If there has been one debate raging across twitter and among the so called experts is whether we’re in for a larger, sustainable bull market or are we readying ourselves for another 5-10% downtick, like it has happened in the past two years now.
People have drawn out charts going back 2000s when the bear market rally led to another cataclysmic drop in the Nasdaq and how we’re in for a similar drop this time. People in India have seen so many false tops at around 18.5-18.9k on Nifty that everyone and their aunt is scared as hell for a major reversal beginning Monday morning tomorrow. Everyone who’s known me knows I’m a perma bull and I’ve been extremely bullish on the India story for reasons I’ve made clear on more than a few times.
This debate to my mind is because of the recency bias. Humans have a tendency to believe that whatever has happened most recently is most likely to happen again. So a stock going up is bet upon to keep rising, a range bound market is most likely to play in that range and vice versa. We, however, miss the fact that markets move in a range for long periods only to breakout on the way up, delivering outsized returns in extremely short periods of time and then making us play the waiting game. sSo just because we have been in this 15-19k range for two years does not mean we will never break out and that the lifetime high is permanent. Always remember, lifetime high is like your current age, it has to go up everyday and is only a reflection of how far you’ve come, not how far you will go. It’s a rear view mirror, not a forward looking crystal ball.
History, to my mind, is the greatest teacher of markets. People in 2005 didn’t believe it was a raging bull market. People, especially the market experts tend to talk of 20003-07 as the time when everything went up, all the time and everyone was making money. No, if you go back and read articles from 2005-06, or watch interviews during that time, you will see that people weren’t believing even then, in the midst of the last mega run India has seen. The 2010s has been a lost decade for the indices but it has made our markets much more resilient, cleaner and less immune to the FII outflows.
The only person who has made money in this market is the guy who bought into businesses, bought steadily and sold rarely. There is a guy Shelby Davis who started in 1947 with $50K and turned that into $400 Million by the time he died in 1994! And, he was a retail investor!!! The best investors, the people who have made big money are the ones who just refused to believe the experts, and who never sold. I’m nowhere close to that kind of discipline but I have only made one sell decision in the last year and plan to cut it down to zero this year. It’s not easy but it works.
People are so disbelieving of the current rally and the stocks which are going up that ITC is still treated with disdain, TaMo is still a lumpy cyclical stock and BSE still a second rate also ran stock exchange. The views I have may not turn out to be correct but if even half of it is correct, I’m three years time we’ll make so much money that the entire capital base will change.
One thought on TaMo- the best performing stocks in the world currently are the luxury goods- the Ferraris and the LVMH of the world. I don’t understand how JLR isn’t a luxury carmaker when all the cars it makes oozes luxury of the highest order. The new Range Rover is a $250K per car and even if I’m a bit biased, I believe that it makes the sexiest cars among the big 4- BMW, Merc, Audi and JLR. Maserati and Ferraris are in a different league no doubt but over the past few months, there are a lot many Defenders and Ranges on road, even in a second tier town like Jaipur. If you discount the $10B valuation of Tata Motors EV, the entire JLR is valued at less than $12B with zero valuation for Indian PV and CV business. This must be a joke, right. Mind you, Indians have only recently fallen in love with the luxury cars. The annual sale of even the biggest, which is Merc is less than 20k cars. Imagine in 10 years, that will be more than ten times that number, easily. Why, you may ask. Because, even the JLR sales more than 100k vehicles a quarter globally. I don’t see any reason it can’t sell close to 25k in India in five years.
If one goes back and read the history of the USA, and there’s a fantastic book I’m currently reading about the Brown Brothers Harrison, the financial powerhouse in the US for over 225 years, you realise that even the US didn’t become the financial behemoth it is today overnight. I’m an Indian patriot and truly believe that in 25 years, India will become the second largest economy with over $10K per capita income, overall $15T plus economy and the amount of money up for grabs is just mind boggling. The Reliances and the TCS are just warming up. Google does $40B profit a quarter, Reliance does $9B a year! The opportunity is massive, massive being a tad too conservative.
My personal belief is that this time, market will break through the range and by the time it’s elections in 2024, we would be at least 15-20% higher on the index alone. But, as I say, opinion is cheap, unless backed by money. I’m at least 110% invested and that’s how I’ve always been.
PS: one thing which has caught my attention is the REITs stocks. They look interesting to me as of now. Who knows what lies ahead!
Life is all about Compounding! 