, there can be a reason behind it but this reason will be temporary. Prices are falling because of the fear factor or supply and demand and you should try to buy that fear so that you can earn. So, there is never a fine time of buying or selling. I have gone through such things in these 30 years and have seen three circuits and that's why I have a sound understanding and easily differentiate between what is fear and greed. This is why I can analyse or anticipate the market better. 

Q: Have you seen a situation where the stock recommended by you has/have dived 40-50% down?

A: Several times and very humbly we can say that we are wrong but that is a market. 

Q: How one can escape the fear of keeping the bad shares, which can cause huge losses to the retail investors? 

A: It is a million-dollar question. The first thing is never average a losing stock as you are putting your good money after a bad and I have learnt this principle. 

Q: You will not take a company despite you like it?

A: Yes, at least in the case where I can't get the reason for the fall.

Q: If you are not getting the reason then you do so?

A: Yes. But, if I am aware that it is a genuine company and a blue-chip and is falling due to certain reason then I will not. But, if I am on the wrong foot and my ego is not allowing me to sell it then I will not try to buy more shares of the company. 

The best thing that has come to India as a revolution is a SIP and Mutual fund. Mutual Fund managers are unemotional because they are managing your money and they know how to cut off the losses. They genuinely don't have emotions because they need to show you the performance. They can sell things which you and I can't. That is why the mutual fund route or the SIP route is the best long term investment for passive investments. 

Q: People having two emotions are present in the market. The one who can invest in the market through mutual fund and SIP and wait for a long term of 10-15 years and the second is one who wants to play in the market and earn several times by investing in stocks. So, tell us the way to control their emotions?

A: These emotions are pure and simple for which you will have to read your balance sheet properly and check your routes. If I have ever made a multi-bagger than it has been from the grass-root level and without reading the balance sheet. There is no competition against a brand that is viable and noticeable. For instance, ladies won't change their Sunsilk shampoo because of the increase in the price of Rs10-20 and it comes under personal consumption. Sometimes you can earn a lot through common sense. Similar is the case of Maruti Suzuki which was a hope of almost every house in 1985-90 and the government sold its share at Rs125 apiece when its issue was out in 2002-03 and those who owned that share has seen a journey till Rs10,000 from that level. If you do research and see what is necessary for India in the day to day usage. 

Q: When shall we sell the shares?

A: My initial capital was low and the money does not multiply. So, I learnt to pull out my original investment after it reaches the expected return levels and let my initial capital as a stock, which multiplies over time. So, money is limited and it depends on the way I rotate it or kept it at my end. But, I haven't liquidated the profits and allowed them to be in the form of stocks, which has increased with time. In short, take out your initial capital from your returns and let the returns stay as stock. 

Q: People often think to start as a trader and later turn into an investor. Is this a right thought?

A: If you are a trader and have a sound understanding of every nuance and doing it professionally then you will not find a better business then this. But, it is a myth that it is an easy business as it will make you work hard as you will have to research on several factors like the price of gold & oil, bond yield, macro & micro and also analyse the market. In true sense, it is a tedious job. Similarly, trading is not easy if you can keep three nuances of the same, namely (i) Mark To Market, (ii) Value At Risk and (iii) Hedge. 

Mark To Market - Daily settlement is required in the case of derivatives and if there is an increase in your mark of the market then you can't get back. So, you should have a control on the mark to market.

Watch Zee Business live TV below:

Value at Risk - If you have a contract valued between Rs507 lakhs, if I can earn Rs50,000 then can also lose it. So how I should have a control on it. 

Hedge: If I have a long of Rs10 lakhs then do I have short/s or not because I am not aware of the event that can occur the next night and can I tolerate it or not. You should hedge in the market or else you will not last long here. The volatility in the market will always see your stop loss