This has been one hell of a year. It will be remembered for, before everything else, the resilience of Indian retail money. Until a few years ago, markets went down just in anticipation of FII outflow and when they sold, markets collapsed. In the fall of 2008, Indian markets went down over 55-60% when the cumulative FII outflows were around $20B. Come 2021-22, the net outflow was over $40B over an eight month period beginning October 2021, and yet we hardly caught a breath. Indian indices are up on a year to date basis and have hit fresh lifetime highs in November 2022.
There of course have been people and institutions who were waiting for our markets and more than that our economy would collapse but to their dismay, both are in sound shape. History tells us that when Sind was attacked in the seventh century, it was the natives of that region who helped the invaders to cross the Indus river. So our land has always had a history of traitors. They’re now in myriad forms. Some ex-employees of the previous regime are desperate for a post retirement/ rejoining the post at high levels and thus do everything in their might to criticize everything the nation does. When the entire world has recognised India as a beacon of growth and stability with it being the fastest growing major economy, they will claim that India will do well to even grow at 5%. Sour grapes I must say.
Anyways, coming back to our discussion. It is now believed with certainty that the country is poised for a major upswing in this decade. The absolute size of the opportunity over the next ten-fifteen years can be anything between $3-10 Trillion, depending on the rate of growth. If one is seized of this fact, the biggest risk is to not invest in India and the second biggest risk is to play for a ten-fifteen percent gain.
If you can’t choose a stock, put all your money in a low cost nifty or sensex Index fund and do monthly SIP. Don’t look to book profits and ride this wave for the next decade, you’ll make a lot more than what any other instrument can offer. From an individual perspective, FD post tax is not more than 5%, gold is just around that in a good scenario, real estate has such a high ticket size that a man in early 30s with a 30l yearly income can’t afford to buy a decent house in a tier two city. Bitcoin has run into muddy waters with get rich quick schemes like it and NFT etc going to zero.
What has happened in Alameda/ FTX isn’t anything novel. It happened in Theranos a few years ago, with Berni Merdoff in 2008, Enron in 2002 and Harshad Mehta in 1992. Men and women alike want to get rich quick. If I explain to ten colleagues of mine to quietly buy an index fund for ten years and that it can give you 12-15% compounded return, they’ll not listen to me. I, however, tell them to lend me money by guaranteeing 5% a month, they’ll sell their house to give all they can and then ask their friends and families too. In a famous quote, somebody asked Charlie Munger as to why people can’t just follow him and Buffett and get rich beyond imagination, he said because nobody wants to get rich slow. Unfortunately, except maybe Elon Musk and Zuckerberg, everybody else has gotten rich slow.
Coming back to my favourite part- new age tech stocks in India. I was recently reading a book on the origin of PayPal and it struck to me that whatever Paytm founder has been saying about being making profits etc is nothing but the exact words of Elon Musk when he launched the X.com and Peter Thiel when he led the merged entity called Paypal. There is, however, just one difference. Paypal never made money in payments, until it began to charge people for it. In India, that’s not possible because UPI, my friends, is a public good managed by NPCI. Thus, it doesn’t matter what Paytm or the likes tell you, there will never be a way to make money as all these apps use UPI to transfer money and the technology is free for the public. So, I get everything Vijay Sharma says but since the hole in his P&L can’t be filled, more money is required to be burnt every minute of everyday to keep the game going and the moment he runs out of funding, it’s over. And then comes the fantabulous idea of buyback. A company which is burning cash to stay alive wants to waste 850 crores to buy back shares in order to support its share price.Such noble thoughts!
Byjus is in trouble for more reasons than just shady accounting. It is accused of using malpractices to push its products by almost blackmailing parents and siphoning off their hard earned money. The biggest emotion there is to tell a middle class parent that unless they use some course, their child will be left behind. With rising child suicide cases in Kota, I’m more than certain that this coaching – Edu Tech business is soon to be facing the might of the government. The best entrepreneur was the Aakash guy who sold it off to Byju at the peak of market valuations and has been buying farmhouses in Delhi for hundreds of crores.
Regarding Myntra and Nyka, what I believe is that once Reliance is game, you can’t beat it. Ajio has made massive strides in fashion this time and the deals and offers have been better than before. You just can’t beat a company which has a 50000 crore annual free cash flow from its Oil refinery by raising a few hundred crores. Reliance ecosystem now has everything – shopping, malls, online, toys, digital products, and what not.
One online business I really think will survive is this food delivery one. The valuations are an issue for me because I myself use it twice a day and know the retention levels are enormous. I will actually wait for Swiggy to list and valuations to correct another 50-70%. You can lose a lot of money by paying top dollars for a fantastic company too! So Zomato at 25, maybe yes. At 60, avoid.
This year marks the end of sixth full year of my investment career and from personal experience, all I can tell is that the best returns are in sitting. You’ll make 2-3x on the portfolio in six months while the rest of the time will be a test of patience. Hence investing is an art of keeping patience, when everyone has already lost it!
Life is all about Compounding! 