“It is not about being perfect, but mostly about being the first,” says former capital markets lawyer Rajat Sharma on his new 9-3:30 job as CEO of Sana Securities – a Delhi-based financial advisory firm he founded in 2011.
“In the last two-and-a-half years I don’t remember any day when I’ve had to be in office beyond 7,” says Sharma, who began his career pulling “all-nighters” as an associate in the capital markets teams of Baker & McKenzie, followed by Axon Partners and Khaitan & Co in Mumbai, after an LLB at the University of Pune in 2004 and a New York University LLM in Securities law in 2006.
Now it’s mostly about an early start – the markets open at 9am and close at 3:30pm, and 50 to 80 per cent of the trading happens in the first hour so he tries to deal before the markets open – and then it’s about blogging and coffee in the afternoons, followed by work-free evenings.
Dealing with documentation
“I spent way too long writing documents than I should have,” he jokes on his five-year long stint as a capital markets attorney that happened after the stockmarkets had already begun to catch his fancy in 2005. The infatuation began at an NYU guest lecture by the hugely successful American investor Al Podell - the first investment lecture Sharma had ever attended.
In the lecture Podell had spoken about how he called his approach to look for investment opportunities as “educated speculation”. That approach, as Sharma explains on his blog, is about studying companies in detail and finding “hidden gems”.
Sharma notes that the nature of capital markets lawyering is worlds apart from active trading because lawyers have plenty of time to perfect documents and then get them reviewed by a law firm’s seniors. “In the active market, I don’t have that kind of time: you have to keep track of so many data points and so many numbers.”
Yet writing business descriptions for many companies in various sectors and thinking of their revenue projections familiarised him with the business model of those companies. “My background as a capital markets lawyer really helped me here.”
Apart from clearing the NCFM – the NSE's online Certification in Financial Markets that is a regulatory prerequisite for trading on the markets – Sharma has had no formal education in finance. But so doesn’t the nanotechnologist who is slated to join as the fourth financial advisor at Sana Securities, he argues.
“Part of the reason I was able to cross over was that I have been very, very interested in this area for many, many years now,” he comments. “I’ve read so much literature, so many books on finance and investing. It is my own interest mostly. When I was in capital markets [law] I was always looking out for companies. If you see something which will sell, everyday around you, you want to then find out more about the company and people behind it and invest in them.”
Crossing over has been “not about unlearning, but about changing” the way he works – lawyers, bankers or anybody coming from the transactional side, he feels, do not need to think about the markets on a macroeconomic level.
Sharma has been investing on his own account for the last 10 years but the switchover to investing for others, he explains, happened when he started blogging about investment advice – company analysis and benefits of investing in stocks - and circulating his posts among other investors. These investors then encouraged him to take it up full time and many of them ended up becoming his first clients.
“The biggest problem was to get people to just believe in you as someone who can advise on investments,” he remarks. He observes that he sometimes regrets having started a financial advisory firm around three years later than he should have, thus having lost out on “giving a lot more of [his] younger years to the business”. But then, almost by way of an after-thought, he adds: “Till now I face this problem of convincing people that I am old enough to give me work.”
He often ends up doing existing clients’ legal work, he says, as a bonus to their investment work. “A lot of the work which used to come to me was borderline legal when I started. People used to confuse what I do with legal. How I got my first few clients was by doing some legal work for them. I don’t do any solicitation for legal work to date but the clients who invest with me, they are comfortable that we look at their legal.”
Lawyers and Bear (market) hugs
“I know a couple of lawyers who have worked with me. They have never really looked at investment themselves,” remarks Sharma on lawyers’ investment behaviour. “Based purely on my interaction with them, [I understand that] lawyers are risk averse.”
“I don’t blame them man! They know so much about the risks. Also, they are really busy people,” he adds. “ They don’t have time to invest or the inclination to follow the markets. This is true for most lawyers, if you’re in litigation or even on the corporate side.”
When they do invest they are “very disciplined” with their investments, investing in systematic investment plans, he notes.