THE STRANGE CASE OF 'DUPLICATE' JHUNJHUNWALA
By Ruma Dubey
On 9th June, a company not even heard of on the streets, Surana Solar was the “hottest” pick on the bourses. On 10th June, the stock was up 10% and went up to Rs.64 levels. And why this sudden spike up in the stock? Well, apparently, Rakesh Jhunjhunwala bought 2.56 lakh shares in the company via a bulk deal on NSE at an average price of Rs.53.74/share.
Today, the stock is locked at the 10% lower circuit, like the way it has been for the past few days. And the explanation for this sudden turnaround in mood? Well, its truly the strangest reason – apparently, it has come to light now that the “Rakesh Jhunjhunwala” which the thought it to be was not the same one; this was someone else who had the same name the so-called Bull of Indian markets. Its like going to see a movie as the title said, “ Starring Amitabh Bachchan” only to know that it was a duplicate Amitabh!
But that was just the price of a movie ticket going waste; here people had blindly bought into the stock thinking it has the backing of “Jhunjhunwala” and now that they know, it’s a duplicate, they are trapped.
The strange thing here is that the broking firm which had opened the demat account for trading for this Jhunjhunwala from Kolkatta had all the legitimate documents to prove his name. It’s just that he shared his name with the big investor of Indian stock markets.
SEBI has directed exchanges to withhold settlement on select trades on June 10 and 11 and has started a probe into this deal. But the bigger issue here – if this Jhunjhunwala does prove his credentials and turns out to be a legitimate person sharing the same name, there is simply no case here at all. And the grapevine on Dalal Street suggests that this is what could happen.
So where does that leave all those who followed a stock simply because they thought the original Jhunjhunwala bought it? Whatever Jhunjhunwala buys, the stock price zooms up and investor frenzy whips up. Many call him the “Warren Buffett” of Indian markets. There is no doubt he is discerning and extremely intelligent, which is why he has built up an enviable net worth. But because almost all their investments have turned into goldmines, people feel that, that would rub-off onto them too if they buy the same stocks. But then is it right to follow him, buy what he buys?
There is no doubt that he buys stocks after a lot of research; it is rarely an impulsive buy as he puts in huge amounts of money. But remember, he gets the shares before we even know about it and by the time, the bulk deal is announced, the price is high, leaving very little for us on the table. What this means is that when these big guys buy, just on the momentum, the price rises but it is not that the price rise is always sustained just because they have a stake. Thus as a trader you could probably make some “news based” money but buying for long term just because they have a stake, makes no sense at all.
What we have to learn here is that like every individual is different, his investment needs and strategies should also necessarily be different. What works for Damani or Jhunjhunwala need not work for you. They are like a lion on the prowl in the jungle; when they move, the entire jungle knows but can a monkey eat the lion’s hunt; it is only the hyena or the vulture, both scavengers who eat the leftovers after the lion has eaten. Is it a good idea to be a scavenger? Best to be a hunter but one can take lessons from the best. The basic purpose, to eat, is the same but methods and requirements are different. That’s the same logic when it comes to following these legends or Warren Buffett. You can take lessons from the king of the investing jungle but it defeats his teachings if you only follow him blindly.
This strange case of Surana Solar should probably highlight the importance of proper disclosure. There has to be a standard format – like mention the full name or initials or name of company. There has to be an indicator that this one is the original, the same individual and not a duplicate. Maybe this will force SEBI to now take this “name” issue very seriously and prescribe a standard format.
And for those following blindfolded, Jhunjhunwala and Damani made millions by staying invested for a long term. They are not day traders. And that is probably something we all should follow them blindly for. Invest wisely using your own mind and intellect and maybe, you could emerge as the new Jhunjhunwala, Damani or even the Buffett of India.