The Contrarians Playbook When To Exit Rajeev Thakkar

TITLE: The Contrarians Playbook When to Exit | Rajeev Thakkar | ET Alpha Wealth Summit CHANNEL: ET Markets DATE: 2026-06-20 ---TRANSCRIPT--- Now, investors spend years learning how to buy. Far fewer ever master the harder, lonelier discipline on the other side of the trade, knowing when to walk away. And our next session addresses precisely this, the art of the exit. And uh for this wonderful session, we’ve got Mr. Rajiv Takar once again the chief investment officer and director PPFAS asset management. People have paid quite a bit of money to come here or you have been invited especially because you are wealthy. So hopefully everyone has that seed capital of 1 cr and everyone has the aspiration to become a dollar billionaire which I’m assuming a 100 rupee exchange rate and taking it as 10,000 crores. So essentially you are looking to double your money 14 times. One becomes two, two becomes four eventually crossing 10,000 after 14 doubles. So before I tell you how to sell, when to sell, let me cover why not to sell. Uh so in the introduction it was said that everyone talks about how to buy, when to buy. No one talks about the selling part. How to buy, when to buy is one portion. How to keep staying invested is the second part arguably the larger part and then finally how to sell when to sell. I’ve listed some common reasons that for which people end up selling and which are terrible in my view uh as reasons to sell. You researched the stock idea. You met the promoters management. You read market research reports in terms of the potential for the product or service. All the work is done. You buy something for 6 month it is sideways. You think it will not work out. You get bored of it. You sell it and move elsewhere. That’s a terrible reason to sell. Stocks are meant for wealth creation or any investment is meant for wealth creation not necessarily stocks. Any investment is meant for wealth creation or income generation. It is not meant for entertainment. If you are looking for entertainment and if you want to keep aside some money, keep that money aside. Do horse racing, go to Vegas, go to Goa, Delton or wherever. do online poker, do whatever else, but don’t mix investing with entertainment. Investing is not for your entertainment purpose. The other place where massive amounts of wealth destruction happens is if you are following news too closely and here I don’t need to explain this point in great detail. Everyone has seen how the last three months have been. One day the war in war is on in two in 48 hours or whatever war is off. Crude oil price will be 120 on one day will go to 90 the other day. Uh dollar rupee will fluctuate. Some days FBI will come in some days they will go out with even greater force. If you follow every news stimuli, you’ll go broke. This is a real life incident. In February of 2020, someone who currently stays in the US, that person got in touch with me on WhatsApp. This person worked in the technology field. uh the IT services the IT companies over there not services companies the uh max 7 kind of companies this person knew some person who knew a congressman equivalent of US parliament in the closed door meetings in the US at that time February of 2020 there was this discussion that The outbreak of the co virus in China is massive and there will be probably be lockdowns. Uh there will be serious health issues, there could be recession and all those things were there. This person knew one month in advance before everyone else knew and he got in touch with me saying this is the news. What should I do? I said, I don’t know. I am not doing anything with this. This person sold out his big tech positions in February of 2020. And guess what? His news was correct. The world went into lockdowns. The market crashed. After the crash happened, did this person buy back those stocks? Answer is no. At that time everyone was fear fearful. Everyone thought markets will go down even further. And as it turns out the tech companies were the biggest winners of the lockdowns. So end 2020 everything that he sold was higher than the price at which he managed to sell. So the answer is never base news stimuli as your base your uh selling on new stimuli. Don’t use news stimula as a reason for selling. That’s a terrible way of running your investment portfolio. The other thing is something you bought at 100 has gone to 150 160. You have this itch. I’m already in profit. Let me book something. I think this booking profits as a terminology has been invented by some finance minister or the other in the past. I don’t see any reason why this terminology should be in the uh financial lexicon. The only people who benefit from this periodic quote unquote profit booking is the finance ministry, your stock brokers and Mr. Raam Morti who was there before me. No wonder that the exchanges are the best per performing stocks. Some of the discount stock brokers have listed and they are valued at 1 lakh crores and plus whereas the investors have not made money over last two years. It’s because of hyperactivity of people. When you drive a car 95% of the time is spent looking out of the windshield. Occasionally when you want to change lanes or break you look at your rear view mirror. Is someone in the adjoining lane or is someone uh very close to my car behind in investing 95% of the time people keep looking at the past returns. The excess equity allocations of 2024 happened precisely because of this reason. People looked at the past 3 four years returns, projected them into the future and even short-term money came to equities and now all those people are crying. So never base your sell decision on trailing returns. Oh, this stock has given me negative 5% return over last one year, two years. It’s a poorly performing investment. Let me exit this. Not a good reason to exit. And this thing, buyer’s remorse. You buy a shirt, you look at someone else, you think you could have done better. This one doesn’t look good, that one looks better. You buy a house, you buy a car, your model looks slightly dated in 6 months. That same image comes when it comes to investing. You have bought a stock, some other stock looks more alluring. You have this itch to sell your existing position, get into something else. So all of these are terrible reasons to exit your investment. If somehow you manage to get into a good investment with long-term prospects, the management and the promoter team is excellent, the uh valuations are right, the total addressable market is huge, execution is happening, then just hang on. If you get into a rocket ship, just hang on. Don’t try to get out of it early. And these come in your investing career very rarely. Uh if in your investing career you manage to get three, four, five of these, that’s a very very uh good track record, then you just have to hang on, not worry about selling at all. Some people argue that, oh, I live in Dubai. I am a Dubai resident. I don’t have any personal income tax there. I can buy and sell without any capital gains tax. Or if you are running a mutual fund, if you are running an insurance company where your investment income is not taxed on every transaction, then maybe some people are equipped to do this kind of uh what Buffett calls gin ramy kind of investing strategy. At every round, you evaluate the card in front of you and your cards in your hand. If the card in front of you looks more promising, you discard one and you pick up something else. So if you are an institutional investor or if you are living in a low tax jurisdiction, no tax jurisdiction, then maybe your churn could be slightly higher. But if you are in India and a taxpaying entity, you should aim to have a low churn strategy in your investment portfolio. So after telling you all the reasons not to sell, now let’s come to the actual topic of the presentation. How to sell, when to sell. The first reason is very clearly you need the money for some reason or the other. If you are a family office, you have a diversified equity portfolio, bond portfolio, retinid portfolio, private credit, all of this and you get a acquisition opportunity in a sector which is very familiar to you where you have made your wealth and that looks very promising. Obviously, you’ll have to sell some of your investments. You need the money to spend it on something else. That’s a great reason to sell. And here I don’t need to explain this in any great detail. This is a great reason to sell. But this is a reason where there is the maximum resistance. In fact, people do the opposite. people try to average or people try to double down. Just think about it. If uh our famous ex liquor baron had recognized the mistake of starting an airline and had sold it out or cut the losses saying let it go bust then things would have been great, right? Same way in our own uh decisions if we recognize a mistake that this was there was a fundamental error in due diligence in terms of uh valuing the entry price and this investment is going to go down in the dumps. Exit at the first possible opportunity. People who are good at this will actually do better than people who are great at identifying investments but who don’t sell when they make mistakes. Because the people who don’t sell when they make mistakes are the people who will have their capital locked up in dud ideas and they will not be able to meaningfully take advantage of the good opportunities that come their way. If still you are resisting, I’ll give you one additional incentive to act on this. If your sale price is lower than your purchase price, you will actually realize a loss which can be offset for tax purposes against your other investment income and hopefully you’ll end up paying lesser taxes rather than keep holding on to a bad investment and watch it go down to zero. This is simple. Uh there is a fraud exit at the first opportunity. This is a slightly tricky one. Uh when internet comes in, should you sell your newspaper business? Yes or no? Those kind of questions come. If renewable energy has come in, should you sell your thermal power investments? If electric vehicles have been invented, should you sell your investments into companies making petrol and diesel vehicles? So this is an area where you may not get clearcut yes or no answers. There are a range of outcomes. It’s mostly a maybe. Here what is important is you will have to ultimately take a decision. Even not taking a decision is decision to stay invested. This decision you cannot say that this is my decision forever. Especially if you are invested in listed securities. that decision has to be revisited maybe every 3 months, every six months in a fast changing environment. So in the previous panel discussion I was asked about IT services companies. As of now I think they will have some role to play but can I write that on a piece of stamp paper and guarantee that for another 20 years? Answer is no. One has to keep taking in uh inputs. One has to keep looking at incoming evidence and one has to decide. As of now, one thinks that fossil fuels will still have a role to play at least for another 10, 15, 20 years. That’s where we are invested in some of the fossil fuel areas. Is it possible that it can be disrupted in 5 years? Theoretically, yes. So, one has to keep looking at incoming data. one has to keep looking at developments in the real world and recalibrate your investment strategy. So if your business is going downhill, if you are invested in Kodak and digital cameras have been invented, no matter how great a company Kodak was in the past, somewhere you’ll need to exit. So uh this is something to be aware of at the same time not be too jittery. uh a lot of false signals also come in with uh actual signals. So you have to distinguish between signal and noise. Realize what is true and what is not and one has to be evidence driven rather than sentiment driven here. This is one reason. So there used to be one famous uh serial acquirer in the pharma space in India created a huge pharma franchise of generics and uh outsource manufacturing in India. But then this person was made a offer which was too good. The valuations were very compelling. this smart entrepreneur sold out the entire company to AMNC made a lot of sense. So if sometimes valuations are absolutely crazy no matter how the how good the company is it may make sense to sell. So if you were a if you were an early investor in let’s say a Infosys or a Vipro in the mid ’90s then it would make sense to sell out those investments let’s say in early 2000. Uh so sometimes you get an exit price where maybe 15 20 years of future growth is already baked into the current market valuations. In such cases, it may make sense to exit, pay the taxes and then hope for better opportunities. Sometimes what you own may be reasonably valued but something comes your way which is 5x better than what you already own. You don’t have further cash in the bank account. makes sense to sell, pay your taxes, pay the brokerage, impact cost, all of that and avail of that opportunity. So in short, that’s it. If you are an if you are a family office or if you are an H&I the lesser the churn that will be there in your portfolio the more the opportunity you’ll have for compounding. A lot of people get excited about some vehicle or the other, about some opportunity or the other. What you have to look at is as a family or as an individual looking to make generational wealth. You have to always look at returns not in nominal terms, but you have to look at returns on a postinflation and post- tax basis. That is what really matters. If post inflation, post tax you are not beating 7% then you are doing something wrong. After reaching where you have reached, you don’t want to go back to where you started either in your generation on the or in the earlier generation. You have to you don’t want to go back to zero. It’s like that game of snakes and ladders. You don’t want to get bit at 98 and go back to two and then do the journey all over again. Uh Buffett has said this beautifully. I cannot put this better. He has said it is foolish to risk what you have and what you need in order to get what you don’t have and what you don’t need. So first step is preservation of capital. The second step is growing it bulk. So this is a point I made on the panel earlier as well. One way of looking at investing is look at it in a tactical sense. Next 12 months do I see bonds doing better or do I see equities doing better? Do I see REITs doing better? Should I be at the short end of the investment curve or should I be in in 10-year bonds or 30-year bonds? End of the day, the more money you have in inflation protected assets, the better off you will be despite intermittent cycles. The more diversified you are, the better off you will be because typically people generate wealth from either one sector or one company or one employment and bulk of their net worth is tied to that one activity. In your other investment corpus, try to be as diversified as possible. Don’t take concentrated bets in that space. Individual employees have wonderful vehicles to compound their wealth in terms of NPS and EPFO and PPF accounts. Mutual funds and CIFS are the PPF account for the rich folks. As long as you don’t redeem your units within the fund structure, whatever they do is taxexempt. Try and use this ve these vehicles and stay put for the longer term. If it doesn’t help you, if the vehicles are tax efficient, if you are going to churn every 18 months, you will end up paying that 15% tax at the every uh churn. So, I’ll stop here. I we have maybe 7 minutes odd for Q&A and happy to answer questions that you s

if you can get a mic there. So, good evening. Uh this is Rahul Eklare. I have uh several companies and I manage uh my portfolio as a family office. Uh most of my investment follows uh value investing like uh you Rajiv Bay or Mr. Narin or Mr. Prashan Jane. Now um I wanted to give you two three cases which I have experienced where selling became an issue. Uh for example, I invested in Marauti Suzuki at say 6,000 to 8,000 rupees. at a point it reached 16,000 uh bharti at uh 500 600 rupees it reached somewhere around 1,900 2,000 rupees this is over a period of 3 four years where compounding happened everything happened after a point these companies stopped growing there was consolidation uh fundamentals are intact uh similarly silver I started investing at 60,000 70,000 it reached four lakhs came down to 2 lakh 40,000 Now sir at these these three examples if you see uh as a investor like me we don’t know whether we should exit fully when they reach a certain peak or we exit a little stay put for a certain period of time and see what’s happening to the stock cuz these decisions are very difficult to take as uh individual investors and when you have a big chunk of money floating in these uh different investments. How do we take a call? Sure. Uh so firstly uh as I mentioned earlier uh silver is a non-cash flow asset. Largely it’s in the realm of forecasting demand and supply and what the price will be after some time. So I don’t have any framework on when to buy silver, when to sell silver, gold, bitcoin, any of these art individual businesses. When you talk about individual companies, the best of companies will go through a period of sideways uh market where nothing seems to be happening in those companies. Uh a company like Hindustan Uni Lever in the past has spent six seven years as a sideways kind of price uh movement. A company like Infosys would have uh spent similar amount of time from year 2000 to

Uh even the let’s say the darlings of the current market let’s say something like a BAT electronics which came into limelight after the uh fancy for defense stocks would have spent 7 8 years as a sideways stock. PSU banks have gone through that phase. What happens is when you have a diversified portfolio, there will be portions of the portfolio which are in a sideways phase or in a slight downward phase and there will be portions of your portfolio which are doing well. Overall, what matters to your long-term investment journey is that at the portfolio level, you should hopefully make what the index makes and do slightly better on a post tax basis. If after self assessment, after 10 20 years of direct stock investing, if you think you have not been able to beat Nifty returns, you should liquidate your portfolio, put money in a Nifty fund. If you are doing better than Nifty by two or three percentage points on a post tax basis, by all means, continue doing it. Don’t beat yourself up on uh some stocks being sideways or you not being able to catch the peak or you not being able to catch the bottom while buying or while selling. So Buffett has been owning Coca-Cola for such a long time and it hasn’t done uh exceptionally well for Burkstar Raway uh in that sense but still he was quite right in his Apple investment for example. So uh equity investing is not something where you’ll get 10 on 10 correct. If you are getting six seven right that’s fine. What you should try and do is not get stuck at excessive peaks. So for example real estate peaked out in 2007. Now hopefully if your discipline is there you will not buy overvalued real estate companies in December 2007 or if you are into IT services you’ll not buy whip pro and Infosys in January 2020 but rather if you own them you would gradually be selling uh how to exit a overvalued stock try and do it gradually if you are uh worried about the whip sawing prices. Just like uh we advise systematic investment for investors put some money every month. If your stock or if something in your portfolio is at let’s say 70 80 times earnings and you feel it’s fully valued yet you are afraid that after you sell it may still go up. Maybe sell 10% every month and keep gradually reducing your weightage in your portfolio. Do it gradually instead of one shot but no one gets the absolute bottom or the top. There’s a question here. Rajiv, I’m Navi Tajira and uh excellent presentation and on selling which often is considered the most difficult part of investing. uh in a way you partly answered my question but you know um in in in this answer uh my question was like you gave this example of Hindustan lever not doing anything for six seven years HDFC bank TCS Infosys so even if and I’m an individual investor even the rest of the if the rest of the portfolio is doing well but say this component is not doing well how long should one wait like you know because otherwise one feels that you know is one getting too emotionally attached and hence Hence not taking the right decision. So it you know that becomes a little difficult. Thanks.

Correct. So you have to distinguish between stock price performance and the company performance. As long as the company is doing what it should be doing, you can stay invested. If the business is deteriorating, then it would require a sale. Uh then you should not stay invest. Hi Mr. Rajie. Uh I’m Yashas. Um I had a question on reason number six I believe which was reason to sell is if valuations are in your words absolutely nuts. Um my question really comes from the fact that valuation can’t exactly be a science. Nobody gets an exact number. The best you can do is a range and what you believe is the you know present value of the future cash flows. Yes, that if we get into the intrinsic value or the replacement cost whichever works. So for example, if I had to take a case um I was holding Nvidia in 2019 uh split adjusted it was $10 and then you know I see something and it’s like up you know 3,000 4,000%. and it grows to like 20 30% of my portfolio from like what was initially like a 2 or 3% allocation. Now I can look at it and say okay um you know it’s still like I can do some quick heristics and say okay well it’s still 33 times earnings um they’re still growing like gang busters and until you know whether a Google comes up with the TPUs that they’re talking about that can be used for AI inference or whether someone else comes up with um a different kind of chip uh for training AI models. It seems like Nvidia and uh Nvidia and AMD and these guys are here to stay. So if you know how do you decide what is absolutely crazy or nuts and when do you decide no this thing still has legs and we should keep it going. Sure. So let us take a hypothetical scenario where you have a 10 stock portfolio uh and one 10 so 10% each you have 100 rupees you have 10 rupees invested in 10 stocks 10 rupees is invested in Nvidia and that goes up 1,000x so that 10 rupees is now worth 10,000 your remaining portfolio is more or less where it So effectively 100% of your portfolio value is in one stock. Right? Now if the stock falls by half your potential value will fall by half. If it doubles your value will double. All the rest of the stocks in your portfolio are meaningless in that uh manner. Would you be comfortable in sleeping at night if that situation were to come about? Even if you answer yes, typically it psychologically plays havoc on your uh personal spending decisions on your behavior with your family with your colleagues and all. In the mutual fund context, what happens is we are forced to trim our positions. Maximum weightage we can have in a company is 10%. So typically when such a thing happens my recommendation would be to keep trimming down to a level at which you are comfortable. What will happen is your original cost will come out and plus a lot more money will come out of that position but you will still have enough in play. Let us say you keep trimming it every time it goes up and you don’t let it cross 10% of your portfolio. You will still have a meaningful portion of your portfolio in Nvidia but if it falls 50 60 70% you will not lose sleep. That’s the way I would do it. But that’s not the way to maximize wealth. That’s a way to preserve wealth. Outcomes are binary. Either Nvidia will go 10x from here or it’ll fall 90% from here. I don’t know which is which. to protect against that. I don’t let any one stock or any one sector become a disproportionate part of my portfolio. Thank you. That’s a very helpful answer. Thanks.