My Hobby Turned Into My Profession

Ambareesh Baliga 
Managing Partner-Global Wealth Management 
Edelweiss Financial Services

I started investing when I was still in my college days, 30 years back in Kolkata. We didn’t have enough tools or information flow thus it was a challenge to independently analyse to arrive at investment decisions. Since I managed to do so efficiently (compared to my peers), I started advising my friends which led me to my first business opportunity as an equity advisor in the late eighties. We had to depend on friends in the broking fraternity, especially in Mumbai and those from the industry to get insights. During the latter half of the eighties we saw a few investment related journals filling up this vacuum and providing investors with information and insights including Dalal Street Investment Journal which was keenly awaited every fortnight. 

The boom in the early part of the 1990s saw broking houses reinventing themselves with the advent of the FIIs. I joined Kotak Mahindra Finance which was one of the upcoming NBFCs, and it was a dream come true when my hobby turned into my profession. It was an exciting phase as a whole new generation was trying to understand equity markets which in turn were feverishly reinventing itself. Finally in the late nineties, Internet resulted in a paradigm shift with information and tools available to everyone. It has been a fascinating journey from an opaque market to a decently transparent one. Companies pass through a life cycle, sectors pass through their respect cycles, but what remains fairly constant is the Management and their philosophy. Hence Management is of utmost importance for me while spotting an investment opportunity. I constantly try to look for companies and sectors which are out of favour (contrarian style) and work out scenarios which could put them back on track. The one which seems the most practical finds a place in the portfolio. 

I maintain two portfolios, a Core portfolio which consists mostly of blue chips with a few quality midcaps which provides the alpha for my financial investments. The second one is a contrarian and opportunity based portfolio as described above which gives me immense professional satisfaction. I allocate a larger portion to the debt, fixed income and other asset classes as I don’t believe in putting all the eggs in the same basket (equity). And I consider my career too as an investment in the equity markets.

India is passing through a crucial phase. We lost a huge opportunity to move to the next level in 2009 when UPA-II was elected. Today we are at crossroads with the economy in the state of despair. There is a hope of a stable government post elections which could put the economy back on track but serious money would flow in only after the new government is formed and the intent is displayed to welcome investments. Markets could move based on hopes till the election, but investments and asset creation will await the final outcome. 

I would have a split strategy. Prior to elections I expect a run up (though we are in midst of a correction currently) and thus I would be investing fresh. I don’t want to take a call post elections as elections can throw up unexpected results – the last we saw in 2004. Based on the election results I will take a fresh call but would utilise any large corrections to add to my portfolio as I am bullish on India over a longer period. 

The macro data should start showing improvement month on month, especially inflation and manufacturing data. The import bill is getting under control and along with that I expect the currency to remain stable within a band of Rs 60.50/- to Rs 63.50. I would also expect the repo rates to be cut going ahead (despite the surprise hike last week) as inflation is expected to cool off substantially. This along with the divestment and election related sound bites could be triggers. Sale should be able to keep the deficit under control.

The negative triggers such as emerging markets currency imbroglio, Chinese slow down and tapering is already discounted by the markets to a large extent. 

The sectors which have underperformed in the recent past such as Capital Goods, Infrastructure, Banking, and Auto Ancillaries could outperform in the “hope” rally which we normally witness prior to a general election. I would invest in these sectors for a run up till the elections. In case these stocks move per expectations, I would book partial profits before elections to lock in the profits and lower the cost of acquisition for the rest of the portfolio. This is a prudent step as elections can throw up unexpected results, just like 2004. In case there is a sharp correction post elections, I would utilise that to top up my core portfolio with blue chips. And in case of a continued run up post elections, the balance portfolio will provide me a good appreciation, and I would wait for opportunities to invest my liquidity.

Every participant should have his objective clearly laid out and should not get swayed by the market movements to the extent that the original objective of investment is lost completely. Secondly, one should remember that there is nothing called “free lunch”. Do your homework before investing, though you would be utilising the services of an advisor. After all it’s your hard earned money!!! And finally don’t regret lost opportunities as equity markets provide you opportunities every day. You just need to grab the ones which fit your bill.