I have long been a believer that we’re in a multi year bull run in Indian stocks and what we’ve witnessed in the past 18 months is just the beginning and not the end of this mega run. I now argue that we’ve moved beyond the Skepticism phase and are entering the third stage of this Bull run when people are slowly waking up to the idea that this is for real. Why do I say so? It’s because it’s FOMO in parts of the market.
A while ago when the trend started to go up everyday in certain stocks such as IEX, IRCTC, Dixon, midcap tech etc, not many realised how strong the rally would be. IEX has all but tripled while IRCTC has just the other day hit market cap of 1l crore, which until a few weeks back even IOC couldn’t touch. People around me jumped from not Investing anything at all to suddenly going all in to IRCTC, some random organic stocks, Dixon and what not. More so, they’re selling other stocks and buying into the frenzy, fuelling it further up and away.
This is classic fear of missing out in the early bull run. The skeptics who didn’t invest at Nifty 10k or 12k or 15k or even 16k are now waking up that they have missed a phenomenal run and now hypothetically they’re poorer than they would have had they invested six months back. So, throwing caution to the wind, let’s make up for what we’ve missed out on. So instead of carefully building a portfolio and hold it for long, let’s invest into what’s going up the fastest. In that way, we’ll make up for the lost time quickly.
Hence you see retail tweeting the most of how they’re thankful to IRCTC for an early vacation, a dream car and how IEX and I’d cap tech or chemical stocks gave them multiple of lakhs as profits. I recently heard someone suggesting me a stock saying- buy this and I’ll be malamal soon!
Here’s my two cents to this mania- this is. Bull Market. The trash goes up the highest, fastest. So anyone who has sensibly built a blue chip portfolio will begin to underperform vis-a-vis the crap which goes up 5x in 5 months. This creates self doubt in the most sensible of investors who either finally throw in the towel and buy into the frenzy, only to feel great temporarily or suffer the ignominy of being less rich than the cocky trader who’s nuts. The FOMO occurs even to the most seasoned investors.
However, there’s some end to this at some point in time. Unitech went from 1800 to zero, DHFL from 700 to zero, Yes Bank from 400 to next to zero,. JET, Kingfisher, Suzlon, Rcom all went to zero. And mind you, some of them were even part of Nifty or even Sensex in some cases. This means, they were supposed to be the ultra blue chips in their heydays. Hence, it is extremely difficult to retain your sanity and stick with the portfolio which has all the good stocks but doesn’t do as well as the crap does.
This is, thus, the biggest threat in a rising market!
PS: Here’s what I feel of the two stocks I mentioned-
IEX has a great niche business and strong margins etc. However, the valuation is out of the roof. It’s trailing twelve year profit is 260cr, and today at 830, it’s market cap is close to 24k crore. ICICI securities has its recent quarterly profit of 351crores with 40% net margins and 65% ROE, a market cap of 25k crore. So if the color of money is same, either IEX should trade at 200 or ISEC should go up to 3000! And for the monopoly part, both BSE and MCX have approvals to start power trading and will eat into atleast some of the volumes it’s generating. However, I do feel all these exchange businesses are great and would like to buy if this becomes as unpopular as BSE was and still partly is!
As far as IRCTC is concerned, it’s the travel agent of a loss making entity, Indian Railways. And last I checked, travel agents do go bankrupt, even when they’re very, very large and famous. Eg, Thomas Cook in UK. And regarding growth, how many Indians do you know who could have gotten into a train but haven’t? I guess none. And with the advent of better cars and highways, people drive as much as they can and take a flight to fly long distance. And with a socialist railway ministry, railways is a declining business in India, with fares never going up. S far as monopoly is concerned, Coal India, IOC+HP+BPCL, HAL, and multiple other PSUs are monopolies. Just look at their charts. I’d not buy this even if it goes down 90%!
Life is all about Compounding! 