It was a brutal Monday for Rekha Jhunjhunwala as her prized stock holding in Titan Company tanked over 7%, erasing more than Rs 800 crore from her net worth. The late Rakesh Jhunjhunwala and his wife had built up Titan as their flagship equity investment over many years, with Rekha now owning a substantial 5.35% stake. However, the jewellery-to-watches major’s lacklustre Q4 earnings report triggered a sharp sell-off that painfully exposed the couple’s concentrated market exposure.
Titan has been the cornerstone of the Jhunjhunwala portfolio for its consistent growth profile and dominant market position in India’s fast-expanding branded jewellery sector. Over two decades, it grew from a small acquisition by the Tatas to a behemoth valued at nearly Rs 3 lakh crore. Its attractiveness as a ‘play’ on India’s consumption story made it a perennial favourite among local institutional investors as well.
For the Jhunjhunwalas, who famously put their money where their research was, Titan offered a quintessential long-term ‘buy and hold’ proposition. Both partners saw it as one of those unique businesses with multiple growth levers and resilient competitive advantages that could endure economic cycles. And for nearly 15 years, the stock delivered handsome returns, cementing its place as the family’s largest listed stake.
However, one lacklustre quarterly showing was all it took to puncture sentiment. Titan’s Q4 numbers fell short of lofty market expectations, with a 5% profit rise and 11.5% sales growth appearing pedestrian after several years of outperformance. More worryingly, operating margins contracted 70-100 bps due to higher gold prices, dampening optimism on its ability to pass on costs.
The results triggered a wave of profit booking that overwhelmed previous optimism. Titan shares plunged over 7% intraday on the NSE, their worst single-day fall in two years. The bloodbath lopped a massive Rs 22,000 crore off the company’s market value, with Rekha herself losing a cool Rs 802 crore as per share price movements.
While one disappointing update need not derail the long-term Titan story, it underscores the risks of concentrating large fortunes in just a few stocks. Had the Jhunjhunwalas diversified more, the earnings blow would not have been so painful on their net worth. As it is, even a small dip in Titan disproportionately impacts their portfolio given its outsized allocation.
More importantly, the selloff spotlights the perils of emotion-led stock-picking in an increasingly volatile market. By essentially betting their wealth on just a few ‘favourite’ stocks, investors open themselves to bouts of short-term pain from unavoidable company/sector hiccups. This can rattle confidence and trigger inopportune exits at the worst possible times.
As the widow of a legend grapples with her first major post-Rakesh challenge, the episode serves as a lesson. Great long-term stock pickers must also be adept portfolio risk managers, balancing concentration with prudent diversification. Purely bottom-up stock calls alone cannot safeguard fortunes from macroeconomic crosswinds and the fickle dynamics of market sentiment.
Only time will tell if Rekha uses this opportunity to re-examine her exposure and hedge against single-stock overdependence. As an astute investor herself, she likely understands mean reversion is inevitable and one setback need not define an otherwise strong franchise. But with a net worth on the line, emotional detachment from large positions becomes crucial to make wise decisions in volatility.
The silver lining is Titan‘s business fundamentals remain sound, with India’s affinity for gold unlikely to fade anytime soon. A market overreaction was perhaps on the cards after a dream run. With its robust distribution, brands and financial strength, Titan is still in a unique position to continue expanding its slice of the country’s gold market.
In the end, one must take a long-term view on companies, not quarterly noise. If Rekha is able to do so in this test of her mettle, she may emerge an even stronger portfolio manager like her late husband. And Titan, after due course correction, could well resume delivering for its loyal shareholders.
