Friday Whispers!

As the weekend beckons, I take a look back at some of the developments which has happened in the past two weeks and are of a lot of relevance to me, personally. Markets are on fire absolutely and the whole talk of Nifty falling back to sub 18000 has slowly fizzled though there are enough people still waiting for that elusive correction we were sure to have gotten in April, then in May and for certain in June. Market still holds up at over 19500 and in my opinion as long as this fear of an impending correction looms large, it is only going to go up to much higher levels.

Classic bull run plays are unfolding. In mega performing stocks, such as ITC or a Reliance, there’s a sharp correction of 5-10% and fear spreads that the top has been made. It goes nowhere for a couple of weeks and then once the retailers have sold thinking they got out on a high, stock moves up another 10%. This is exactly what has and will play out in both ITC and in TaMo and in other stocks.

Let’s discuss a few darlings close to my heart. TaMo came out with fantastic numbers and as I’ve been relentlessly saying, it has begun to throw big cash profits. A stock which made successive losses for five years is now making over 3000crore profit every quarter with reducing debt to add on. What was trading at negative PE to a PE of over 80 till March numbers because of earlier losses has now gone to hardly 20PE even at ₹640/-. And if it does continue on this path, it’s hardly trading at 10-12 times earnings one year down the line. So once debt goes down which is happening, dividend alone will be north of 15-20₹ and stock will be extremely cheap even at ₹4 lakh crore market cap as the PAT will be easily above 20-25k crore. That’s easily a double from here without missing a beat.

Now the second part. Tata Motors must be saluted for getting the DVR shares delisted at such a fantastic premium of 0.7x the normal shares. In its 15 year history, it has traded at best .55 times the ordinary shares. My friends will agree that when DVR was 300 and TaMo was over 600, I was screaming loud that the convergence has to play out to historical levels. And how beautifully has it played out. The TaMo management is exchanging DVR shares at lifetime high valuations with high premium, something ICICI Bank should learn. The price at which DVR is being offered to be extinguished is a level at which these shares have never traded!

On the issue of ISEC delisting, there was not even a word mentioned in the analyst call, investor presentation or alike. I am sure that this is more of a gimmick to move the needle on share price than anything else and personally, I believe that ISEC is an excellent business to own.

Reliance came out with Jio Financial de merger while ITC finally got the hotels business off its balance sheet. This makes us future owner of two more stocks and everybody with some sense of financial history knows that spinoff are the closest to free money in markets.

There’s an excellent intra-sectoral rotation playing out which is furling the rally upwards. Way back in 2018-19, only a handful of HDFC twins. Bajaj twins, HUL, Nestle type stocks moved up. Now even in FMCG, it’s not the HUL and Nestle but forgotten heroes such as Colgate joining the party. United Spirits will also now be a dividend paying stock and the re rating is happening. People who are chasing the last year’s favourites will be in for a disappointment as every bull run is led by a new leader. For this run, it’s clearly TaMo and ITC.

Now how can I not mention of the run BSE has had. It’s up 100% since it’s March 28 lows and now the business is stronger than ever. The F&O volumes at least on Fridays is well over 10% threshold and is only going to grow from here. Mutual Funds business is growing rapidly too. So earlier, I used to value the net cash sum of the part as an indicator but if the F&O turnover results in contributing to revenue, we are in for a multifold jump in the bottom line. One more thing, the buyback price is now within touching distance of the market price and I won’t be surprised if the board revised the buyback price upwards in the range of 1000₹ if the CMP will go upwards.