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and collapses Happening ramdev agrawal Now joins us let's understand from his experience how should one cope up with this kind of an sell off Mr agrawal good morning thank you for joining us what does one do is it time to take a realistic look and say look this is a crisis and in a crisis strange things could happen in 2008 when crisis had happened markets had collapsed more than 50% right now we're down another 30 so if right now we dealing with a man-made crisis which is health and uh uh which is oil and a medical crisis which is the virus things could go even worse than 2008 uh good morning uh Nik you know uh and viewers see one of the problem is that uh we are not this is not Corona virus problem this is the problem of fear of Corona virus so underlying Corona virus is there of course and the solution for Corona virus is shutdown of the economy which has never happened whether it is a SARS or whether it is 9911 whether it is Y2K collapse harab meta collapse you never close down the economy this is for the first time it is happening and I don't think there would be anybody on this Earth who has seen this kind of situation when the global economy is literally coming to an halt uh and how do you model it and everybody knows it's for a month or two and yet nobody knows how to model uh uh this kind of uh change in the uh in the marketing scenario so so uh I mean ultimately the underlying values of the companies will prevail uh and all the all the excesses which were there in the markets in terms of whether it is a growth company and excessive valuation was there or forland company which was kind of running the show I think all of those uh uh extra gas which was there in the market I think it will definitely has evaporated and is evaporating but uh these are completely Uncharted and uh first time ever in the history at least in my for me it is first time in the history so what is right and what is wrong in this market what is value and what is still uh expensive how does one figure out that look this is the fundamental bottom for this Market technical bottom Mr agrawal Nobody knows but what is the fundamental bottom given that economy will slow down earnings will be contracting and NPA cycle will rise again so I mean it all depends on your understanding of the company I mean uh the uh the valuation check or value check uh remains still same because post Corona virus we are not thinking that it's a different world different theories will come different way of understanding will come again the present value of future cash flows are the uh is the you know Foundation of value so that doesn't change and I also don't think that fundament ly uh uh economics or the company long-term future is impacted probably even 2022 onwards EPS is also not impacted and hence I think uh whatever was the assist value say a month back and today would not be significantly different from most of the companies some companies which are weak and somehow they they not able to sustain this particular avalanch or uh this particular stress of course uh they will go under or their valuation will change but broadly all the Blue Chips all the strong companies uh they would their earnings power is not going to change and hence I don't think the underlying value changes what is changing is the price and uh right now the crisis is that that of not a value change it is a crisis of price change and in the short term uh this price changes can be quite uh quite crazy I mean this markets are all wired up and world over prices are collapsing you look at the Dow Dow future and decide the what should be the level of the markets here so it it I mean it's a very different uh world and very different way of looking at value or price in the short term I don't think values have changed so much and it is going to change so much in the uh the months to come now Mr agraval before the crisis happened we were staring at a very polarized Market 1520 stocks were going higher rest of the market was not uh going anywhere the valuation difference between a Bajaj finance and a e wise had become extremely po extremely high and that's largely because of growth and liquidity so what happens now uh do you think some of these polarized stocks which were going up because of global flows and local flows now will start coming down and that's where the you know crushing fall will be even more see right now this is I think 18th day foreigners have been selling almost half a billion dollar every day so that pressure is continuously there and uh I mean all the foreigners all the institutions they own all the bluest of Blue Chips all the growth companies are owned by them and hence selling is going to come in the growth companies only and growth compan see as you said in your beginning when the selling comes and there is not enough buyer the floor falls through I mean there is there's no buyer at 3,000 R there no buyer at 2500 rupes so what do you do how do you create a buyer so the biggest challenge is it is not it is caring over the buyers I mean it's not that there is no purchasing power in the system there is a purchasing power in the system but today the fear of moving uh uh moving out or coming out and buying uh is becoming very difficult because anybody who did bottom fishing at 9,000 Nifty uh they are kind of uh uh uh they scared uh at 8500 and now index is even lower so uh so the fear is becoming total and uh and hence anybody wants to sell and another problem globally is the ETF now in ETF Global ETFs of whether it is emerging market or MSI index when the buyer wants to sell at $10 billion or $20 billion there is no option of anybody but to press the button and we have seen our uh in our dealing rooms that uh the the sellers have a orders to finish off somehow other during the day irrespective of the price so they're not looking at the price at which they are selling they also bought without looking at the price the the world has changed in a way in America incremental all the subscriptions are to the passive and now I think all the sales must also be coming from passive now when the passive sells uh when the passive buys they they don't look at the price when the passive sells they don't look at the price hence if you see the chart formation I mean all the technical guys they say they never seen a drop without correction because my sense is the ETF guys are selling without looking at the price and uh so I mean it is Uncharted uh and we have to face it uh you'll take all the all the knock on yourself and my sense is if you press the screen uh spring so much I think it will also come back at Double the speed but when that come back will happen nobody knows okay Mr agal there are some sectors where there is going to be a very strong disruption like oil omcs Hospitality Aviation uh you know where because of virus it's going to you know businesses will shut down businesses will have to rethink their agility businesses will have to rework their basic maths so what happens to some of these sectors now and what will happen because of these sectors to the banks which have given exposure to them you know uh do you think we that is the bigger concern now yeah see this disruption of 3 4 months I think authorities have to come forward and uh say uh I mean whatever see because this is first time in the history so how do you run the economy and how how do you run the companies or how do you run the banks so uh they have to they have to come out with the they have to listen to the problems and say somebody is not able to say somebody working in shopping mall and shopping mall itself is shut and his salary or his income is impacted the small shop owner or an employee and his Emi or her Emi is impacted so I think there has to be some kind of relief for 2 three months by the authorities for these guys and I'm quite sure it is coming I mean I think authorities must be listening to all of that they are not able to announce till they get on top of the problem but I'm quite sure government authorities I mean world over I think France they have suspended lot of uh uh tax payments utility payments and all of that uh that exactly those kind of reliefs depending on what is is our problem has to cometh is must uh come and talk to the markets and talk to you and assure that the way they have stood by in the yes Bank crisis same way they should stand by everything is a crisis in the sense that if Ami not coming or shops getting closed for 2 3 months I think it is only the uh the government only can bear this particular stress because government has unlimited printing power government has uh liquidity of The Last Resort I mean ultimate liquidity of Last Resort even I hear that IMF is thinking of releasing a trillion dollar stimulus to the all the needy countries and also I think lot of these things are going to happen but right now if nothing has been announced you cannot build on to any of these and out of here people who who cannot take the stress of seeing the lower quoted prices if my portfolio is worth 100 cres and today it is 70 and day after it is becom 75 there is a limit at which uh everybody gives up and that pressure is just too much just a very personal observation and slightly out of box Buffett is sitting on1 billion of cash last comment from him is that I will watch the fall and have more coke we've not heard anything from bshar hat or him which could calm the market or where he feels there is value in the World Imagine the biggest value investor in the world is sitting on 100 billion doar of cash and he's still not indicating to the world that look he is buying because if he speaks he's buying that automatically will calm the markets good thing is that he has got $130 billion of cash and literally in the global markets today at zero interest he can raise as much money he wants but probably I mean two things which might be hurting that uh since he's a world's biggest insurance underwriter risk underwriter which must be running into 10 15 trillion I don't know what is the number uh and uh what all risk he has underwritten that he only would be knowing so probably he is expecting uh unusual you know kind of a combination of claims uh and hence uh this $130 billion he would not like to blow off in buying shares and when the claim comes uh he would like to be fully liquid so I don't know what's going on in his mind and uh uh or he's buying something which we are not aware so uh anything to say about him is very tough only thing is that finally he has been proved right that he sat on $130 billion of liquid cash well the more I read about Mr Buffett the more I admire him that how Financial discipline is important I mean hats off to him to maintain this kind of an cash and now he's got opportunity okay Mr agal since you are a practitioner of value investing where is value in this market and imagine if some client calls up and says Mr agraval this is the moment I've been waiting for I want to buy India here's your blank check please feel free to invest how will you invest will you invest right now or will you invest at lower levels or will you invest after 6 months so uh I mean n i mean to be truthful I mean we have been saying that uh uh you should you should uh uh uh you should start investing 10 20% every day or every week uh as the market goes down and uh uh so we call it short blast kind of sip if you think that this problem is going to go on for uh uh this problem is going to go on for 3 to 4 months I mean that is a period in which you must complete your investing uh the bottoms bottoms are made for bottoms and tops are made for foods and liars and don't try to time the market too much you if you are sitting on the sidelines you got it right I mean completely at your price your stocks are available so if you want to build your own portfolio obviously you must know the value but if you are not if you not competent to understand underlying value of the companies I would say go and find two three brilliant managers there are all lots of them in India and uh and start rolling out your 10 20% now and uh don't buy it everything in one day uh uh spread it to whatever whatever 2 3 months you you get average of the worst of the sell off already we are in and you'll get averages and I think after one year one half years you will have a fabulous return uh out of your courage to move out and face the market when the whole world is uh fearful you are to be greedy uh Mr Graal you were there and I was there and we both jointly have seen the 2008 fall the fall happened in 2008 and it took almost 2 and 1 half years for markets to recover and that was because liquidity was injected right now liquidity is already there in the system and markets are not reacting so when do you think markets will react and do you think we are in for a Long Winter which is that for nvs and for sips to turn positive it could take at least a year and a half or maybe two two and a half at least year and a half to two years see in any case last 3 to four years of gains uh uh is all washed out uh I think uh when uh when this government was saw in 2014 I think index was about 75 7600 now index is uh index is about 8,000 so clearly almost five to 5 years returns are gone now uh the values of the companies I mean companies are not same in Last 5 Years clearly uh we will get some return uh once this uh uh I mean you cannot do your return calculation at the bottom of the market you have to allow the markets to normalize and uh in one year's time you'll find that you would have a little uh and I don't know how fast it will recover what my experience is even if you remember 2008 it fell all the way and then it came back 100% in next 12 months so I would think that the fall has been sharper than 2008 at this point of time and it should take a shorter period of time I mean don't don't uh don't brand me as a technical guy but since it has fallen so fast the moment you get the message the world is safe and it's a place to live in I think it will come back within no time so I would I would not time too much whenever it reverses it will reverse vertically up right okay so let's understand what what is coming next for someone who has no cash and says look I know these are bad times I'm a student of Finance My Portfolio is bleeding right now but I have a compulsion that I don't have cash I'm fully invested lot of fund managers are fully invested so what is out of jail card how does one deal with this fall which I'm sure in hindsight will turn out to be an opportunity but the limitation is that you don't have gunpowder or you don't have anything uh left to invest now so you have to stick to your investment style and our investment style was always to be fully invested never to be in cash uh what has happened in the past is that out of 10 years uh roughly 8 years used to be uh bull I mean positive years and 2 years typically used to be negative so mathematically it doesn't make sense to keep waiting for 2 years and stay in cash so obviously your cash will not perform in those two years uh uh sorry the cash will perform only in 2 years and for 8 years you'll keep missing income on those uh that cash you are sitting on so clearly I was very clear I don't want to waste my time in timing the market and hence and I don't have competence to do it so I'll be fully uh fully invested now what do we do I mean actually we have Frozen uh uh because uh when I look at the things unfolding see I'm I cannot control the price but when I look at the fundament development whether it is a credit crisis whether it is the oil crisis whether whatever is happening in the economy right now multiple things are happening I don't think my portfolio is suboptimal I would I'm I I love my portfolio we are doing too many con calls we are we are going back to the companies talking to them trying to check whether our stock identification is right our stock allocation is right can we switch uh 2% from here to 2% somewhere else so those kind of discussions are all but broadly the uh the the impact is going to be very little maybe 5% or 10% at Max we can switch from current portfolio to something else but uh but everything is falling right now whatever I was thinking is the best is falling the most so what do you say I mean right now because what is happening is what is the most popular and uh ultimate growth is stock or it was expected to be growing that has been laed up by everybody all over the world and there selling now and when that kind of sale is coming there's nobody to buy and hence the damage is maximum over there and it is hurting us so I think uh I would just pass this time uh it is painful time and painful more for the customers that uh they are under pain uh I have seen three four of them in last in 92 2000 2007 I have seen three turmoils in the marketplace but uh this one is very unusual very intense and very painful and U uh for light-hearted it is very difficult to pass particularly with the with the mobile phones where you can see entire your portfolio the market mov by the second uh it it it just increases the pain uh a lot more so the behavioral construct how to pass this time is very important you have to just keep cool maybe you to do yoga you to do Vasa you have to uh you have to entertain yourself uh but uh stay away from doing anything that's what I'm doing it's a great point I mean you're admitting that it's pain but that's the nature of equity Market that's the nature which creates opportunity and that's a time when uh you know greed also gets created really appreciate your time Mr agraval uh but it's important for us all of us right now to keep ourselves safe and uh maintain social distancing so that's what we are doing and that's what I believe we are for
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