Book Review: Gurus of Chaos…

Title: Gurus of Chaos – Modern India’s Money Masters

Author: Saurabh Mukherjea

Publisher: Bloomsbury India

ISBN:  978-93-84052-55-3

Pages: 171

Price: Rs.  350

Reviewed By: Sonia Gandhi, CFA

 An enormous amount of unwarranted noise and chatter coupled with several other unique challenges, makes India a tough market to invest in. Leveraging on his decade of experience in the stock markets, Saurabh Mukherjea juxtaposes his learnings along with the collective wisdom of seven of India’s elite investors to write ‘Gurus of chaos- Modern India’s Money Masters’.   Saurabh delves into the minds of seven veterans of the Indian Investment management Industry and tries to understand what makes them so successful.  He sketches a nice little background helping the reader understand their journey, mistakes made and lessons learnt. He also uses his knowledge of stock markets to lay down some simple rules for successful long term investing in India.

The author sets the tone in the prologue, by giving example of massive value destruction by an Indian private sector utility company, who’s IPO had created mass hysteria. The reader’s attention is instantly drawn to the unique challenges of investing in the Indian market. Numerous such issues are discussed in the following chapters. How the seven veterans evolved their unique style of investing while dealing with these challenges is the crux of their detailed interviews. Each chapter discusses some aspect of investing along with interviews with one or two of the gurus, to put things in a practical context. Saurabh has also liberally used quotes from Money Managers across the globe, to either corroborate what has been stated or to provide a useful context.

In the first chapter Saurabh discusses the three key traits of successful fund managers- intense training over long years in analyzing companies, an obsessive focus on intellectual integrity and the ability to deal with greed and fear.  The subsequent three chapters delve in-depth in each of these traits. He specifies four key areas of research focus– the strength of the franchise, the quality of the financial statements, promoter’s competence and promoter’s integrity.  The concept of franchise strength is further explained in terms of a combination of brands and reputation, firm architecture, and innovation. Throughout, there are engaging examples and case studies of Indian companies. Anyone looking to invest in India will find it useful to spend time on the section on quality of financial statements, promoter’s competence and integrity. The author highlights various red flags to watch out for and some basic techniques and number crunching tools to spot the same.  He also states three simple rules for buying which relate to understanding of business model; cash flow generation along with high ROCE; and margin of safety.

The last two chapters take the reader through the science of the brain and its impact on decision making. Author discusses five traits of successful fund managers- skepticism, risk aversion, an open mind, patience & preparedness and differentiated thinking and whether these traits can be acquired overtime. Some useful tips are dispensed and author uses his own case study to corroborate the same.

Saurabh simultaneously takes us to a fascinating journey into the minds of seven successful investors in India. Sanjoy Bhattacharya’s (founding CIO, HDFC Asset Management) journey from majoring in marketing to becoming the CIO of the biggest Mutual Fund in India is legendary. Sanjoy stresses the value of patience, humility and continuous intellectual development. Alroy Lobo, Chief strategist, Kotak Mahindra Asset Management, spent close to fourteen years on the sell side, before moving to the buy side.  He explains the need for fund analysts to build their own models from scratch, ensuring that Cash flows are at the core of the valuation process.  Akash Prakash, founder and CEO, Amansa Capital, focuses on mitigating the risk of capital loss, avoiding momentum stocks   and sectors with massive government influence.   Sankaran Naren, CIO, ICICI Prudential Mutual Fund, believes in the art of value investing, the need to understand investment cycles, and the ability to identify bubbles. Sashi Reddy, First State Stewart, is valuation focused, and follows First state’s unique approach of shunning financial forecast in favor of focusing on management’s past behavior to gauge their culture, and competence. B N Manjunath, amongst the very first professional fund managers in India, is concerned about only two macro variables- interest rate and exchange rate. His framework comprises of assessing four risks about a stock – business risk, liquidity risk, valuation risk and management risk, last one being non-negotiable. The seventh guru, who chooses to remain anonymous, advises sticking to basics and not relying on quick fixes. He also believes that in the context of Indian managements, education does not necessarily equate with better ethics.

 Some of the questions raised are specifically targeted at Indian Mutual Fund managers whereas investors the world over grapple with several others. How to implement a disciplined long term investment strategy while facing the pressures of daily NAV (Net Asset Value) and constant public scrutiny? Whether and how to take  exposure to sectors prone to heavy government/political intervention? How to cut out the excessive noise levels  and stay focused? How to avoid conviction in a stock turning into confirmation bias?  “When is a good time to sell” is perhaps one of the toughest questions that investors struggle with and the varied responses of the seven gurus provide interesting insights to their unique styles.  What does emerge unequivocally is that investment expertise must be backed with a strong work ethic, humility and lack of greed to result in continued success over a long period of time.

 ‘Gurus of Chaos – Modern India’s Money Masters’ provides a rare glimpse into the minds of some of the most well respected names in the Indian market.  The rules for successful long term investing propounded and discussed by the author would hold water in any market across the globe. Saurabh’s Knack for story telling using his personal experiences and case studies from the Indian market, and the fluid structure of the book, makes for delectable reading.  Excellent book for anyone investing or looking to invest in India.

• S G