Saurabh Mukherjea's Case for Global Diversification: What Indian Investors Must Know

Will Saurabh Mukherjea's Unconventional Investing Strategy Pay Off for Indian Investors?

As the Indian market continues to grow, investors are faced with a critical question: should they stick to what they know or diversify their portfolio globally? Saurabh Mukherjea, founder of Marcellus Investment Managers, makes a compelling case for the latter, citing the legendary investor Sir John Templeton as an inspiration.

Mukherjea's argument is rooted in the idea that investors are wired to repeat past successes, rather than seeking balance and diversification. This instinct, he claims, has been elevated into doctrine, celebrated as "sticking to your circle of competence" or, in its retail form, "home country" bias.

Who Was Sir John Templeton?

Sir John Templeton, a 20th-century investing legend, is often credited with pioneering the concept of global diversification. Born in Tennessee in 1912, Templeton's formative years were shaped by scarcity and self-reliance. He worked his way through Yale during the Depression, partly funding his education through poker winnings, before earning a Rhodes scholarship to Oxford.

Templeton's investment career spanned decades, during which he deployed capital across continents, often going against the grain. His most famous decision was to borrow $10,000 to buy 100 shares each in 104 US-listed companies trading at $1 or less in 1939, as war broke out in Europe and markets collapsed. The move paid off, with all but four companies eventually making a profit.

Five Principles That Defined Templeton's Success

Mukherjea outlines five principles that defined Templeton's success:

• Global diversification: Templeton allocated capital across countries with low correlation to each other, well before the benefits of diversification were formalized.
• Contrarian investing: Templeton invested in companies at "points of maximum pessimism," such as European companies during World War II and post-war Japan.
• Classical value investing: Templeton avoided stocks he considered expensive, defining that as a five-year forward price-to-earnings ratio above roughly 12-14 times.
• Emotional discipline: Templeton maintained a stable life outside markets and relied on quantitative signals to avoid anxiety and poor timing.
• Historical patterns: Templeton placed deep faith in historical patterns, warning against assuming that current conditions were fundamentally different from the past.

What Should Traders / Investors Do Now?

Here are some key takeaways for different types of investors:

• Intraday traders: Be aware of the global market trends and how they may impact Indian stocks. Keep an eye on the Nifty and Sensex, and adjust your strategies accordingly.
• Short-term traders: Consider diversifying your portfolio across sectors and asset classes to minimize risk. Keep an eye on economic indicators and market sentiment.
• Long-term investors: Take a cue from Templeton's philosophy and consider global diversification. Look for value investing opportunities and maintain emotional discipline.

Frequently Asked Questions

Here are some answers to common questions:

• Will the Nifty fall after this news? It's unlikely, as the Indian market has shown resilience in the face of global uncertainty.
• Is this good or bad for bank stocks? It's neutral, as the news doesn't have a direct impact on the banking sector.
• What should retail investors watch next? Keep an eye on economic indicators, market trends, and global events that may impact the Indian market.

Follow us for more market updates and insights #IndianMarket #GlobalDiversification #InvestingStrategy