“Intraday swings are a thousand. I mean, extraordinary journey. Some of the big corporations have gone from a few thousand crores to a couple of lakhs,” says Ramesh Damani, Member, BSE.

What is the first thing that comes to your mind? I mean, I can see your expressions are like a child in a candy store when I talk about BSE.
It is such a historic area that actually gives me goose bumps to come here. If you just stand, this is like the epicentre of the Indian financial system. If you just stand here, you look north, you have SBI and RBI. You look westward you have the House of Tata’s, the House of Godrej is there. You go eastwards you have the Indian Hotels and the fabulous Colaba. You go back, Back Bay Reclamation, Hindustan Lever has its office, HDFC has its office. So we are right at the centre of the financial revolution that is taking place in India. When I came in 1987-88, India was a backwater. Dalal Street was the backwater in global financial markets. Today, we are the third largest economy headed towards the third largest economy and the place to be, all eyes are on the last street. So it has been a lovely journey and thank you so much for showcasing it. So we look here, there is SBI, we look there, there is the House of Tata’s but look up, there is the house of Damani; your office is there.
Thank you. That is my old office. I did share it. And I must remind you that many people say that, you know, the village is your globe but Paris is my hometown to imitate Gertrude Stein. But the same way, I mean, I might have travelled the village but Bombay is our hometown. And this building, this iconic BSE 25-story building is the Eiffel Tower for investors because everyone has come to make your money from Dhirubhai Ambani to Narayana Murthy. The streets may look like they are paved with asphalt but actually they are paved with gold. And the rise of the Sensex perhaps redoubles my effort to say that because when I came, the Sensex was maybe a thousand, below a thousand. It is now close to 75,000.

Now the intraday swings a thousand?
Intraday swings are a thousand. I mean, extraordinary journey. Some of the big corporations have gone from a few thousand crores to a couple of lakhs. And it all started in 1991 day when Manmohan Singh presented his dream budget to Parliament and that broke the ethos of static, regulated, slow growth economy to fast growth modern economy. So it has been an extraordinary journey for the last 30 years.

What makes Indian stock market so unique and so resilient?
Let me tell you a bit of history, which people may not remember. My father was in the stock market and he has lived through very painful times, the Dividend Control Act, the China War, when the markets were closed and there was no foreign investment coming into India. So they were non-existent out there. And then in 1977, the winds of change swept India. The Congress government was thrown out and a new Janata government came into power. And the industry minister used to be an old socialist called Mr. George Fernandes. And here is where we learned the law of unintended consequences because what George Fernandes did was he told the MNCs in India at that time that either you dilute your shareholding by 40% or you get out and leave the country.

So companies like IBM and Coke left India because they did not want to dilute their shareholding. But companies like Colgate, Nestle and Hindustan Lever stayed on in India and gave shares to the public. And as history will record, the shares have gone on to become multi-bagger, 100x, 1,000x, 2,000x over a period of time but they also gave India good corporate governance. People understood how good companies behave, how good companies are managed. So we were 20, 30 years ahead of China in good corporate governance. And that is now reflecting in the markets because you have such a nice group of companies that follow the best practices globally, while China, even the best companies are now trading at 20, 30-year lows. So I think that the law of unintended consequences took place because you had Mr. Fernandes throwing the companies out because he did not like foreign capitalists but that in fact led to better corporate governance and a better pool of investable companies for India.

The financial market economy right now, which is the market cap of Indian companies, is actually higher than the real economy. And that is a clear indication of the migration of the economy, like Amrit Kaal for financial investors. Why is that happening?
Well, I am not sure there is any particular reason but we are going through a bull market, as Homi Kharas points out in his new book about the global middle class. He says the global middle class started with a few hundred million people in Victorian England. And now I think by 2030, there will be 5 billion people in the middle class. And I think the next billion people are more likely to come from India than China in the middle class. So the middle class demands financialization of savings, better education, action on climate change, so many things. So it is the middle class bull market that is leading it. And every bull market has its own thesis. For example, you recall when we first met in 2000 there was a big bull market in TMT stocks. It was presaging the age of the internet and presaging the age of zero communication costs.

And what happened to those stocks at that time. And after that time, the bad ones got weeded out, the good ones continued to form. I think what we’re experiencing now, perhaps, is this great middle class revolution. I think this bull market we call the middle class bull market in India. I think that will create prosperity, wealth of a dimension that we are not yet familiar with. Another big city which is as buzzing and as exciting as Bombay happens to be Tokyo. And if you remember 1964, India won the Olympic gold medal in the Tokyo Olympics. But that time, Japan was a beaten third world country. Over the next 30 years, the Nikkei went from 1,000 to 40,000. Companies that were not well-known outside like Sony, Honda and Hitachi have now become well-known companies.

So the India bulls, which include me, by the way, believe that India is on a similar trajectory. That over the next 25 years, as Japan went from a third world country to a first world country, Indian economy will go from a third world country to perhaps the third largest. So we are very hopeful.

We are using the word Amrit Kaal. The meaning of Amrit Kaal is something which is long and something which is for eternity. Do you think India’s indeed Amrit Kaal has started, and especially for financial investors?
I think it has because you it is hard to, I think the Sensex moved at 15%, 16% compounded; the last few years, probably better than that with dividends of about 18%. These are extraordinary returns. Even if it is in rupees and not in dollars, this is an extraordinary return. And there have been very fair and just tax policies by the government. And more importantly, I think this bull market, you have to give a lot of kudos to the Prime Minister’s office, the Prime Minister and DIPAM, for the way they have handled the biggest investment Indians, in Indian taxpayers have made, which is in the public sector stocks.

By introducing better corporate governance, by stopping leakages, they are really extracted value from these companies, which was sad and forgotten in the Indian stock market.

So I think we owe a lot of credit to the government for its forward-looking policies on that matter. So having said that, if these companies can start delivering a market rate of return, Amrit Kaal should not be too far behind.

If the Indian bull market is a train journey, starting from Churchgate to suburbs of Bombay, where do you think this train journey has reached?
It is a very interesting question. A lot of people think for example that we are in a bubble sort of atmosphere. I do not think we are in a bubble. All bull markets end that is the tough news. No bull market rise permanently. Even this bull market will end but having said that we are not seeing indications right now of the bull market ending. I will give you an example, earlier when I said the Japanese bull market went up 40x in yen terms and 100x in terms of dollar terms. So bull markets can go on for a long time and they change the complexion of the country. And I believe we are in such a bull market. I think when we get closer to the top there will be flashing signals of red. I do not see that right now.

What are those signals?
Signals are the way market reacts to news. It would not react to good news. It will react to bad news. There will be extreme amount of leverage, extreme amount of IPOs coming to the market, a lot of idiotic talk going on the Dalal Street.

What we are having now is more of a rolling sector wise correction. So markets get overheated. Large caps will correct. Markets overheated. Some other stocks will correct. But the underlying tone is good because liquidity is good. Domestic money is good out there. Markets are still reacting positively to the announcement. And markets are very hopeful that the election outcome will be a market friendly outcome.

The whole purpose of a stock market was to provide capital. Companies like Infosys they have come and they have tapped capital from there. But today the innovative companies are not coming to the stock market. They are coming to stock market after they reach a size. So do you think the role of stock market going forward could diminish?
I do not know. I have heard that but I am not really sure. I hope not. You know it has been a great place and our trading systems are now the best in the world. We do T+1. You might go to T+0. It is extraordinary the amount of risk and volatility we have subdued. In 90s when I used to walk the Dalal Street you would always fear there would be a default coming and the markets would be closed and you know deliveries would not happen on time. I think that fear has been completely removed by the forward-looking regulations of the Securities and Exchange Board of India. So we are deeply grateful to that. So I think the stock exchange will remain capitalistic and this will be our Eiffel Tower.

To really look at a very simple way of how Ramesh Damani invests. You have always said that look I am not going to give you a fish to eat. I will tell you how to catch a fish. So no tips, no advice but the framework. Share your framework with us. You always say buy something which is cheap. Buy something which is long term. How does it work?
When we were young we used to play the game of passing the pillow. And I think a lot of people who come to Dalal Street, the new ones and the younger investors and the more ones who are excitable tend to pass the pillow. They buy something at 80, it goes to 85, they sell it and they are very happy.

They go out and have a drink, celebrate whatever. But the true winner in this game is the one who holds the pillow at the end when the music stops. And that music is not going to stop for a while. So you invest in great companies and give them a chance to grow. I have seen so many companies that seem to have peaked out. Then they correct maybe 30%, 35% after a time. Then they come back and make new highs. You know good examples are companies like ITC for example or Lever or Reliance which have conquered many a bull market and gone on to new highs.

The true winner making long-term wealth is about making long-term generational wealth who holds on to that pillow to the end.

I think you can imagine what a financial conglomerate in America is worth and what it is worth in India. What a tech company is worth in America and work in India. I think you start doing those numbers you tend to be more patient and hold. So my advice to come back to your question to all new investors coming is that if you have to trade, trade but only trade with a portion of your money. The rest invest in a great business and believe in that business. Hold on to it. Think you are not buying a stock or a price movement but a piece of the business and you want to hold that business and the true wealth is sometimes created there.

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