'Commodities are instruments for speculation'

Emerging investment avenues like commodities and currencies are more of places for speculation than investing; hence, they are not good investment options, says Indian stock market’s billionaire investor Rakesh Jhunjhunwala.

The commodities markets, despite having achieved a voluminous turnover of over Rs 67 lakh crore for the period between April 1 and November 15 (according to the data provided by the Forwards Market Commission), are not lucrative avenues for investors as Jhunjhunwala argues it is impossible to hold the underlying assets for longer period.

In an interaction with Business Standard in Ahmedabad on Monday, Jhunjhunwala said equities gave better opportunity for long-term investors. “I think commodity or currencies investments are speculative. I do not think they are good option for long-term investors,” he said, adding “In equities, you get an option to hold your assets as long as you want, but in commodities, or for that matter in currencies, it is not the case.”

Speaking about the investment scenario in the country amid corporate scams like 2G and housing loan scams, Jhunjhunwala noted the Indian growth story was the key driving force for the markets and as long as there was optimistic growth outlook, no scam could deter investors getting into investing.

“I believe India’s growth prospects are strong. Further, India is such a big country that isolated cases of such scams can’t destroy investors’ confidence. Although, there could be some temporary impact, but the overall scenario remains positive for the market,” said Jhunjhunwala.

On the sidelines of the announcement of the initial public offer (IPO) of A2Z Maintenance & Engineering Services Ltd (A2Z), Jhunjhunwala said he was bullish on some of the key sectors likely to perform well in next six months.

“I am bullish on banking, retail, infrastructure and pharma that can yield good returns in the coming time,” told Jhunjhunwala, who is also one of the directors of A2Z.

A2Z Maintenance and Engineering Services Ltd, an engineering, procurement and construction (EPC) company, is planning to raise Rs 676 crore from the IPO by way of fresh issue as well as via sale of 4.55 million equity shares by the selling shareholders. The company has set the price band of Rs 400-410 per share of the face value of Rs 10 each.

The company intends to utilise the net proceeds of the issue towards setting up of three biomass-based power cogeneration projects of 15 Mw each in Punjab, five biomass-based power plants of 15 Mw each in Rajasthan and repayment of loan as well as other corporate purposes.