Life Highs 2.0!

Today’s move was a classical bull market rally- markets sold quite sharply yesterday, just around at the life highs levels, fell a bit more today and then made a massive one side up move. Anybody who sold his shares has certainly missed the bus. The best thing about such moves is that they make you fearful- oh this is the top, the market is moving south, this is the pullback we were waiting for and markets drop 2-3% in a day or two and then you sell. In a day or two, markets regains the lost ground and boom, you can’t enter at a higher level than you sold at!

So the belief gets cemented that people have burnt their hands buying the dip so much that they’re extremely scared of any reversal, a minor pullback is enough to throw them off and panic sets in. This is the phase when even through you’re making money, you’re so afraid of that 10% correction CNBC or Zee Business was telling you or that report from Goldman wrote about is that you’re extremely nervous at the slightest of the bad move. And, people have now been waiting for that correction for two months while markets have gained strength over strength. Portfolios have recovered a lot more than we anticipated but nervousness pervades the market. This makes me so happy because the more people doubt, the higher the market rallies and ultimately this doubt will lead to FOMO and acceptance which eventually will lead us to much higher levels and a booming bull market.

So coming back to a more recent events. The SEBI order barring IIFL securities from client acquisition is the answer to all the questions people have asked me about my belief in ISEC instead of an Angel or potentially a Zerodha. The problem with all Lala type companies, and that includes the new age tech entrepreneurs as well is that once they are on a high, they’re after a fancier lifestyle- Malabar Hills Apartment, Porsche and the business takes a beating. Also, since the gains are so concentrated that the owner is more likely to either let the competition mount an attack or do some hanky Panky to further increase his net worth by all means, not all of them fair. We have had numerous examples of large broiling houses vanishing overnight for that extra ounce of greed.

Now I’m not saying that it can’t happen with an ISEC. Only that the rewards are not disproportionate for its CEO to fudge his accounts because like we have seen with leading ex Bank CMDs, all their earnings are clawed back. And most of the employees are system driven because at the end of the day, reputation of the $100B bank is at stake. So the incentive to fudge is minuscule compared to the punishments which could be meted out. And this safety net of having a bank behind the broker is what makes me so bullish on this stock. The Indian capital markets are going to explode over the next decade or so and anybody who manages to just do his boring job with a 7-8% market share and doesn’t blow up is a guaranteed ten bagger. It’s almost like buying an HDFC Bank in 2002-03. And best part is they have no state owned banks to compete against. If ISEC simply manages to remain in business, it’s a $25B market cap in ten years by default. That’s more than a ten bagger!

TaMo is very close to its life highs and the move has been significant for a few reasons. It’s market cap used to be a fraction of Maruti’s and about half of M&M’s. Over the past one month, it’s lead over Mahindra has gone up to almost 35k crores and tha gap with Maruti has narrowed to less than 80k crores. There was a moment in automobile history when Tesla crossed Toyota in market cap, way back in 2020 and then went up 5x from there. Over the next one year or so, TaMo will cross Maruti and that will mark the end and a simultaneous beginning of an era unparalleled in Indian markets. That’s still a long shot but well, this elephant has only managed to deliver zero returns in past 8 years, peak to peak. Similar consolidation breakout led ITC to 450 while HUL went 5x and Reliance went up 4x after crossing the peak. Moonshot, maybe. Possible, hell yeah!

PS: if you haven’t yet noticed Oracle, please do! Thank me later