Veteran value investor Ramesh Damani is brushing aside doomsday predictions about US tech stock corrections and concerns around corporate earnings growth in India, sticking firmly to his long-term investment philosophy. In a recent interview, the seasoned stock picker emphasized that domestic liquidity remains robust enough to counter any selling pressure from foreign portfolio investors.
Long-Term Vision Over Short-Term Fears
Damani remains unfazed by short-term market fluctuations, advising investors to "remain invested" and harness the power of compounding. He draws a powerful analogy: "We will all die one day, but can we just stop living? Similarly, all bull markets will end eventually, but that doesn't mean you shouldn't participate."
The investor revealed that he maintains a bottom-up approach to stock selection rather than focusing on broad macroeconomic indicators like GDP and inflation. "I look at my stocks bottom-up, and I generally have a mixed bag," Damani explained. While some of his holdings reported strong earnings, others disappointed due to factors like rupee depreciation or US economic slowdown.
Sector Performance and Investment Strategy
When asked about specific sectors, Damani noted that defence stocks performed particularly well in his portfolio, along with select auto ancillary and engineering companies. However, he expressed disappointment with media stocks and revealed reduced exposure to IT companies.
Emphasizing his long-term commitment, Damani stated: "Everything is for the long haul only." He doesn't panic-sell when companies report weak quarterly earnings, preferring to focus on whether the structural story remains intact. "We don't really care about three bad quarters as long as the structural stories are intact," he added.
Advice for Retail Investors
Damani offered clear guidance for retail investors: "If you don't have time, invest in an index fund." He recommends passive funds for those busy with their careers or families but acknowledges that stock-picking offers greater wealth-building potential. "If you want to get rich, you'd better start picking stocks. That makes a huge difference between picking stocks and index funds over time."
Regarding the primary market and high-valuation IPOs, Damani believes there's sufficient liquidity to absorb them. He cautioned against prematurely declaring bubbles, noting that it's difficult to identify them in real-time. "When you're living in a bubble, you don't understand. It's only afterwards that you expect it," he observed.
AI Bubble Concerns Addressed
When questioned about potential AI bubbles, Damani acknowledged concerns but highlighted key differences from the dotcom era. "We're nowhere near that level of overcapacity" seen during the 2000s tech bubble, he stated. Current AI utilization is growing exponentially across business, education, and professional settings, with data center capacity yet to be fully utilized.
Damani summarized his investment philosophy with a maritime analogy: "The ship is always safe in the harbour, but it's designed for the high seas." Similarly, while money remains safe in bank fixed deposits, investors need to venture into quality businesses to achieve meaningful returns that outpace inflation.
Currency and Interest Rate Outlook
On currency movements, Damani expects the rupee to continue depreciating at around 3.5% annually, which he considers "par for the course." He anticipates a 25 basis point interest rate cut this year, citing controlled inflation and positive impacts from GST rationalization that should become evident in the December quarter.
Regarding foreign portfolio investor activity, Damani appears remarkably unconcerned. "It used to be earlier. They used to be the most important number in the market, and now I barely look at it," he confessed, emphasizing that domestic liquidity is strong enough to absorb FPI selling. He even suggested that if FPIs return to Indian markets while domestic investors continue buying, a significant "melt-up" could occur.
Damani continues to explore new opportunities, expressing interest in building positions in new-age economy stocks despite acknowledging they've "run away" in terms of valuation. His overall message remains consistent: participate in markets, focus on the long term, and don't let fear dictate investment decisions.
