All of us invest in equities to become wealthy. We would like to cover the core principles and beliefs of those who have generated huge money from equities in a series.
Let us start this today with the first principle – “Believe in the India story”Our economy is poised to grow manifold over the next two decades. This will result in strong corporate earnings. Those who remain invested in high quality companies for the long term (ignoring all the noise and negativity) will make enormous returns.
Nilesh Shah captured this very well in a letter to Jim Rogers in 2017. It makes for compelling reading. The article was written in response to Jim Rogers expressing regret for his exit from India in 2015. This was of course gleefully picked up by our vested media who thrive on such news. Do read this Livemint article on why Jim Rogers exited.
We will show how this has generated outsized returns for great investors in India in the past and will continue to do so going forward.
India will be a global leader by 2030 and beyond
The Indian economy will maintain 7% plus growth and will be amongst the top 2 or 3 countries in the world over the next few decades. Last week Standard Chartered released their annual note on GDP growth. As per the article, India’s GDP in PPP terms will overtake the US by 2030.
For a broader picture, there is an excellent PwC report on the World in 2050. Six out of the seven largest economies in the world would be what are emerging economies today. The implications of this for investors are enormous and positive.
Titan and Rakesh Jhunjhunwala
Let us take an example of how remaining invested in a high-quality company which closely tracks the India consumption story generates enormous wealth. Titan is a great Indian company which has grown purely based on India consumption. Rakesh Jhunjhunwala had purchased 6 crore shares in 2002-03 at a price of Rs 3 per share (yes, Rs 3 !!).
Today he still holds 6 crores shares with a valuation of Rs 7000 crores!! That is the power of compounding based on the belief in the long-term story. During this period, Titan and the jewellery sector has gone through turbulent times driven by changes in regulations, consumer behavior and gold prices. But the ability of the management to adapt and continuously move into new sectors has reaped rich dividends.
Need to invest in quality companies and dismiss the short-term trends
Of course, for every Titan, there are several other investments which may have not paid off for him. But the point is that every investment need not pay off!! Identifying high quality companies which benefit from the India story will give great results over the coming decades.
This long-term journey of wealth creation will have many short-term tests. But we need to absolutely believe in the India growth story over the next two decades and continue to be invested in high quality companies which benefit from this growth.