'The biggest enemy in investing is...': Valuation guru Aswath Damodaran's warning to Indian investors

Valuation guru Aswath Damodaran has cautioned investors against the dangers of hubris, the belief that one can outsmart the market by relying solely on tools, data, and expertise. 

"The biggest enemy in investing is hubris," Damodaran warned in a recent interview to ET Now, stressing that even with decades of experience, mistakes are inevitable, and that’s okay. 

Reflecting on his career, he noted that early on, he would blame himself for errors, but now recognizes that unpredictable external events can often disrupt even the most accurate valuations.

Damodaran shared a key lesson from his journey: once all the data has been gathered and every analysis has been done, the outcome is out of one’s control. He recalled valuing a hotel in late 2019, only for the COVID-19 pandemic to render the valuation nearly obsolete months later. "You can’t blame yourself for not predicting the unpredictable," he said, underscoring the importance of accepting uncertainty in investing.

The NYU finance expert also discussed some of India's largest companies, offering a sharp analysis of their business trajectories. 

On Reliance, he pointed out the balance between its mature petrochemicals division, which generates steady cash flow, and its high-growth arm, Reliance Jio, which is still scaling. "Middle-age is not bad; it just means you have to act your age," he said, noting Reliance’s ability to manage both established and emerging businesses as key to its long-term success.

Turning to India’s tech scene, Damodaran drew contrasts between Zomato and Paytm. He praised Zomato’s growth, highlighting its acquisition of Blinkit as a smart move to diversify beyond food delivery. “Zomato is starting to grow up,” he noted. However, his outlook on Paytm was less optimistic. Damodaran expressed concern over Paytm’s focus on growth without a sustainable business model. "Paytm hasn’t come to that realization yet, and I’m not sure they ever will," he remarked.

On Tata Group, Damodaran acknowledged the company's recent progress in managing its aging businesses. "TCS was dragging along some aging businesses, but they’ve now done a good job of being realistic about what those companies can actually do," he said, highlighting the group’s adaptability.

Looking ahead, Damodaran sees the healthcare sector as a potential game-changer in India. As the country’s population grows wealthier, demand for medical services is set to rise, and healthcare could present significant long-term growth opportunities. "Healthcare has the potential to change the lives of millions of Indians," he said, noting that young companies in the sector could be undervalued but hold real promise for investors.

Damodaran’s advice remains rooted in practicality—accept mistakes, anticipate unpredictability, and always be cautious of overconfidence in a market that defies perfection.