Yet Another Pied Piper

Rakesh Jhunjhunwala, the Mumbai-based stockbroker and a chartered accountant, has suddenly shot into prominence. Market circles are comparing him to bulls like Harshad Mehta and Ketan Parekh—both unknown entities who became famous (or infamous) for their ability to move critical stocks. To be fair, Jhunjhunwala has made his presence felt with his dynamic investment strategy. As of June 2003, Jhunjhunwala had holdings of over 1 per cent in 21 companies at a value of Rs 114 crore. Some of these companies are Crisil, Geometric Software, Hawkins Cookers, KPIT Cummins, Matrix Laboratories, Tata Infomedia, Relaxo Footwear, and Titan Industries. His wife, Rekha, has over 1 per cent holding in at least eight companies worth Rs 11 crore.

His successful track record and an uncanny ability to spot "value scrips" has suddenly made him the darling of retail investors who tend to follow a leader, rather than pore over research reports or recommendations made by investment bankers and technical analysts. Exactly like they treated Parekh and Mehta as their market gods. Jhunjhunwala follows thought processes, which are fundamentally different from the conventional methods followed by many fund managers. He does not have any fixed philosophy nor any icons, but believes in innovation. The essence of his investing is his ability to anticipate changes—both internal as well as external.

In the past, he has dared to invest against market sentiments—his investment in Bata India way back in 1996 is a case in point. Jhunjhunwala took a contrarian view to invest in the stock at a time when domestic institutions, FIIs and even small shareholders were selling the stock. This was on the back of his bullish view on the footwear industry—the rewards followed in the next couple of years as his investment almost tripled.

But success has its flip side too. For example, market regulator Sebi has initiated investigations into allegations against Jhunjhunwala and other broking outfits of circular trading in certain stocks. Circular trading occurs when a set of brokers acts as a cartel and keeps selling the same set of shares to each other so an impression is created that there's a buying wave in that scrip. The income tax department had also attached his property after a search operation in March 2001 following the Ketan Parekh scam. Jhunjhunwala has survived till now, but mauled bears have a way of getting back at the snorting bulls.