Okay so let’s not be humble here. Anyone who did hold any amount of BSE before March 30,2023 and still holds the same quantity has made a ton of money. For the stock has gone up almost 5x from around ₹410 to ₹1900 in just around 7 months! That’s massive with a capital M!
And, to those of you who know who I am and have bought BSE because I kept telling you to over the past three years, it’s Diwali time and I’ll appreciate a couple of bottles of Gold Label! Thankyou for saying thankyou
So here are some facts to the run! BSE has gone up over 20x since covid lows of now adjusted price of around 95₹. It’s up almost 8x since IPO price of around 280₹( adjusted, again) an most importantly, this is just the beginning! I’ve written maybe over ten blogs in the past two years highlighting the same thing but since the story is now playing out before our eyes, it’s a great time to revisit it.
The power of low float with low fund interest is magical. BSE has a total of 13.5 crore shares, held completely by public. Nobody, except a Zerodha and a few others hold even close to 5% of the shares each. As on April 1,2023, BSE was a micro cap with about ₹5500 crores market cap. Thus, it wasn’t even worth enough to be a small cap and thus had no fund or index which mandatorily bought it. Even as on June 30,2023, domestic funds had only 0.18% of the total shares. Thus, it was completely neglected even when the price had crossed ₹650-700.
Once the equity derivatives began to generate significant interest, genuine rerating led the stock to move up the market cap to around 10-12k crores and alongside came fund interests. The funds- MF and Insurance and other PMS houses do nothing but to chase momentum. So they’ll not buy when the stock is cheap but only when it has moved enough to outperform the market so that they can then buy it, do a backtesting which proved that if they had bought it ten years ago, their fund was the biggest outperformer. Plain nonsense but that’s what they will say on TV. Just like that idiot Mukherjee claims to have done with Eicher and Nestle in his early days.
So in a market where the so called alpha generation is rare, not having a stock which has beaten every other index or stock black and blue is blasphemy. Thus, more and more funds began to buy during the September quarter and held over 8% at the end of it. Now, the key to remember is that when a fund buys, in order to even have the stock to have a weight of 0.5% of their portfolio, they will have to buy shares worth in crores. So the demand of a share suddenly goes up. The daily trading volume which used to hover at less than 3lakh shares a day suddenly moves up to over 10-20-50 lakh shares a day. And this creates punters to track and trade, creating more price action.
Now remember this. The stock is moving up with increased sustained demand. As when one fund buys a rising stock but the other doesn’t, the other can’t justify it! So the rest of the funds also have to buy it and that keeps up the demand high for a longer duration. This is the reason why HDFC twins. Bajaj Finance, Eicher kept on moving up beyond logic. Or even a Dmart or a Titan or an IRCTC.
Now did I say anything about the low float? So once the demand is high, the power of limited number of shares limit the supply. As against 13.5 crores shares of BSE, IOC would have something like 1000 crores shares or even an ITC would have close to 1242 crores shares.
Thus, the moment a fund punches an order to buy over 50k-1lakh shares, the limited supply forces the order to get filled at a much higher price. This creates additional action on the upside and the punters- day traders and the likes kick in. Thus, the price moves up. This spiral move on the upside is what we saw in IRCTC and DMart or even in Nestle in the last few years.
The funds also have to at least pretend to hold the stock for a few quarters. And additional fund buying helps shore up the NAV so they all look geniuses. This is what’s happening with BSE, folks!
On a personal note, I intend to hold BSE not for now but for the foreseeable future because it’s the business, not the price which matters. With rising derivatives volume, BSE is now beating NSE every Friday on turnover volumes. So the profits estimates are rising with every passing week. And that’s real! BSE last year made an EPS of around ₹13 per share, which is likely to be around ₹22 this year but will jump to over ₹40 next year! That’s what the market is liking. And because the company needs zero additional cash to run its operations, the entire money will come back to us in the form of dividends. So the yield will be humongous!
So, it’s party time now! Hold, hold it firmly! There might be sharp, vicious 20-30% corrections on the way but hold it tight!
One multi-bagger is enough to change your life. If you have one in hand, don’t sell it for your life depends on it!
Life is all about Compounding! 