Random Musings

The new FY is here and we’re trying to figure out how markets are likely to behave and how our returns are likely to be going forward. So here I am with my two cents:

We’re also celebrating two years of Covid lows and the recovery in the markets has been truly stunning. If we see how many people were willing to buy if they got March 2020 prices vs those who actually bought when markets collapsed on Ukraine scare, the difference is stark. I have made this point before that news and prices are almost inversely related. When you see green on the screen, the mood is good, headlines are upbeat, the prices of stocks are more likely to be higher than what you ought to pay for them. On the other hand, when the news is that of an impending apocalypse and the world is going under for some or the other reason, the prices are most likely to be most favorable to buy.

However, ask yourself if you followed this advice in last week of February 2022. Nifty was bleeding and stocks were trading at a discounted price. But we were scared to buy because the news made us believe that the world is coming to an end. We were going in for a nuclear war and WWIII and what not.

Investing requires the vision to see, courage to buy and patience to hold. Of the three, patience is rarest among investors. Unless you systematically train your mind to ignore the news- the Fed, interest rates, Russia Ukraine, elections etc and focus on the underlying business of a company who’s stock you have bought, you will make decisions which are injurious to your wealth.

Now let me talk about some things which I have been thinking about. Recently, you must have heard Nitin Gadkari about reducing EV prices and also that he used a Hydrogen powered car to come to the Parliament. Also, we see there are almost half a million Government cars which are likely to be replaced by EV. Everyday some or the other company is either talking about installing charging stations or making progress with battery. Now add to this that TaMo has sold it’s highest ever 3357 cars in March 2022. Just imagine the runway ahead and the kind of sales it can generate in years to come. TPG values it’s EV unit at $9.5B and today the entire company, with PV and CV unit trading at around $22B only. This is a no brainer where this stock is likely to be headed.(https://zerotomillion.business.blog/2021/10/13/hello-tata/)

Reliance is making numerous acquisitions in retail and Renewable energy and the thesis which I laid out in my earlier blog https://zerotomillion.business.blog/2022/01/10/is-the-new-amazon-amongst-us/ is being played out. Reliance is now almost 12% of nifty 50 and my bet is that it will continue to outgrow a lot of other large caps.

Over the past one year, I have moved away from cyclicals and commodities towards what I believe are beneficiaries of the larger India story. This has proved extremely beneficial in some and not so in others but am happy to add to ISEC and HDFC AMC as I believe they’re not three year stories but 15 year stories with a huge runway ahead.

One more thing I wanted to write about was this two wheeler EV catching fire recently. Ola, Okinawa and one other scooter was recently in the news for this reason. My point is that once the legacy auto makers- Bajaj, Hero and TVS comes in all guns blazing, the new kids will either fade away or merge or die. The analogy in this regard is the smartphones market in India. Not too far ago, we had brands such as Lava, Micromax and Karbonn. They all were cocky enough to poke the Samsungs and the Apples. However, once the economy of scale was achieved in the ecosystem, none of them could compete against the better equipped players such as Vivo, one plus and Oppo, coupled with Apple and Samsung.

Similarly, I believe in a couple of years, we’ll see some of the new entrants fizzle out and market being dominated by the players who deliver not just the product but after sales and service. Ola can claim to build a superfactory but how will it service customers in smaller cities? My bet remains Hero Moto as it also own a large chunk of Ather Energy.

PS: the recent news about bogus transactions by Hero seems far fetched to me as someone like Pawan Munjal who has run this company for 30 years and prides itself on paying highest tax and has a great dividend history , do you think it’ll destroy the name for some farm house in Chattarpur. This I believe is a non issue and the matter will subside in a few days. This might play out like the whistleblower complain in Infy when all it turned out to be was a great buying opportunity!