What a move it has been! Exhilarating isn’t a term I use often but it has been one such ride. BSE has gone from 400 odd levels at end of March to ₹1126/- on closing basis on September 1! Am I happy! Of course I am. My liking goes back to the 2018 when it was trading at pre bonus levels of around ₹735. It fell to a low of ₹275 and now on a non adjusted basis, it is at almost 3375/-. Over 12x move in three years is one multi-bagger, isn’t it.
Is BSE the New Game!
I wrote about BSE in numerous blogs over the years and today won’t be much different. I’m now only waking up to the reality that when you hold the stock for one purpose, it can climb over wall of worries and deliver on to altogether new frontiers while on its way to multi-baggers status.
Me or people who have held BSE bought it for the new businesses it was incubating- power exchange, MF distribution, INX at GIFT city, etc. Well, it is now firing on all cylinders in a product we all knew it was dead- Equity Derivatives.
The way Sensex F&O turnover stands today, it won’t be long before it breaks through the almost unthinkable territory of over ₹100 lakh crores on a daily basis, at least on Friday, the expiry day. It took NSE 20 years to get to this level, BSE has finally broken the code in four months, after languishing for over 30 years since Harshad Mehta scam tainted it badly.
The maths are simple- NSE does over 7000 crores of Net Profits, almost everything comes from equity derivatives. So if BSE can breakthrough to around 10% of the market share and even if it continues to charge a tenth of NSE, it’s almost ₹100crores net PAT for a company whose annual PAT is around ₹200 crores. That’s a significant jump in bottom line and the valuation game changes completely. BSE is now moving away from the backwaters to the main beach- the run up is just a reflection of what markets are seeing!
The market cap is still around ₹15000crores. You can’t value the second largest exchange of the fifth largest economy of the world at less than $2 Billion!
If ever there was a play on India’s rising growth story, it is BSE. I’m substantially invested and am more than happy to hold it for all times to come.
Now let’s discuss what else are we seeing in the markets. Indices have not done anything except going down 4% in the past month and people are extremely sceptical of it breaking through on the upside. The regular culprits- market experts are digging out parallels as to why Nifty should go back to 16k or why the mid and small caps running up is a siren song for upcoming miseries, etc but to my mind, all that is bullshit.
If I’ve learnt anything from my six years in the markets, it is that you need to hold on to your stocks through times of extreme pessimism to make outsized returns. I can’t stop telling you how BSE went down over 60% between March 2022 to March 2023 and everyone was so pessimistic on the stock. The rally on the way down was so brutal that it almost brought my portfolio to tears. The gains are for all to see, the pains are felt individually.
Everyone buys for the long term, unless either the stock does well and they sell at the first 10% up move or it does badly and they sell at down 40% and swear to god to never put a penny in the markets again.
My learnings over the period has been to keep buying at every price levels, to hold at all times and not sell either at moments of great euphoria or at extreme pessimism, unless the business has done badly. You buy into a business and as long as the company is doing well, price will come around. It has happened in TaMo, in BSE, ITC, Infosys and what not. It will eventually happen in ICICI Securities as well. In HDFC AMC and Nippon AMC as well.
PS-: here’s my take on this rally in PSU stocks. Please get out as long as the music is playing for once the music stops, you’ll have nowhere to hide. The Government is extremely consistent in value erosion through great moves like OFS, cross selling etc and the value premium your HAL or RVNL etc are getting will erode the moment government throws in additional ten percent equity in the market. This is the reason our Oil PSUs which are worth their weight in gold are valued at their price in lead. Look at IRCTC- it was the hype of 2021 and is down 40% without a buzz. And am certain that it’s going to go significantly from here once some Ministry official decides it’s time to do another OFS for a few thousand crores.
Life is all about Compounding! 