Raamdeo Agrawal, chairman and co-founder, Motilal Oswal Financial Services
Image: Joshua Navalkar
In part 2 of an exclusive conversation on Forbes India Pathbreakers, Raamdeo Agrawal, chairman and co-founder, Motilal Oswal Financial Services, talks about his journey of wealth creation from zero to thousands of crores. “I did not take the beaten path,” Agrawal says as he shares his life philosophy and traits which helped him withstand the test of time and ride the ups and downs of the market cycle for over three decades.
India shining: A fantastic decade for investing
The market veteran is very bullish about India’s long-term growth story. He identifies three factors, which are likely to drive markets in the coming months: “One is FII flow. FIIs are very unpredictable. They cannot permanently depress the market but they can hold it at lower levels for some time. I don’t know what will be their behaviour but I do believe that the Indian market cap to global market cap is about 3.5 percent but allocation of global institutional investors is less than 1 percent. As the India story emerges, I am sure the allocations for India will go up. I am more positive on a 1-2 years basis—they will have to come with bigger bags of money.
Second is oil prices because we are very dependent on oil. Whatever forex we gain, a lot of it, goes to buy oil. When oil goes beyond $100-110, that creates a weakness in the economy. If there is a global recession for the next 1-2 years, it is quite possible oil will be more reasonably priced at $70-80 so that can sort out one problem. Third, after a long time, local investors are relentlessly coming in a big way. So, that is having a huge impact. My sense is this revolution from 40 million to 100 million retail investors in the last two years can go up to 200 million in four years. I think this is going to be a fantastic decade for investing in India provided the corporates do reasonably well. Local money is guaranteed to come here and if some bit of global money also comes in, we’ll have a big party. Global news flow is not very good but India is outperforming markets. India has a very unique growth story,” Agrawal explains.
Agrawal points out that markets have returned 15 percent over 40 years despite several downcycles, and he is confident that markets will continue the momentum, in terms of returns, in the next 10-15 years. “We have made everything here. I’m always fully invested in good and bad times. You don’t have to worry too much about the highs and lows of the market. By looking at the market, you don’t make money. You have to focus on the stocks. You have to buy undervalued stocks. Find bargains, buy it, and sell it when you think it is fully priced. Market has its own momentum. Just because the market is down 5-10 percent doesn’t mean anything. That should not scare you out,” he advises. Also read: Pathbreakers: Raamdeo Agrawal's Timeless Investing Tips For Blockbuster Market Returns
Brick by brick
Raamdeo Agrawal is not just an ace investor who has helped thousands of retail investors create wealth, he has co-built Motilal Oswal Financial Services from the scratch. Today, the financial services behemoth is present in a wide range of segments—from stock broking to mutual funds to investment banking. It was a bumpy ride. “Moti [Motilal Oswal] and I built the company completely from our own architecture because there were no chartered accountants in the stock market. Then, success breeds success. In 1987, we had nothing, but by 1993, thanks to the Harshad Mehta bull run, we had about Rs 8-10 crore, which is a lot of money for two young men. From there on, we kept on building. If there was no success in 1991, then I don’t know what could have probably happened. Maybe we would have come back to corporates. It is also important that whatever you are passionate about you persevere till you hit the first success. A lot of people give up before they hit the first success and success takes a little time,” he reminisces.
Agrawal highlights the importance of “passion becoming profession”. He recounts, “In 2003, we incurred losses for 2-3 months. That time, I was a little confused but I rededicated myself to the stock market rather than getting disappointed. The faith in markets and the India story has kept us going even in bad times. There were bad times but we never left the market. So those things, with the help of God, kept us rational. See, it takes time. This is 30 years’ journey, from zero to thousands of crore of wealth. That is possible only because of compounding, and compounding is possible only when you are in one type of work. The moment you go from stock market to say fashion, or automotive, then everywhere you have to restart, and then you get lost. You don’t know what is right.”
Succession and legacy
Agrawal says the company is professionally managed. “We have to step back more and more as we grow. Our children are also here but they are young. Between them and us there has to be a professional layer who will take the next 25 years’ journey and, by then, hopefully, our children will also become part of the professional team. But then the company has its own journey. We have designed it in such a way that the company will outlast our life. I know financial markets are going to be very exciting. The opportunity size in the financial markets is going to explode and people who are there with reputation, brand equity, distribution, satisfied customers… I think we just have to be there and do our job and we will keep growing. We have tried to put in place a very professional architecture, let’s see how it goes,” he adds.