After trying his hand at stock investing alongside his IT job for nearly two decades, Basumallick founded his own stock research firm Intelsense in 2019. A few months back, he also started Shree Rama Managers LLP, a Sebi-registered, portfolio management service (PMS) company, with a friend.
Basumallick shared his personal investment journey—from being a software engineer to an investor—for the specialMintseries Guru Portfolio.Edited excerpts from an interview:
What brought you to the stock markets?
I was born and brought up in Kolkata. After my engineering degree, I started working in an IT company in 2000. However, in the first month of the job, a friend gave me a book—Rich Dad Poor Dadby Robert Kiyosaki. Before that I had no knowledge about stock markets. I was from a typical Bengali family and there was nobody around me who was involved in stocks or business. After reading that book overnight, I realized that the only way one could become financially independent early was either by running a business or investing in somebody’s business. The easiest and the lowest entry barrier at that time was getting into the stock market. I remember getting ₹10,166 as my first salary and investing ₹5,000 from this in stocks. I also started reading business newspapers and magazines. The first three-four years were mostly spent in learning and experimenting with investing.
What were the first stocks you bought?
The first stock I bought was that of Hindustan Unilever (HUL) and the second was of Hindustan Construction Company. The third and fourth were of HDFC Bank and Pidilite. I held HUL for 10 years without any returns, and I sold it just before it started taking off. It was as if the stock was waiting for me to sell. I learned a good lesson that a good company need not be a good investment.
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Did you follow any strategy early in your investment journey?
The main strategy was pretty much close to what Warren Buffett used to follow: buy good companies. Initially, I was following GARP, or growth at a reasonable price, strategy.
When did serious investing begin?
I think I was very serious from day one. The first decade, from 2000 to 2010, was a period of wealth accumulation. Then, 2010 onwards, my commitment in terms of time and effort went up manifold.
How did your transformation into full-time investing happen?
From 2015-16 onwards, I started feeling that investing was something that I really enjoyed. Office work and scheduled meetings, etc, did not appeal to me. After a while, I was making more money from my investments and I wanted to pursue that. It took me about a couple of years to convince my family about leaving a job with a big multinational corporation with a good salary. Later, I found that getting honest advice was actually very difficult for a retail investor. So, I decided to start my own research service Intelsense, which was launched on 1 April 2019. I was surprised by the number of people joining us.
Can you take us through the schemes that you offer?
I’ve started a PMS with a friend, Mohit Beriwala. One is Intelsense, which is a research services for retail clients, and then Shree Rama Managers, which is our PMS. The strategies and the thought processes are the same for both. But ideally, in the research service, what we do is we have been focused on multiple strategies. One is obviously the long-term compounding kinds of stocks. That’s where we have an outlook of one-three years. Then we have Hitpicks, where we focus on Technofunda concepts. So, we use some technical overlay on good fundamentals stocks, and the holding period is roughly two-six months. The third strategy is quant. Personally, I’ve evolved into using quantamental strategies even in our long-term investing. So these are primarily our three buckets. I also have a Smallcase specific strategy called Quiver, where we use both Technofunda and quant as input strategies.
So overall, we have more than ₹1,000 crore in terms of assets under influence across Smallcase, research services and PMS.
What is the fee structure for your schemes?
For Intelsense, it starts at ₹12,000 a year and the maximum is ₹20,000. For the Smallcase strategy, the fee is like 2% of the invested amount per year. Lastly, for the PMS, we have a 0.9% management fee, and 9% performance fee every year.
How are you currently invested?
I don’t own gold and I only have one family house where I stay. So, my investment portfolio is 90:10 split between equities (90%) and debt, which is the money that I got from my provident fund and gratuity. This debt portfolio is in bank fixed deposits. Going forward, I think my equity allocation will rise because returns from debt won’t be much.
How has your equity portfolio performed?
Over the last 10 years, my equity returns would be around 35% CAGR (compounded annual growth rate). The last year has been a little bit tough, so, broadly, we’ve been up around 20-22%.
Do you look at market capitalizations before investing?
I have absolutely no bias toward market caps. For example, I have stocks that have a market cap of ₹2,000 crore and we have stocks that have a market cap of ₹2 trillion. I could sell a ₹2 trillion stock today and buy something which is ₹2,000 crore tomorrow.
The whole idea is to use different strategies. I use a lot of quant nowadays to look at which sectors are doing well. This is one key difference that has come in my investing over the past 10-12 years. Earlier, I was not looking for a price trend as much as a business trend. Now I want both, I want a good business and I want the stock price to be in a good place. I don’t want to buy a stock and then hold on to it for two years with it doing nothing. Because I personally now feel that there’s an opportunity cost of holding a stock.
One strategy over the years that has worked for you, and one strategy that didn’t?
What has not worked is when you are pinning your hopes on something changing in the market. So, betting on hope trades hasn’t worked. I believe that I need to focus on a trend that is already happening. If you don’t have a well-defined process, you always tend to make the same mistakes over and over again. If you have a system in place, then you would incorporate your learnings over the years into your system and into your process. I think that has helped me tremendously in terms of continuously updating my processes.
Which stocks would you identify as the pillars of your wealth-building?
Supreme Industries, Bajaj Finance, Divi’s Laboratories, Cera Sanitaryware, Astral, Mayur Uniquoters, Ajanta Pharma, Vinati Organics and Aarti Industries have really helped me a lot over the last 10-15 years.
What are the sectors that you’re bullish on?
In India right now, engineering & capital goods sector looks really good. We see a lot of investment related to railways, roads, etc, from the government side. Pharma is starting to look good again; so is real estate. Autos, auto ancillaries are emerging after a slump. India has and will always remain a perennial play for consumption, which will be retail-focused. I’m slightly bearish on IT right now.
It will take time for it to turn around in my opinion, except maybe some select companies might do well.
I’m bullish on India, specifically where consumption is internal. I am more sceptical about export-oriented themes because globally things are not looking as good as it was two years or five years back.
How many stocks do you hold in your portfolio?
Between 10-20, not more than 20 Usually not less than 10.
Do you invest in international stocks?
A little bit on and off but not too much.
How many months of emergency fund do you provision for?
I don’t have any emergency fund, but I would use my FD funds if any emergency arises.
Do you have life insurance and health insurance?
I have life insurance and health insurance for my family.
Were you able to go on a holiday in the past year?
We are Bengalis, so, every month or two we have to go somewhere. During Covid, we have been doing small trips to North Bengal, Mandarmani, Murshidabad and Shanti Niketan.
Any lifestyle change that you picked up during the lockdown that you think will become permanent?
Watching movies, web series on OTT platforms. I just watch a lot of movies, but the propensity of going to a theatre has reduced and I am now more comfortable with online platforms.
What does wealth mean to you?
Basically, wealth means freedom of time.
And how do you identify yourself as an investor?
Someone who keeps learning and evolving to improve.
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