Categories Interviews

Behavioural Finance Biases with Anshul Saigal

Radhakrishnan Chonat – AlphaStreet

Good day, everyone. Welcome to the Fund Manager Series. Today, as the last interview of this year, we have Mr. Anshul Saigal, who’s the Executive Vice President and Head of PMS, Portfolio Management Service at Kotak AMC. Anshul ji has expertise in behavioral finance and value investing principles. 

Anshul has over 21 years of experience in the Indian capital markets, of which he has spent about 15 years with Kotak PMS. Prior to this, he has worked with J.P. Morgan in their Equity Research Department, ICICI Bank and Standard Chartered Bank where he analyzed equities and corporate credit. Anshul completed his MBA Finance from MDI, Gurgaon and is an engineering graduate from SIT, Tumkur. Anshul also is an avid reader and I’m looking forward to his book recommendations, with particular interest in behavioral finance.

Anshulji, welcome to the Fund Manager Series of AlphaStreet.

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

Thank you so much. Thank you, RC ji. It is a pleasure to be here and to be speaking to you. Thanks for inviting me.

Radhakrishnan Chonat – AlphaStreet

Great. So to kick off, I’m sure my audience will be more than interested in your journey. You have this two decades of experience in seeing the capital market in India and how it has evolved over the years. So if you can quickly walk us through your journey, how you got into finance and investment management and what you have seen over the years?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

Honestly, my journey into finance was quite by accident. What I was geared to do is what my family was always doing, which is engineering and engineering-related work. But over the years, when I started my MBA, I met with a quite an accomplished professor who was a doyen in the field of value investing. And some of his principles actually clicked with me quite nicely.

One thing which he said in a class is that if someone was to give you $1 for $0.50, then why would you not take it? He would obviously take that bargain. And that is what the equity markets offer you on and off. And that’s where there is an element of bargain in the equity markets. And if you can understand the bargain, you can benefit from it or profit from it.

Now that intuitively is something that kind of struck with me very nicely. The only hitch that I had at that time is that why would someone give me $1 for $0.50. Now that is something that I realized over a period of time. It has to do with a lot of things from psychology to other aspects, adjust the institutional imperative, how people analyze companies differently.

A combination of those leads to this bargain. And in search of that bargain, I started sort of investing and being in the finance field, and it has been a great journey over the last 20, 21 years. So, this is how I entered the finance industry. As I said, I was geared to be an engineer, but it just so happened that I met this professor and I entered this industry.

Radhakrishnan Chonat – AlphaStreet

Excellent. Is the professor Sanjay Bakshi sir by any chance?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

It is. Absolutely.

Radhakrishnan Chonat – AlphaStreet

Great. Great. Excellent. So, you sort of mentioned about the psychological or the behavioral finance aspect that picked your interest. And I have always seen that the greatest investors, they always are contrarians in terms of not going behind the herd mentality. In the last two decades of experience, sir, can you highlight any key points that came like a revelation, okay, this is how it works, this is how it works, kind of related to behavioral finance aspect that you have seen that probably will be of interest to my audience?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

Of course. It has been quite a revelation to understand how our inherent biases kind of lead our investment style, our investment in the markets and how that can be detrimental to our own interest. Let me give you an instance. I manage monies for many investors and one thread or one bias that I see through investors is the tendency to be averse towards losses.

Now of course, this loss aversion is quite — you can say that it is quite natural that people don’t want to incur losses in their hard-earned money. But what investors are unable to kind of differentiate between is volatility and permanent capital loss. When investors are coming into the markets and they’re investing their monies, this is risk capital. And clearly, when you say it is risk capital, there will be an element of volatility involved in the markets.

So, you could very well see 20%, 25%, 30% of your monies depreciating before the returns come through. In fact, Warren Buffett says that if you cannot see a 50% loss initially in your money, then don’t come to the markets. But because of loss aversion, what happens is that either investors don’t invest in equity markets or those that do invest, when they see temporary losses, they get nervous and they exit. In both instances, they incur losses. In the first instance, they incur opportunity loss because what they make is what debt capital gives them, maybe 4%, 5% net of taxes. But what they miss out on is significant returns over a period of time.

Just for instance, the Sensex used to be 3,000 points in 2003. And 20 years later, in 2022, Sensex is 62,000 points. That itself tells you that over 20 years, you generated 20 times returns, 20 plus times returns. And if you had not invested in equities and maybe you had invested in debt over this period, at 4%, 5% compounding, you would probably be, by now, doubling your money or maybe tripling your money, but you let go off a 20x return. So, there is an opportunity loss in case you had not invested in the markets over this period.

And on the other hand, assume that you had loss aversion and during the COVID period when the Sensex was down somewhere close to 25% and many small and mid-caps were down 40%, 50%, you got nervous. Because of your loss aversion tendency, you exited. From there, these stocks are up 5 times, 10 times and you let go off that opportunity. First, you incurred a loss on your capital. And second, you lost that opportunity of making that money. I see this as a thread running through investors in general. In fact, I can tell you that traded — trained investors also have this tendency in their heads, but the ability to conquer this tendency ensures that you generate returns over a period of time.

Similarly, there are other tendencies, something that is colloquially called herd behavior, but in technical terms it’s social proof. What you see around yourself is that if everybody is a buyer of one stock and that stock has been going up, you see that everybody is buying, the stock is going up, there must be something right with this opportunity and you jump in and invest seeing that the herd is investing.

You look for society’s tendencies towards this stock and you come in and invest. But a simple rule of economics tells you that if demand is high, the price will be high. And as a result, if the stock’s demand is quite high because everybody is buying, the stock will be priced high as well. You don’t want to be overpaying for an asset that you have been — that is on offer. You want to be underpaying for an asset that is on offer.

And so more times than not when the herd is buying, your tendency will tell you, your bias will tell you go in and buy because everyone is buying, but in essence it is in your favor to not be doing what the herd is doing and to stay out of such sort of situations. A recent example being Bitcoin and the cryptocurrency. Everybody was jumping in. And because of that, prices were going up. We have seen what has happened in that speculative asset of late. You see many such examples in the markets and it is really your psychological tendencies, your biases which lead to these developments.

Radhakrishnan Chonat – AlphaStreet

Excellent point, sir. Loss aversion, social proof of fear of missing out. So coming to Kotak PMS, PMS investors are, I believe, high-net-worth individuals or ultra-high-net-worth individuals. So interacting with them, what sort of insights have you got? I’m sure a huge part of your job is to convince them that this is the part of the market cycle and all. So, what kind of a customer base you had seen evolving right from the time the PMS started and even now? Is there a paradigm shift in the investor mindset from HNI, UHNI perspective? Any insights on that, sir?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

There is — you find in within the HNI community all sorts of individuals and all sorts of experience that these individuals bring to the table. These are mostly accomplished people. And so they have over a period of time turned their time into money. They’ve created wealth. And paramount for them is the ability to preserve that wealth.

And as a result, for us, fund managers, it is important to understand that psyche of the investor, that this investor has created wealth over a period of time. And for him, because he’s not a market participant himself, he doesn’t understand the markets in so much detail as we do because it is our day job, it is important for him to see that his wealth is not eroded and he gives his money to someone who will ensure that his wealth is not eroded.

And as I was mentioning earlier, it is very difficult for those investors who are not daily participants in the markets to differentiate volatility from permanent capital loss. And as a result, the requirement from a fund manager is to both prevent volatility and also to prevent permanent capital loss. And so investors typically like low volatile portfolios.

The second thing that investors, I mean, any investor for that matter would like is that he would like to see his funds beating the markets. And in that context, investors are looking for fund managers who can do that for them in a low volatile sort of portfolio. Now those are, for a practical fund manager — for a fund manager who practically invests in the markets. He knows that it is very difficult to marry these two aspects, both be low volatile and I mean, low on volatility and to generate market-beating returns, but that is the endeavor that fund managers typically have. And it stems from the investor’s psychology and we are catering to that.

The second set of investors are those who are kind of knowledgeable and who can bear volatility as long as they see outsized returns on their capital. Now, there are offerings that we can bring to the table for such investors as well, where in short — small bouts, there may be high volatility, but that these funds over a period of time can generate significant returns over the index and generate outsized returns. So, we also cater to such investors where we can offer them outsized returns and portfolios which can generate — I mean, which may be volatile, but can generate such returns for such clients. That is the investor’s psychology in general.

How we ‘ve seen investor’s psychology change over the years is that investors have become more attuned to the markets. They can understand that as markets are going down, that’s really not the time to be exiting the markets because they’ve seen cycles, many of them. And they’ve seen that even as recent as COVID when markets were down, it was in their own interest to actually stay invested because when markets turned, portfolios generated significant wealth. So to some extent and for some investors, that element of loss aversion is coming in control.

The other thing that has happened is that by virtue of regulation in the market, SEBI doing a great job on regulation, leverage in the markets because of margin requirements coming — I mean, margin requirements going up, leverage in the market has come off quite meaningfully. And as a result, the Indian markets are far less volatile as compared to how they used to be in the past. And both of these things combined, we are seeing that investors are more at peace now in the markets and they can take more sort of distant bets on the market; many investors, I won’t say all, but many investors can do that.

And this is a process of sort of maturing of the investor community in India. We must bear in mind that in the last 10 years is when the Indian investor has actually gained in size and become quite sizable in size. And as a result, the industry has matured in this period. And that is getting reflected in investor behavior for sure. So, that’s how we would look at how investors are behaving today.

Radhakrishnan Chonat – AlphaStreet

Excellent insights, sir. Taking a leaf out of the regulation aspect that you mentioned, just last week SEBI and the industry body has come out with PMS regulations. And I know the moment that news came on Twitter or whatever, I’ve been bombarded with questions from my friends. Is this good? Is this going the mutual fund way? I mean, am I going to get extra Alpha? So to put everyone at rest, sir, if you can just brief about what the SEBI regulations with regards to PMS is, that would be great?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

In PMS, there was really no standardized way till about three, four years ago in how investors were actually — sorry, portfolio managers were depicting their performance. Some were giving an aggregate performance of their portfolios, others were giving model portfolio performance, some others were giving just the first client performance. And to that extent, there was variation in how performances were depicted.

Now some time back, SEBI came up with a regulation that all investors will have to — all portfolio managers will have to give time-weighted returns of their portfolios and this would have to be aggregate returns of these portfolios. So to some extent, standardization in how a performance was calculated was brought to the table.

Now in the recent regulation, what SEBI has again kind of come up with is basically standardization of benchmarking. How PMSs will be benchmarking their funds? SEBI has brought some standardization to that, so that it becomes easy for investors to compare themselves to these benchmarks, and in a sense also compare between portfolios on how portfolios are performing. And again, this is one area which was — which had some loopholes because benchmarking was really a tricky situation within the PMS. PMSs didn’t know whether they were classified as mid, large, small or they were thematic.

Now with benchmarking, at least to that extent for the investor that would be clear that this is a thematic portfolio or this is a large, mid, small or that kind of a portfolio. So it is good regulation. It again standardizes how performance is depicted to the investor. And as we have seen in the mutual fund area, as regulation has gone up, we have seen more and more participation from general public in the mutual funds and mutual fund size on equities itself is as high as INR17 lakh crores odd today in comparison the PMS and AIF Industry on the equity side, listed equity side, is only in the range of INR2 lakh crores today.

So the room for this industry to actually move up and become dominant or at least a sizable industry is quite substantial. And as we have seen, as I mentioned in mutual funds, greater regulation only leads to greater participation because there is a greater transparency for the investor. It is always good for the investor. What is good for the investor is good for the industry. And as a result, we think that this tightening of norms is going to be only good for the industry.

Radhakrishnan Chonat – AlphaStreet

Excellent, excellent. Kind of a leading question. Sir, can you talk a little bit about the PMS offerings that you currently have? What sort of funds you have? A quick explainer would help our audience.

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

Yes. We have four portfolios. One is the India Focus portfolio, Kotak India Focus Portfolio. The second is, Kotak Small & Mid-Cap Portfolio. Third is Kotak Pharma & Healthcare Portfolio, which as the name suggests, is investing in pharma and healthcare opportunities. And fourth is the Kotak Fintech portfolio where the fund is — the portfolio is investing in finance and tech companies substantially, but other tech leaders as well. So, that is the offering set that we have for our investors. Our flagship scheme, the India Focus Portfolio, is a scheme where we are investing in leading companies from various sectors within the listed Indian equity space.

Our endeavor is to find bargains, as we have mentioned. The route that we use to find those bargains is that we look for special situations or we seek value opportunities. In our judgment, value lies where growth is not priced in, and that really is what we are seeking. Value does not lie in a stock being 5 times price to earnings. Even that may be a value trap if there is no growth. We find value where there is growth of 20%, but the stock price expects growth of 10%. And as that growth of 20% comes through, value will get unlocked even if the stock today trades at 25 times price to earnings. That is our endeavor. And those kinds of opportunities we seek in this portfolio.

Typically, this is a portfolio where we have concentrated positions, 20 to 30 positions. Our typical investment weight in individual opportunities would be 3% to 8%. And when we go to 8%, our endeavor is to identify those companies and hold them at a larger weight where these companies have limited downside much more than they have substantial upsides. This gives us a room for the smaller companies and say, the 3%, 4% holdings in the portfolio to actually unlock value because these companies give stability to the portfolio since they don’t go down too much and in a sense that’s how we balance the portfolio.

The portfolio, why it is unique also is that it is very nicely sort of structured or the — I mean it’s crazy, I’m missing that word, but it’s diversified between large, mid, small, between sectors and between styles. We also have growth at reasonable value. Companies, we have value companies. Those are different styles, sectors and market capitalization. That diversification to the portfolio lowers its standard deviation.

And as a result, the portfolio is less volatile in our judgment and also it has exhibited that. Even in a year like last year where you had nearly — I mean, the small, mid-cap seeing extensive volatility, our portfolio is up, not down on a one-year basis, somewhere in the region of 2% to 4%. And that itself tells you that in periods of immense volatility, this portfolio can hold its own and it can hold up well.

Similarly, our small and mid-cap portfolio is also diversified amongst various segments of the markets. And that portfolio has — we look for bargains in that portfolio where growth is quite significant over the next two to three years in these companies. And that growth is not getting priced in. And as a result, by virtue of our diversification and superior stock identification, that portfolio in the last year where small and mid-caps have actually been so volatile has generated an alpha of as much as 8% to 9% over its benchmark. So, our ability to identify these opportunities are these bargains and to take conviction calls on these names, yet keeping the portfolio well diversified amongst various segments is what makes our offering superior and that is reflected in how our portfolios have performed.

Radhakrishnan Chonat – AlphaStreet

Excellent, excellent. Sir, there is a saying that nothing happens in couple of decades, but within a few years a lot, probably essentially where stuff happens. And that’s what we have seen in the last three years, 2020 onwards. If I were to ask you what are your top three key takeaways personally as well as professionally that you would like to express that you have learned in the last three years, would more than happy to hear.

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

I think the most important thing that I’ve learned is equanimity. 2020 was a highly stressful year. As I said, it was a time of immense opportunity because stocks had corrected meaningfully and their earning power had not been impacted to the extent that the stocks had corrected. If things were to turn around, if the world was going to go bust, everything was going to go bad, then it was — I mean, then whether you were investing in the markets or not, it would be all the same because your money would go to zero. But if the world was to survive, then the opportunity at that time was quite substantial.

And just looking at this risk reward, it made imminent sense to be investing in the markets at that time. I mean, some of the leading building material companies, for instance, branded building material companies were trading at valuations where the stock prices indicated that expectations built in into these stocks is of terminal growth being zero and that in a country like India where we were at a very nascent stage of growth.

Now if this — what it told us is that if this terminal growth was to go from 0% to 5%, these companies would generate somewhere between 3 to 5 times returns on those stock prices. Now that was a very mouth-watering sort of valuation. So having equanimity and not being overly perturbed at a time like that, allowed you to invest in the markets at that time, also having equanimity at times where markets are frothy or at least some segments of the market are frothy.

For instance, last year, IT as a sector was building in significant growth expectations, was building in margin stability and the multiples that these stocks were trading at were really all-time high multiples or at least those multiples were not seen since the year 2000. That told you that possibly this is a time to be cautious on this space and not get carried away. If you had that sort of a grain in your head, you would have actually taken some monies off the table and that would have worked well today.

My point being that your emotions being not so sad when things are bad, being not so happy when things are good is something that holds you in very good stead in the markets. At the end of the day, the markets are — and not just markets, even in regular life. Your life has also — the markets are prone to cycles and just having equanimity is something that holds you in good stead. Other than that, I would say, that being focused, being driven, being passionate to get up and do something that you enjoy, these are edges that you will have and others will probably be only chasing you if you — and in a highly competitive world, if you have these traits or you build these traits in your own self.

And I can also tell you one additional thing that markets are like a puzzle. It is almost like you are trying to see the future that you have the arrogance to say that the market is wrong on PSU banks and PSU banks will trade much higher one year out. At the same time, you have the humility to say that PSU banks may not rally, and as a result, don’t put all your money in that one basket. That play between you can say arrogance or confidence and humility or the possibility of you going wrong is what again is an edge. And I think that these are some things that one should be building in into oneself and be as truthful to yourself. When you are wrong, accept your mistake, understand why you made that mistake, correct it. And when you’re right, learn from that also. Don’t get carried away, learn from it and kind of implement that in other opportunities.

Radhakrishnan Chonat – AlphaStreet

Very insightful lessons I’m sure for my audience, including me. These are all insights that only we can get from you. Excellent. You mentioned — my next question was that if I were to ask you to sort of crystal ball gaze, you mentioned about arrogance and being in the humility side. If I were to ask you, let me phrase it differently, what will be your wish list that you would like to see in 2023 in terms of events happening, geopolitical events or how the market — what are your views? I’m not asking you to take a wild guess, but sort of a wish list, what would you like to see?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

If you ask me, RC, over the last 30 years, since the time that India reformed its economy and opened up, the one thing that we have seen is that wherever there is an involvement of government, India has lacked. And wherever the government has taken a step back, India has really thrived. The case in point being the services sector. Look at how IT has done over this period where the government had really no involvement. And on the other hand, look at how manufacturing in this country has done over the last 30 years.

For all practical purposes, the small and medium enterprises of this country were wiped out over the last 30 years. What remained was, to some extent, a perversity that these small and medium enterprises could only thrive if they were not part of the organized setup, that they were getting the benefit of not paying taxes. And that much benefit is what made them thrive or sustain their businesses in the context of the economy.

Now it’s not rocket science to expect that the manufacturing segment of the market, which was so sort of ignored over this 30-year period, is something that we really need to revive. Otherwise, what we will continue to see is a client economy where the country’s GDP keeps growing, you keep seeing per capita increase, but the benefit of that per capita growth in income goes to not Indian companies, but those who are catering to Indian consumers.

So, manufacturers out of the country who are catering to the Indian requirements. As we have seen in the case of the trade deficit, China’s trade surplus versus India is somewhere in the region of $70 billion. And that tells you a story that we cannot even manufacture or at least so far we were unable to manufacture even furniture, toys, mobile phones, electronics, et cetera. And all of those were getting imported into the country catering to the Indian consumer.

My wish list for 2023 and beyond is that this growth in Indian economy and in per capita income should be to the benefit of Indian industry that we should be consuming what we manufacture. And as a result, the manufacturing sector should get a lift up. And the PLI scheme, the tax rationalization, GST, all of these are measures in the direction of making this country compete with other competing economies.

Even geopolitically, we are in a very sweet spot. The world has seen, because of COVID and also because of general machinations around us, that the one country which benefited most from globalization and sort of convergence of supply chains was China. Most of the world’s sort of production was done in China and they were catering to the rest of the world.

The world realized in COVID that once this supply chain is disrupted, they will be at the mercy of this one country. Or at least if that country is unable to supply something, then there will be a huge cost to pay because they don’t have alternate supplies of goods. And as a result, the world is looking for alternate suppliers of goods that of course means that the scale benefits of buying only from one country come down. You do have some cost increase because you’re buying from multiple countries, but this trend is something that India can dip into and benefit from, particularly in manufacturing.

Our belief is that all these measures that have been taken, as I mentioned, PLI, tax rationalization, GST, all of that, all of these play into this theme. And our belief is that going forward, India should become a much more dominant manufacturer than what it has been over the last 30 years. And more importantly, this manufacturing will be in the organized sector, not in the unorganized sector and the benefit of that will be for everyone to see. Even the lower income categories will be lifted up.

Radhakrishnan Chonat – AlphaStreet

Excellent, excellent. Valuable insights from services. We are also looking at manufacturing being the India story, like how IT services is being talked about, manufacturing should be talked about. Sir, from your vantage point, what have you seen with all these schemes that have been announced? I think we started off with Make in India, The World Economic Forum push. On the ground, is there a reluctance from private enterprises to spend on capex, because right now from what we are seeing is the government is doing lot of infrastructure or capex and all that stuff. But we keep hearing from the Finance Minister that private enterprises should come up. Is there something that is stopping them? Or from your vantage point, has the tide shifted and is there more confidence from enterprises?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

I look at — metaphorically, if you have a child in your home and you have been for 10 years feeding that child one chapati, in the 11th year if you tell that child that you should have four chapatis, the child will not have the capacity to have four chapatis, right? He can only have one chapati because that is what he’s trained to do.

Similarly, the manufacturing nudge from government to the Indian industry and saying that you should Make in India is not something that they were geared to do because India Inc. was not competitive on capital, not competitive on labor, not competitive on land, not competitive on taxes, not competitive even on the consumer because he didn’t have the consumer to take his goods.

Now unless all these things were rectified, that child will not be able to eat four chapatis. He will need the base to be created for him to actually ramp up. So maybe after one chapati, you feed him one and a half, then ramp him up. What the government has over the last few years done is through all its reforms and through the process of making this economy much more formal, it has built a system where the Indian corporates are competitive or at least the environment that they get is competitive versus what the competing economies have.

So if everyone is paying 25% taxes, so is India Inc. now. If there is one tax across the country in all other countries unlike how it was in India where each state was a country in itself, with GST, you have one or at least a rationalized tax structure across the country. There is no incentive for someone to actually not be in the organized sector. There is more incentive to be in the organized sector for a multitude of factors.

So a lot of — then the production-linked incentives scheme where, for incremental production, you get further incentives. All of these are in the right direction to create the conditions for Indian manufacturing to manufacture in India. And as a result, after all this framework has been setup, now we can say that we are in a far better position to be actually manufacturing in India than what we used to be when there was a nudge from government, but the underlying conditions were not favorable.

And as a result, we are seeing that so far this year we’ve exported out of this country INR50,000 crore worth of mobile phones. And this is a country which used to import a similar number of mobile phones till about eight, nine years back. So clearly, there is something that has changed on the ground which is leading to these developments coming to the fore.

Radhakrishnan Chonat – AlphaStreet

Excellent insight, sir. Sort of segueing away from markets. Anshul ji, if I were to ask you other than following markets, I know that’s your passion, what other passions you have? How do you unwind?

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

I enjoy intellectual games. I mean, some — one may say that how boring is that. First of all, you are in the markets and then you enjoy intellectual games like chess and poker, but that is something that I enjoy. I used to be — when I was in school and college, I used to be a cricketer and I used to play other sports, but that doesn’t interest me so much anymore.

What interests me is maybe a chessboard or a poker table. And aside from that, I do play the guitar, although of late, I’ve not been very — it’s not just something that I’ve been doing too often, but I do play the guitar. And that’s something that I like to do off and on. And I like to read interesting books, either on the subject that is investing or something multi-disciplinary thinking, I mean, something that spurs multi-disciplinary thinking in me. And so that’s what keeps me busy. Off and on, I watch movie and family. That’s really what keeps — what I do other than work.

Radhakrishnan Chonat – AlphaStreet

Excellent, excellent. So, you mentioned books and this is sort of a standard question that I ask all my guests before I end the show. If I were to ask you to pick three books that profoundly change the way you look at things, the top three picks if you can name them? I’m sure my audience would be more than happy to pick them for their Christmas vacation reading.

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

Sure. So the first book that I picked up and which changed the way I started thinking about my life ahead, my money, how I needed to deploy my capital was a book, very simple book called Rich Dad Poor Dad. Now that book is something that really changed my perspective towards money. It is a story where there are two friends, one has a rich dad, the other has a poor dad and how there is a difference in both — the teachings that these two kids get from their respective fathers. So very interesting. The rich father teaches his son investing. The poor father doesn’t have that sort of an understanding about investing. And so he can’t really give those learnings to his child, though his child learns from the other — the friend. Very interesting. I think that this is a must read for someone who doesn’t understand these aspects.

The second book, which really kind of gave me a great perspective about investing in particular was a book called Margin of Safety by Seth Klarman. Now that is a book that one should read and re-read. There is a lot to learn from that book on how to identify bargains, what a bargain means firstly and how to identify bargains, which pockets of the market you can get these bargains in. And this is — the interesting part about the equity markets is that a lot of the greats, people who are accomplished in this business, write books and they write about their experiences.

There is so much to learn from those. And you can really gain a lot. At least I can tell you that whatever I’ve done over the last 20 years is on account of just learning from the greats, taking from what they have to teach and kind of implementing it in my own style. So, that is another book that one must read.

And the third book, again, I’ll take a book on investing only. I don’t want to — since you asked for three books, I don’t want to go into other subjects. But the third book which I think or I’d say an article which really changed my perspective about investing was an article. It was actually a speech given by Charlie Munger called The Psychology of Human Misjudgment. Now that is a speech that I think should be read by everyone.

It talks about human biases, the different types of human biases. And these come from his vantage point given that he’s an accomplished investor and a businessman. Through his experiences — he has experienced these and he has kind of collected those in this speech and write-up. I think that these are three profound books or articles that one should read.

Of course, there are many more you can read. Warren Buffett’s letters. You can read a book called One Up on Wall Street by Peter Lynch. Again, a fantastic book. I think that, that again is one book which really changed my perspective about equities, or you could even read a book by Joel Greenblatt called You Can Be a Stock Market Genius. Again, a fantastic book with a funny name, but a fantastic book to learn about the equity markets. These are some examples of books that I’ve read and re-read and I’ve benefited from in the past.

Radhakrishnan Chonat – AlphaStreet

Brilliant choices. And thank you for taking the time out and catching with us. And I’m sure this interview is going to be very insightful for our audience. Here’s wishing you happy holidays and looking forward to catch up with you again next year.

Anshul Saigal – Executive Vice President & Head of PMS – Kotak Mahindra PMS

Thank you, RC. It was an absolute pleasure to speak with you. I look forward to your feedback on whether I’ve been able to add value to your viewers and to interact with you again. Thank you very much. It was a pleasure.

Radhakrishnan Chonat – AlphaStreet

Thank you, sir.

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