The India Story was and is Alive n Kicking!

I’m one amongst those who watch every possible interview of Rakesh Jhunjhunwala with much excitement. Today morning, I viewed his interview by Prabhu Chawla on YouTube over breakfast and couldn’t but resist myself into looking at awe how anyone who’s bullish on India is looked at with disdain and how most prominent Indians are so extremely pessimistic on our growth prospects.

Today’s Business Standard features a piece by TN Ninan( the only editorial worth a read) wondering if India is on verge of becoming another under performing Latin America. This is in addition with multiple reports quoting prominent Indians reportedly depressed as how the market is making life highs when there is death and tragedy all around us. Recently, Nithin Kamath of Zerodha also wrote a blog saying how he was sad to see the disconnect between real economy and markets. Ironically, the same guy tweeted yesterday that his company will do a buyback at $2billion valuation because it’s been the best year in business and he, his brother and his wife( all employees of Zerodha) will take home an annual salary of Rs. 100 crores this year. Hypocrisy, anyone?

Now let’s look at the facts for ourselves. The Covid-19 pandemic led to a nation wide lockdown last year with immense uncertainty all around. It was supposed to be the end of the world and people predicted millions of deaths in India and said how we’ll collapse and never get up again. However, within six months, uncertainty dwindled, we ramped up our testing mechanisms multifold and demand came roaring back. Every major company reported multiple year high growth and profit numbers, which led to rerating of share prices. The foreigners who are generally more bullish on India than Indians put in $80 billion plus FDI in the last year. All this is real money. The cars which were sold are real cars and not wild imagination of some vulture journalist reporting fake news.

The reality is, that despite challenging situations, Indian companies, especially the large ones have had a not so bad, if not great year. If the retail investors have flocked the market in droves, the broking companies would not have said, please come back later as this is not the right time to make money. The results are for all to see. ICICI Securities reported a net profit of over 1000 crores last year. This is in a country where we don’t have more than a 100 companies with higher annual profit than that. No doubt the lockdown has been damaging to our country and the second wave has resulted in real loss of lives. This, however, does not mean that the world is coming to an end. The word doesn’t end this easily. It never will.

I have two limited points. One, anyone who’s bullish on India has made a lot of money. This is true for any period of ten years or more since 1980. If you go back in 1990, the country was about to default on its loans but that was accompanied by the biggest stock market gains in Indian history ( the Harshad Mehta bull run). That led to liberalisation and India is now a $3 trillion economy. In 1947, the world predicted that India will break into multiple countries with chaos all around within no time. We have faced partition, four wars with Pakistan and one with China, multiple years of state led socialism which scuttled our economy for forty years, and multiple such events which have hurt us in the very short term. In the long term, we are now the fifth largest economy in the world, and will soon be the third largest in the world. That may take an additional couple of years but it will happen. Things move slowly in India. This elephant, in the end, does dance.

My second point is about behavioural finance. There are four stages of a bull market. First is pessimism. Things can’t get better at all. This was what we saw last year when the entire analyst community kept predicting 6000 on Nifty when it made a bottom on 7500 and rose up to 10000 in July. People who acted on what the experts said are still sitting on cash, waiting for the perfect buying opportunity. Next comes scepticism. The markets are going up but nobody wants to believe it. They somehow want to negate the gains as it doesn’t look nice . People who are making money do not want to believe this themselves. They think that the rising market is a myth, a lie. This is exactly where we are today. So they write posts pointing to a disconnect between markets and the economy and all such nonsense. The bull market, however, grows stronger with each passing day. This leads to the third phase of Optimism. The economy seems to rebound and newspapers publish reports of higher growth rates in future. The guys who are predicting doom today will publish articles as how India story has revived itself. The bull market now matures into its final stage of Euphoria. People believe that the market can only go up, forever. And the cycle repeats itself.

So for my friends reading this blog, it’s still the second stage of a multi year bull market. This is a tremendous buying opportunity to buy and hold quality companies and make a ton of money. The India story was never dead. It never will be! Bet big on India, you’ll end up very rich!