Author Archives: ZerotoBillion

In my last post, I had outlined my idea of being bearish on the markets and reasons thereof. Since then, we have had some correction in the Indian markets and some large moves in multiple global markets- Natural Gas, Japanese Bonds, Silver, etc, all of which has led to the Episode 2 of our original post. 

A.       First, a quick look on how things have progressed on various fronts:

1.        Geopolitics- The gathering at Davos this year has been incredible. Canada sounding a somber note on the death of rule-based global  order; France lecturing the US; EU announcing the mother of all deals with India to counter US tariffs and a lot of bickering between various NATO members. At the top of it was the public humiliation of Denmark by US Treasury Secretary, EU by its Commerce Secretary and of everybody else by Trump along with a renewed claim on that piece of ice- Greenland.

Unbelievably, the infighting along with imposition and then repeal of additional tariffs on European nations by the US has only heightened our case that we are in a time of major flux, with a flurry of events only reminiscence of those leading up to the Second World War. It is incredible that until the beginning of this year, nobody was even thinking of 1939 but now everybody is picking up their history books to draw parallels from the famous decade of 1930s, both about the Great Depression and the Great War. 

2.        Markets- Indian markets possibly took our piece a bit too seriously and collapsed quite a bit throughout the week with multiple accidents- Kalyan, Havells and what not. Most importantly, people have begun to appreciate the idea that an overvalued market can fall 20-30% and still remain a lot above fair valuation. What has unfolded is a race to exit first before the fire breaks and if the fire does break out, there will be no exit, especially in times of heightened MTF positions.

 

B.       With our cash positions, we are incredibly bearish on this market. I have been in this market for 9 years now and hasn’t sat on a rupee of cash until now where it is our largest holding at well over 66%. It also means that our views are going to be incredibly biased, and you must remember that while reading this. Why do I take such a call is what I am trying to elucidate. So what are we seeing here:

 

1.        The valuations- You look anywhere and 80-90% of the market looks expensive. Every story is discovered, every position primed for forever growth and there is almost consensus buying on multiple themes with a lot of money chasing a forever supply of stocks from PE funds, promoters and FIIs. I do not understand the thesis of chasing a stock like Zomato when the Promoter exited the company and people praised his leadership skills and clear communication.

Most importantly, the usual chatter of how LTCG and STT killed the markets and scared away the FII has now begun to flood the conversations on TV and X. Prominent fund managers, including the likes of Samir Arora who holds a ton of Paytm, Zomato, Physics Wallah type are now crying left and right to pressurize the government in doing away with LTCG or else havens will fall. 

Ask yourself two things. Post imposition of LTCG in 2018, did the Indian market not see the biggest boom ever in the stock markets between 2020-2024? And two, when the market was going up, did all these people not tell you that the FII money is not required and the local money is self-sufficient in keeping up the markets and even sustain a bull run on its own. In that case, why are they crying now?

There is a barrage of such people who are writing long posts about how the poor retailer is hurting; how he is in loss because the FII have vanished from the markets and why you desperately need to lower/remove these taxes to bring back a sense of semblance in the markets. I call these people bullshitters. They are forever on TV in a self-congratulatory mood when the times are good- one guy can’t stop telling how he bought Hero Honda in 1990s, the other one is the first ever multi-bagger hunter in Infosys and there are a multitude of them who forever are outperforming the market and who have always caught the stocks which have gone up recently. 

When the times are good, they hail the retailer for SIP culture and how Sensex will be 200000 in three years and so on and so forth. The moment market turns; they cry foul. Do yourself a favor and watch some CNBC or Zee Business videos in the last week of March 2020- there was an entire gang of fund managers and leading market experts who wanted the government to shut the market down because their portfolios bled. The same guys now are desperate for a tax reversal because their trend following has led to lower returns and their clients have stopped pumping fresh money. They want you to believe that India is the biggest and the best market in the world and government should be out of business but the moment there is a fall, leave aside a bear market, they want the government to bail them out! Bullshitters!

The problem with Indian fund managers is that most of them are momentum chasers. They will all chase the same thing- Kalyan was a darling till very recently and so was Dixon. Call up the people who were extolling virtues of Zudio till last year to see if they would love to buy Trent at half the price? Where are the people who called IRCTC the best monopoly business in 2021 or sold the China+1 story to believing public or who would buy Cochin Shipyard at ₹2900? Funnily, the same bunch now wants you to invest in China!

All the PMS people are now running their mutual funds because that’s where you can accumulate the highest assets and all one has to do is to mirror the index, add a lot of fancy stocks and claim to outperform the markets on CNBC. 

Funnily, as the Indian markets underperform, those selling you the latest Defense and Manufacturing thematic funds now lament the fact that most Indians do not invest sufficiently across global markets and how they are missing out on the deal of a lifetime. They will then pull out the valuations of Nestle in Europe, Unilever in England or LG in Korea to tell you that the parent is cheaper than its Indian subsidiary. 

Well, two points. One, most Indians cannot invest in global markets due to frictional cost involved and the LRS limits set by the RBI- $250K per annum and the TCS involved therein and two, these very people wanted you to keep buying the LG IPO or the Nestle-Lever shares as long as the market kept going up! Further, most Indian mutual funds offering global investing are nothing but a Fund of Fund ETF of either the NASDAQ or the S&P with hefty fees which nullifies a large part of the return. 

 

2.        This is just the beginning-

 The Indian equity market is in the sixth year of a long, secular bull market where people made a lot of money. Until the beginning of this year, I also believed that there is one final hurrah left before the cycle turns but the flurry of IPO and promoter selling along with the geopolitical setup has convinced me that the fall is here and now. 

If you see carefully, over the past few weeks, the selling was first in the EMS space with Kaynes and Dixon beaten black and blue and last week it was the realty index which took the most beating. There were multiple other accidents as well- Kalyan, Havells, Adani group, etc. So, what I think is that people are first selling wherever they have made the most money or have some profits left. Once that subsides and if the index does not recover, there will be a sharp fall across the broader market. Of course, this doesn’t always happen like this but to my understanding, the fall has just begun. If you look at any stock which is down 30-40% from their previous highs, most likely it is still trading at 60-80 PE multiples. 

What I learnt from my experience of 2018-20 is that a stock which is down 30% from its 52 W highs can still fall 50% and still go down further in a bear market. If you read my very first few posts, I had recollected that I first bought Tata Motors in 2018 at ₹430 levels. By February 2019, it was ₹150 and during Covid it fell to ₹60!

So, a lot of you think that buying something which is down 30% or even 50% from its lows is a good bargain should remember that in a normal bear market, even good stocks fall 70-90% from their peaks. BSE alone has fallen 60% at least twice since its IPO in 2017 and has fallen 40-50% multiple times. 

As far as the indices are concerned, they are hardly down 5% for Nifty and 13% for Small cap index. They are still up to 20% above their 52W lows and the ones claiming that a bottom is near has forgotten not just 2020 but even 2022 and February-April 2025! It is very normal for even Nifty to fall 15-20% in any given year and it won’t be a surprise that we see a sharp drawdown across major indices over the coming few weeks. Yes, there can be a sharp reversal in case the budget does take out the LTCG or if there is any positive announcement on the US tariff front but to my mind, that will be temporary as the FII will happily return to sell at elevated levels and the flurry of IPO will only accentuate. 

If there is a sharp reversal in the markets, I will be happy to go upto 90% cash as there is nothing better than watching the madness of crowds unfold. I have a very clear rule in this market; If we fall from here, there is a chance that the fall will be limited to let’s say 30-40%; in case the markets go up in a hurry, the fall from there will be far more brutal.

As far as the retail money is concerned, if you suddenly see the number of funds setting up offices in GIFT city while trying to sell you the dream of a globally diversified portfolio indicates that the tide is turning. People who used to ridicule gold investing are now offering multi-asset funds with a large portion of it in gold to somehow keep up with the returns generated therein. 

 

3.        Geopolitics trumps Markets

If there is one take away from the events of this month alone, it is that the world we knew has ceased to exist. The Europeans blocked the Russians out of Europe are now staring at an unravelling of NATO. The US which preached to the world is now bickering with Canada. India is also at a position where it must balance a lot of things to keep moving forward and I am happy as an Indian that we do have sensible leadership at the helm. It is no secret that the Deep State wants an unstable India because if you can create some fissures now, the 7% GDP growth can easily become a 4% growth with 8% inflation. In that respect, I also believe to a point that the FII selling is strategic and I am sure the government also understands this. 

At the time of writing, the US is moving its warships to Iranian waters and who knows what happens next. There are just too many things waiting to blow up that every nation is now cautious of the next step. For those of us waiting for a trade deal with the US, ask Europeans. They bootlicked Trump for a deal in 2025 only to be told at Davos that they can have even more sanctions coming their way again! If I can see this clearly, I am sure our leadership also does that you just can’t trust anyone anymore, even with a signed deal!

It is logical for the government to do two things- keep the domestic economy going and maintain the lid on inflation. So I would imagine that the capex push will continue, subject to fiscal situations and any tax cut is simply out of the equation. The government simply does not have any room left, especially with the IT and GST cut. Yes, if anything does happen, it can be a raise in LTCG to 15% with a higher exemption limit to let’s say ₹2.5lakh rupees per person.

4.        History does not repeat but it rhymes

In my limited career in the markets, I have seen the small cap index collapse close to 60% between 2018-2020 and funnily, people have a short memory. There used to be market darlings such as DHFL, PC Jewelers, Gitanjali Gems which all fell over 99% during that period. Yes Bank, the then market favorite fell from ₹400 to less than ₹7, well over 98% fall. The OMCs were market darlings in that period until Arun Jaitley levied ₹1 oil cess in October 2018 when IOC tanked 30% in a single day and fell close to 60% between 2018-2020! Vedanta also fell from ₹ 400 to just around ₹60 and I can go on and on. 

What I am trying to tell you is that it is very normal for stocks to correct 50-70% in a decent correction while a lot of stocks will never see those prices again. It is good to remember that Reliance Power, Reliance Communication, JP Associates, Jet Airways, Suzlon etc were part of the bluest of the blue chips in 2008 bull run and most were part of Nifty 50! DLF has not crossed its 2007 high even in this bull run while UniTech and the likes went bankrupt.

It is not a bad time to revisit history lessons while preparing for a long career in the stock markets. If you go back a few more years, you will witness even worse periods with even better storytelling. In 2007-08, India was the next China with multiple decades of 9-10% GDP growth rate ahead of it because we had decoupled from the USA and have easily survived the great recession. Nifty made a high of 6500 in 2008 and did not cross it meaningfully until 2014! The US markets which is the best performing market currently also gave birth to the Internet just as it did to the AI. NASDAQ did not take out its 2000-01 peak until 2010! So much for American exceptionalism.

 

C.      To conclude-

To make money over long-term, you have to flourish in a bull market and survive the bear market. To make lifechanging money, you not only have to ride the winners of the bull market but also have some firepower to invest in a bear market when the prices are so low that a normal recovery will give you a 2-3x on portfolio, turbo-charging your returns. The prices can be so low that you can’t fathom but the key is to have cash and courage to invest at that point. I believe that a massive downturn can be the biggest opportunity of our lifetime. I am neither aware nor have any ability to predict when such a fall can happen but let me give you a small chronology:

In May 2019, Nifty crossed 12000 for the first time. Three months later, In August 2019, the Government cut the Corporate tax rate. Nifty subsequently made fresh highs of 12430 in February 2020 but one month later, the markets were down 40-60%, depending on the indices you wish to monitor. In this period, small and mid-caps were already down 30-40%. Fast forward a few years. Nifty’s previous high of 26000 was in September 2024. In 2025, the government has cut both the Income Tax as well as the GST and the markets have also made fresh lifetime highs as recently as January of this month. The average small-midcap is also down 30-40% from its peak. I don’t want to predict anything more than this!

 

The title is borrowed from one of India’s successful yet recluse investor, Anil Goel who described it as his guiding philosophy in one of his rare interviews. What he mean by that is when the market goes up, he likes to sell his holdings and raise cash over time and when it rises further, he regrets on missing out the gains but in the end when the market collapses, he has enough cash to buy at much lower valuations which is how he got rich.

So why am I beginning the year with this quote? The market isn’t going up and we aren’t seeing any gains to book so why this title? Well, the reason is, for the first time since Covid crash, we have turned extremely bearish! Yes, for the past nine years that I’ve been in the market and especially since the Covid lows, I’ve not been this bearish and thus, the post.

I.              First, the reasons as to why do we think something is wrong with this market:

1.     Geopolitics- 

I do like to read books on various subjects and was in the middle of a book called “Great Power Games” by Shri Vikram Sood, ex Chief, R&AW when Trump took out Maduro in the first week of this year. This is one book I can’t stop myself recommending enough to all of you so please grab a copy and read it for yourself. The crux of the inference which the author has drawn for India is that we are at a point in our history when no great power would want us to grow any further, doesn’t matter if they are our friends or adversaries. If we grow beyond the $10 T, we will be so large that nobody will be able to dictate any terms to us and thus, the reason why the US is putting tariffs on us for buying Russian oil but not on China is that it can. Beijing has grown too big to be messed with already. Coming to the crux, he predicts a world where the US would like to throw its dwindling hegemonic weight more on us wherein we have to strike a balance with China to survive even though even the Chinese aren’t our friends either. You see, there is nothing easy in geopolitics and thus the reasoning.

Now you hear Ajit Doval recently talking about how India has sacrificed immensely to reach where it is today and why a wrong move can take us backward and how we are blessed to have a strong leadership today. 

 

Friends, Ajit Doval is a spy and spies do not talk unless they have to convey something to someone and this message wasn’t for the young students he was addressing then.

My hunch is that the US will take Greenland in some form within a year or two and then if you imagine the world map- taking greater control of Panama canal earlier, taking out Venezuela and now the Arctic route, the world is clearly being divided in spheres of influence. Also, with NATO all but abandoned, even the Europeans have their asses on fire and that’s why you se sudden EU-India FTA, German chancellor desperately trying to sell us their submarines and the bumper order for additional Rafaels from France. It’s all connected!

The main fear for me isn’t Iran or Antarctica but Taiwan. We all know that there have been so many false flags on Taiwan that everyone believes that China might make a lot of noise but won’t do anything but my fear isn’t a full prang attack but more like a naval blockade and tough posturing which is enough for one thing- breakdown of global supply chains of Semiconductors. The global market is rallying on the back of AI and the bull run is one of hardware whose very heart sits in that tiny island southeast of China in TSMC! The Taiwanese are on record to have wargamed a scenario that in case of a Chinese landing, they will destroy the facilities rather than allow it to be captured!

All this doomsday predictions have been going around for a long time and have mostly proven nothing more than a pastimes of retired generals and spies. So why am I paying so much attention to it today?

This will take us back to Vikram Sood where he explains that the US today is a power in decline and not the hegemon it was say 30 years back. It is only when you aren’t strong, you begin to haggle with your friends- read Canada, NATO, France etc. The world as we see today was designed by the US in 1945 and is being unraveled by Trump eighty years later. If there is any parallel to this situation, there is nothing even close other than the late 1930s just before the second world war! 

By this time, you would have certainly told yourself that I have gone nuts and nothing like this ever happens. Well, not until the day Russian tanks rolled out across Ukrainian borders in 2022 that we knew that there was a war in mainland Europe since 1945! Hand on heart and I would like to challenge anyone who did believe that Russia will actually invade- not even Biden believed so. If you go back in history, we always underestimate the chances of extreme events till the point they happen- how many of you believed that India will go in a complete lockdown beginning March 24, 2020 even when we were banging thali on March 22? 

2.    Market Cycles-

This bull run began in the Covid lows of 2020 and will complete six years in three months from now. From then, even with intervening falls, stock market has produced excellent returns for the ones who believed and bet big on India. Sectors like Power, metals, EMS, Capital market and railway-defense have seen multifold returns to name a few. The entire bull run in India hinges on the newfound powerhouse- retail buying through SIPs and Mutual Funds. 

It has led to a scenario where every big guy- Private Equity, promoter, FII and now even the government is selling whatever it can and that too at absurd valuations. This feels a lot like the late 1990s in the US when garbage like pets.com, etc went on to list at lofty valuations before dropping to zero a few years later. It is absurd to see Swiggy fall 50% from top at still at 1 lakh crore market cap. The garbage being sold in the name of new-age stocks is all going to hurt a lot of converts and new believers when the tide goes down. 

We know all this already so what’s my point? The point is valuation. I ran a basic screener to see how many companies in India have a dividend yield of more than 4% and there were very few while there would be hardly any paying more than 6%- the FD rate. Also, if you run a screener of the fancy sectors- you will see the winners of this bull market down 30-50% in multiple cases- Trent, Kaynes, Dixon, Entire Railway pack, Cochin Shipyard, IREDA, Avenue Supermart, Kalyan and so on and so forth.

So now isn’t my point invalidated? The market is off its highs and thus, is a good sign of a healthy market rather than a bubble, isn’t it? The problem my friends is- Valuation. All the stocks which are significantly down from their highs are still trading at 50-60-100 PE and in cases of garbage like Zomato-Swiggy-Nykaa, they are yet to meaningfully record any profits aside from accounting shenanigans regarding ESOPs and tax refunds. 

The poor retailer is hurting. He was sold this dream of 12-15% CAGR for the rest of his life turning his 2000Rs SIP into multiple of crores to fund his retirement, house and what not. He was told to buy dips when FII sold and he did. He is still buying when the promoter is selling but the returns are fast vanishing.  An average portfolio is in red and he is struggling to find his advisor who sold him the latest Defense Fund at the absolute top. 

Moreover, the mutual funds are now beginning to act crazy. In order to capture some portion of listing gains, they are diverting a large chunk of their inflows to stupid IPOs which eventually mean the retailer is giving a thank-you note to the fleeing PE guys. 

And look what our famous investors are doing- Ramdeo Agarwal is asking for some king of ban on IPOs to sustain the markets while the legendary Saurabh Mukherjee is selling us his latest Global Fund asking us to now invest in the US markets. I can’t but share this story- If you go to his PMS website, all of his funds have underperformed their chosen benchmark across all time durations ranging from 1month to since inception. And this is his own data! When this guy sells something, you know that the top is near. His dreamy stories about Asian paints has returned ZERO over the past 5 years, so have HUL, Berger and many more from his coffee can. Thus, I have a very bad feeling for the poor US market!

There is also a rumor about Indian government giving some sort of taxation relief to some FII on LTCG front which to my mind is absolute nonsense. This is a government focused to raise funds from wherever possible especially with mega cuts on Income Tax and GST front. Further, it is a no brainer that the defense budget has to go up. It is not for public health that the government threw ITC and Godfrey Phillips under the bus all for 13000 crore, less than a tenth of the monthly GST collections! Also, any relief in LTCG will only accentuate our bearish mood as that will lead to a true bubble scenario where there will possibly be a 10x jump in IPO activity. This is one reason why I never believed that the government will ban the weekly expiries because the capital market is the only revenue generator left! 

 

II.            So what do we do now?

We happily subscribe to Buffett’s philosophy that we don’t worry about macros but look to buy great businesses at good valuations and hold them for dear life but we also believe in what he practiced- holding cash when opportunities dwindle. Very few people know that he dissolved his Buffett Partnerships in the late 1960s when the US market went gung-ho on the then Nifty 50 stocks and then went all in buying in the carnage of a bear market in the 1972-73 which made him what he eventually became. Also, he held humongous amounts of cash beginning the mid 2010s and was happy to put part of it during covid crash and as on date, the pile is well over $300 Billion when he hung his boots on December 31, 2025.

The recent muted reaction to AMC stocks in face of bumper numbers signify that the market is sensing a near time top in the markets which may be marked by lower levels, reduced retail buying or a combination thereof. Otherwise with that number, HDFC AMC would have gone up 10% yesterday. Ask yourself why the HAL and the likes didn’t hit fresh highs on additional Rafales being bought!

 

We are extremely bearish as stated and are happy to raise cash, wherever possible. We see no point buying something today when the same thing can be bought 40-50% down 12-28 months from now. The main point is to sit out for that long and not just regret but look absolute foolish but we don’t want to be the last one dancing when the music runs out. We will turn bullish when there is a big splash- some fancy IPO going underwater- who knows its Jio or NSE which will jolt the retailer from his enchanted state of buying through SIP and even a 10% drop in inflows will lead to a total collapse in the face of massive supply. We foresee two scenarios here:

A.    Our base case is that this is some sort of 2018-19 phase when the market gets extremely narrow with managed index levels with brutal cuts in the small-midcap names. That time it was the quality stocks which benefitted the most and this time it could be metals, gold-silver, some PSU and capital markets especially if there is a relief on cash STT front. In this scenario, the capital most likely will shift in these names in a heightened geopolitical activity and index remains managed to a 24-26K level. It may even keep hitting fresh highs to fool the retailer to keep buying. We don’t see this play out longer than 12 months thanks to Trump’s compulsion to do whatever he can before the US mid term elections towards the end of this year.

B.    Our worst case is that Trump does take out Greenland in some form and China hardens its postures on Taiwan leading to unwinding of the AI bull run. In that case, it will be the greatest buying opportunity of our lives only if we are sane enough to have cash in hand. Who knows what else can happen in the meantime- the world is sitting atop barrels of kerosene waiting for a spark to blow everything up. Keep in mind that Op Sindoor is still ongoing! In this scenario, there will be no bottom to hold and the headline indices can easily go down 30-50%, just like 2008 or 2020. There is one important lesson I learnt from my reading of the 1929 crash- the first massive dip is always bought because people like us holding cash suddenly look super-smart and rush to buy bargains. It’s the next crash which takes everything down. In 1929, on the infamous black Monday, even Rockfeller bought. 4 years later, Dow had tumbled 80%!

III.          To conclude- No analysis in the stock market is perfect nor can it unfold in toto as predicted and we are fully conscious of the fact that our entire analysis can turn out to be absolute gibberish in the face of a strong recovery in Indian markets- who knows the government does remove LTCG in this budget! The only truth in the stock markets is that anything can happen- bubbles can last longer than anyone can imagine and a world war can start in a day. There is also a possibility that Trump suddenly dials down the rhetoric and the geopolitical tension dies down and the entire market rejoices. Who knows! 

What we are signaling here is based on our reading of the situation and we alone will suffer the consequences as we neither advise anyone nor want anyone to follow what we do. This is our way of telling ourselves how we see the things and if our analysis turns out to be true, we just want to stay sane enough to have cash on the day market collapse! We are here taking cue from Bill Ackman and his thesis – panic early, panic big. He panicked very early during the covid crash that not only he sold ahead of everyone else but also panicked big to buy long puts on his way down while famously buying the absolute dip in middle of March 2020. No doubt he made a few Billion Dollars! 

Here is a list of books I would recommend in the end :

1.     Great Power Games- Vikram Sood

2.    1929: inside the greatest crash in history- Andrew Ross Sorkin

3.    Berkshire Hathaway Letters to Shareholders 1965-2014

4.    How to Listen when Markets Speak- Lawrence Mcdonald

5.    Safe haven- Mark Spitznagel

 

 

 

There are a million ways to make money in the market. You need to find out what works for you and then devote considerable time and efforts to master that thing. What We believe is that the most important decision in any investing is to see that the company which you are buying is likely to survive the next 5-10 years. The second order decision is to also see whether it will thrive or not in the same period. 

A lot of people want to do a lot of complicated stuff in order to make money. This includes F&O, Arbitrage, betting on macro, predicting the price of commodities over the next one-two years, including geo-politics in analysis and so on and so forth. Also, they would like to get in just when the tide is turning and ride the rally in every possible sector and get out before it turns. In our opinion, this is an extremely difficult proposition to undertake and we express our inability to master all or any of the above.

Here are some rules which we try to follow when making an investment decision. It does not guarantees outsized performance because market will do what market does. What it does is to allow us to make sense of what we are holding when the market moves against us. We strongly believe that keeping money safe during a bear market or a sideways market like today is much more important than making money during a bull run because when it’s a bull run, everybody will make money regardless of process, skill or temper. This is also loosely correlated as Buffett’s rules for investing- Don’t Lose Money!

1.      Buy when nobody’s watching- It’s a fair idea that when not many people are watching the sector or the stock, when not many analysts are coming out with Bullish reports and when the market believes that the stock is dirty, it generally pays to give a close look as to whats cooking? There are certain theories like buying a basket of stocks at 52W lows that go on to outperform the market over the next years but we don’t subscribe to them in toto. We believe that market is a fair umpire of the stock price and most stocks which are beaten black and blue truly deserve so. What we get interested about are certain stocks which for one or the other reason have been severely bruised but have their balance sheets intact, still eke out profits and have a sound management. 

Let me give you an example: Warren Buffett famously bought a large part of American Express in 1960s when the stock was marred by some scandal. He also bought GEICO in late 1970s in similar situation. Both the stocks made Buffett who he eventually become. 

It, however, is beneficial to be very careful what you buy which is down 70-80% as most companies in this category aren’t American Express but RPower, RCom, Unitech, Dronecharya, etc.

2.     Buy for which you don’t have to Pray for:

If, in order to make money, a lot fortuitious events have to unfold, it is most likely to be a dudd investment. I’ll give you an example. A lot of people and a very intellectual sounding Fund Manager is currently bullish on IEX. In a nutshell, the latest CERC decision on market coupling means that IEX’s monopoly on price discovery is over and all exchanges will use the same price, irrespective of where the discovery took place. It logically means that new exchanges have some help in breaking the monopoly of IEX and thus, the stock is down 60% from its 2021 highs. 

Now, what these people are praying for is that when the company will move to the Supreme Court, it can get a favorable judgement and then at some stage the price will shoot up on that basis. 

I have some pointers on this idea. One, when the government decides to implement a policy and an incumbent challenge it, it is most likely that the government will win the ensuing battle of tranches in the Supreme Court. Even if the government loses, it can always take out an Ordinance route to overturn or to challenge as it has limitless legal remedy available. For e.g., in the Hutch-Vodafone deal, the GoI brought out a retrospective tax amendment law, putting at stake its liberalized image to claim some tax revenue. Also, in India, government behaves depending on political mood and you don’t know when the issue gets raised in the Parliament and there is so much pressure on the government to choke you to death. 

Also, even if the government does relent on the market coupling issue, the stock would be depressed for far longer than you have hoped for and more often than naught, you would lose all your hopes and book out on the loss, much before the eventual up move. Nobody can have 5-10% dead capital in their portfolio for that long. Further, even if you hold something like this for three years and then make 50% eventually, the best-case scenario is also not so good that it compensates for the holding period.

Another prime example on this is what I call the land-bank syndrome. Post covid, Raymond’s did extremely well because of one land it had in prime location which when sold, allowed it to raise so much cash that the stock went up 8-10x. Now Raymond’s is in realty business! This has led to a peculiar situation where a lot of people want to look for the next Raymond’s, ABREL being a prime candidate in most theories. This may or may not turn out to be true but when you are praying for a lot of things to go right, they generally don’t in reality!

3.     The Cigarette Butt approach doesn’t build wealth- As an investor, you are always looking out for opportunities where you can buy something for 100 and sell for 130 or 150 quickly. The supposed IRR is extremely high and you make a quick buck while also satiating your quest for action. There are a few downsides for this approach:

A.    It doesn’t always work in a sideways/bear market when the price wont budge much or all gains are quickly erased. Recently, DAM Capital has been making a lot of moves between 200-300rs where one could have easily bought it near the lower range and exited at around 300 and repeating the process multiple times. What really happens is that neither you are able to buy it at exact 200 and nor does it always go up to 300 so even though you make 20-25% once, the diminishing returns in the next attempts plus brokerage and STT and STCG take away most of your gains. So, it always does look like a great idea to buy a Share India at 150 and sell it at 200 but sometimes when you buy it at 150, it first falls at 130 when your stop losses get hit or you get scared and sell and then in two days it goes circuit up 20% to 220 and you can’t make any money. Thus, while this approach looks phenomenal on CNBC when all the experts claim to execute these trades easily, it doesn’t happen in reality.

B.    If you deploy 10% of your portfolio in ten such stocks, you will make money neatly in one or two while you will have dead capital in most others. So, you really can’t make sustainable meaningful returns on this approach. And if you are such a genius that you will only bet in those one or two stocks which will go up and avoid the traps, well, you are either lying or are a crook.

C.    You have to constantly look for multiple opportunities because what do you do when you sell DAM at 300 and have some cash? It can’t be that Share India is now trading at 130 on the same day? It is also possible that half your time is spent moving in and out while the other half is left waiting? And, most importantly, what about the times when the range is broken on the upside and you just can’t enter anymore, forgoing 20x returns trying to make a 20%? 

4.     Avoid Junk-

In a roaring bull market, the junk flies the highest. This is because when a persistent loss-making company ekes out a small profit, it suddenly looks incredibly cheap and a value buy. It happens a lot in high fixed cost companies such as metals, etc. where during years of depressed prices, the less efficient companies are unable to even meet their operational expenses and keep accumulating losses. When the tide turns, they suddenly make abnormal profits and thanks to accumulated losses, pay very little by way of taxation and thus appear very profitable. A good example was Hind Copper which used to languish at 30-40Rs making continuous losses five years ago and with the turning of the tide, its making exceptional profits. Now when I talk about it today, a lot of people will frown upon me as its trading at life time highs with rosy projections into the future but it does sometimes pay to read history!

5.     Patience is a Rare Virtue-

It is said that in order to make money, you should have the vision to see, courage to buy and the patience to hold. Out of the three, patience is the rarest commodity. What happens when your portfolio begins to underperform in a sideways market is that you try to question everything you have ben doing. Like for example, when you avoided Metals and see Hind Copper doubling in a year, you do look like a fool holding something which has done nothing for six months. This makes you try multiple things- buying what’s going up, over-trading to book profits early and show some performance, try to own a lot many stocks to find that one multi-bagger and so on ad so forth. 

This is where the true test of character happens. What we try to do is to constantly see how the underlying businesses are performing and if the growth and the story for which we had invested remains intact, we generally go through the pain by adding as much as possible and then holding on through the tough times. This also leads to holding a lot more quantity than originally planned but for us, over-concentration is not a risk at all. If we like to own 1000 shares of BSE, we are more than happy to own 5000 such stocks if we have money because we are not in the business of portfolio management, we are in the business of investing. As long as we are reasonably sure that the returns on this stock will be good enough to take care of the intermittent pain, it’s all the more wise to add as much as possible. For someone trying to outperform the index, that will be difficult but we are in the process of making money. It doesn’t matter to us whether we make money by only owning 3 stocks or 30 stocks as long as out first condition of not losing money is intact. 

6.    Sectoral Views:

All the rules I have outlined above are a filtering criterion. So, firstly, we would like to see a reasonable company likely to survive and make money going forward. For this, we avoid high debt (generally we will only buy zero debt), high operating costs, too much dependence on things we don’t understand- Sugar stocks are oversensitive to state politics, chemicals and metals to geo-politics, etc. Then, we will want to see whether the company fits in our overall thesis of a wealthier India. If the company is in a business of financialization of savings or selling luxury goods or a play enabling the same, we are interested. We generally tend to avoid legacy businesses such as paper, textiles, etc. because they don’t really make good return on capital and hardly pay dividends. 

For us, a clean balance sheet demonstrated by a healthy dividend payout is our insurance to fuzzy accounting. You can file false balance sheets but can’t pay dividends on phony profits!

Having filtered through all this, we generally are left with a few sectors- FMCG, IT, Cement, Financials, Consumer Durables, etc. We do prefer FMCG, the large boys such as Colgate, ITC, etc. because they have gone through this kind of slow growth situations before as well and have come out all gun’s blazing. The issue is that people are still trying to buy Asian Paints, HUL or Colgate and thus, despite time wise correction for three-four years, they are trading at 50x PE with 0-5% growth or less! Doesn’t matter how much we would love to own HUL/Asian paints, we would wait for them to go through the seven-year zero return scenario which will help us believe that at least the time correction is over, just like 2002-2008.

The IT sector is in a sense becoming a lot more commoditized where the ultra-small companies are eating out into the margins of the large ones who can’t do small deals for the needle won’t move and the large deals are hard to come by. And the dividend yields are still not so attractive that a mean reversion to price will itself make a killing.  We do not intend to own cement or chemicals as of now because there isn’t much juice left as either the sectors have consolidated like in Cement where Adani, UltraTech and Shree control the entire market or in Chemicals where the prices are so high that you can’t make out what is a good entry point. Chemicals are notorious for their extreme swings on both sides and what looked like a great entry can suddenly be down 40% in a month. 

We do not also intend to own the Defense, PSU or Heavy Electrical Shares because they don’t fit our thesis and also are incredibly expensive to begin with. Doesn’t matter how you justify their prices and how many defense orders they get, investing based on order book can be very risky for all it takes is one stroke of pen by the government to delay payment or cancel a deal. Even though I subscribe to the make in India push but buying some of these stocks at such elevated levels is very speculative, especially when the entire narrative is played out on order wins! Having worked in the government, I do realize that policies can and will change overnight and once the government stops prioritizing such contracts, the story can unravel very quickly with deep corrections. Part of the story did play out after Budget of 2024! As far as Cummins and Voltamp etc. are concerned, we remain skeptical of their valuations and order books. As an investor, you have no way to verify the order book except trusting the management and as history has shown, it can be very tricky.

7.     So, what do we do now? 

Having filtered through the entire basket to stocks and identified 100-150 stocks which we potentially would like to own, we try to understand which part of the cycle we are in. So, in our thesis, we are in the sixth year of the Bull Run which began in 2020 and this run has one massive rally on the upside left before it corrects sharply. The decadal heroes- the capital markets, EMS, Defense etc. will all make one really higher high when the skeptics will stop questioning and many of them will find their way into NIFTY 50 with a large weightage, etc. A large part of the market where we do see visibility are expensive- hotels, etc. and it makes no sense to buy them now when it can be bought 40-50% down two-three years later.

We believe that this is the time to preserve capital and avoid any fancy activity. If you can survive with whatever you own currently and can see through this phase with 5-10% down tick at max, you will most likely see 2-3x on portfolio in the next leg of the bull run which will come, sooner rather than later. 

For people with concentrated portfolios like ours, it is very likely that 90% of the returns over a three-year period will be made in less than 30 trading days and for the rest of the time, you will either lose 0.5-1% a day or will hardly make any money. Like we said, patience is the rarest virtue. 

In the end, it is essential to elongate your horizon to three- five years while making investment decisions. The greatest investors, Buffett included have also hardly able to make 20% plus CAGR on a sustainable basis for a long time and thus, as long as you are not down 20% in a year when the markets are up 20%, you will do reasonably well. 

Why did I title this post as Random Investing Thoughts? Simply because doesn’t matter how good the process is and how rigorously you select the stocks and build a portfolio, the returns will be what the market gives you. So, you have to be very humble when the returns are high and avoid despair when you are crushed because by very nature, the game of investing is of randomized outcomes! Its like the game of cricket where doesn’t matter how good a batsman you are, you can still get out on the worst delivery ever bowled. If you, however, control the process, you will, in the long run, will score 10000 runs and that’s all that matters!

Let’s be honest, the current market is brutal. The past six odd months have seen the major indices regaining some of their lost glory but the portfolios are either down 10-20% or have done nothing in this period. Market moves up for two days and you take a sigh of relief that oh, the worst is over but it falls down equally and sometimes more over the next few days and the cycle repeats, endlessly. The brutality isn’t in the fall but the constant loss of notional gains, all over again. 

This is typical of sideways markets. We witnessed a good bear market in the first quarter of the year when everything was down 30-40% and the indices also fell close to 15-20% but it also recovered large parts of the fall by June. Now when every bad news has been either relegated to the history books or has been tackled successful and a plethora of good news has flown in, it is only logical to expect a sharp meaningful recovery on the upside. GST cut, RBI rate cuts, GDP growth, everything has failed to take portfolios to fresh highs.

So now what are we seeing here? 

It’s often said that the stock market requires patience to make money. Well, this is exactly what’s wearing thin here and I am no exception. You have analysed stocks in detail, you make entry and keep adding on dips and even on the way up; the numbers are great every quarter, the businesses are growing but the price is down 25% and doesn’t move. On a monthly basis, the portfolio doesn’t do anything but goes down 2-3% and bleeds you to a slow death and doesn’t matter what you do- buy more on dips, hold on the way up or sell at modest gains or book loss, everything turns out to be wrong. So, as we end this year and prepare for a fresh start, let’s try to analyse what the market looks like to us:

 

1.          Metals– There has been a tremendous rally of late in all sorts of metals, led by Gold and Silver and thus you see the likes of Vedanta, Hind Zinc, NALCO etc making fresh highs every day. We have clearly not participated in this run for a couple of reasons. One, the idea of being able to buy them when they are beginning to go up and ride all the way is beyond our capabilities. We see no ability to forecast global demands of metals, precious or otherwise because we realise the complexity of the supply-chain. A lot of people who come on TV and talk these stocks up are doing nothing but chasing momentum, backing the up with the recent article in Financial Times authored by an analyst with one year of work experience. What I mean by this is that nobody really has a full understanding of the entire chain- geopolitics included. And those who do are also forming their opinions based on what they are reading in newspapers and will find it hard to locate Israel or Kuwait on a map. So, we accept our ignorance and do not swing for arrogance.

The second reason we do not own metals is because we believe that when the cycles turn and they eventually do, the correction is not severe but devastating. A few years ago, NALCO was available for 20 Rs, having corrected from its 2009 peak of about 230! So, it took NALCO 16 years to take out its earlier peak. This time, the peak may be even higher but I assume, based on history that once it runs out of steam, we will see it trade below sub 50 levels and that’s exactly the time to own it in bulk. If you are reading this blog for the first time, try to read my 2021 blogs when I was selling NALCO at around 90-100Rs, having bought a lot of it during Covid. Regarding Vedanta and Hind Zinc, I have my opinions on the way the promoter runs the business, bleeding the company of every penny of cash and borrowing at such insane levels in international markets that I fear for the company’s solvency. Be careful when the company’s earnings are in INR and its borrowings are in USD/ GBP as when the music stops, you are not even caught naked, you are found dead.

2.         The New Age companies– As a consumer, I am all in for the quick commerce delivery companies but the speed at which they are bleeding cash is scary. Today’s newspaper reported that Swiggy has burnt all the cash it raised through its IPO last November and is now trying to raise 10000 crores through QIP. I was flabbergasted to see a stock going up, I think it was Zomato or Swiggy when it raised some mammoth QIP. Let me illustrate it for you. If a company raises money through issuance of more shares, which is what a QIP is, the total number of shares increases. If it earlier had 1000 shares and now it has 1100 shares, the total market cap remains the same, your shares are now worth 1000/1100 of what they were before the fund raise. This is called equity dilution. And if a company is diluting equity repeatedly, it’s killing its shareholders by diluting the value of their shares and by increasing the supply of shares outstanding which normally leads to a downward spiral in prices. So, when a lot of people get excited that oh Yes Bank will be 200 Rs again, I quietly point out to the massive dilution which has happened in the past 5 years through issuance of shares to raise cash.

       Now a bank raising a QIP at least is making some profits to show. These new age ones are burning everything they have raised to chase growth and are very soon left with little cash on the books and will come back again to markets with an even bigger QIP. See what happened to Ola when the promoter sold 3-4% of the company at 80% below the lifetime highs! 

Regarding talks of these companies turning profitable, I have only facts to offer. Zomato is making some 50-100 cr PAT a quarter, that too after some funny accounting on ESOP. Assuming it to be true as it is, it’s trading at 1000x PE! Even if it makes a 1000 crore PAT in five years and is trading at 100x PE, the stock price should be 100Rs, down 66% from current 300 odd. And this my friends is a very benign scenario. And it’s only one Zomato. There are multiple such companies listed currently. 

Recently, Ramdeo Aggarwal is hyping lens kart massively. That man, on record has hyped Zomato on listing, abused it when it fell to 40Rs and again hyped it when it went up to 300. Not everybody who cite Warren Buffett are its true disciples! Make your own decisions when you invest as the share prices can go anywhere but once you taste blood in such companies, you can never think straight.

3.         Capital Market Companies– We own them happily and for one simple reason. Any structural growth sector does not fade out in 2-3 years. When IT sector opened up, it created multiple companies doing annual sales of multiple of Billions of Dollars. At this point, the largest listed Capital market company is ICICI AMC with annual sales of 4900 crore. HDFC AMC is at around 3900 cr while BSE is at 3700 cr annual revenue. Let’s put this in perspective. The annual sale of HDFC AMC is at around 500th rank of all Indian listed companies by sale while BSE would be at around 550.  There are at least 220 listed companies with sales between 5000 & 12000 cr annually and none of them include a single capital market player. The largest unlisted such company NSE does 18000 crores annually, which is less than at least 155 companies in India.

So, what I am trying to convey is the immense runway available for these companies before they are even close to a normal 10-15% sales growth phase. Even if they do 4x their annual sales, they would still be below 200 companies in India then! Also, when a sector come of age, the leader generally finds it included in NIFTY and Sensex. See, Zomato, HAL, etc. At current market cap, these companies are yet to be classified fully as large caps and need to at least double before they knock on the doors of top indices.  Also, as the decadal leaders, I am confident of at least one mind boggling rally left in these stocks which will possibly culminate around the time NSE gets listed and gets included in Sensex, which to my mind will take around 18 months odd. Timing may vary but the outcome may still be what we are hopeful for. Fingers crossed!

 

4.         INVITS– With the new SEBI guidelines, government push to make INVITS affordable, invits are a very good investments to make as a cash-plus instrument. There are a few publicly listed and many privately listed INVITS. The privately listed ones like Energy Infra, etc have huge yields up to 17-19% and a lot of my friends wanted my comments on them. So, a privately listed INVIT is traceable on a stock exchange but has a minimum ticket size of 25000 units. So, you can’t buy 10/100 or even 10000 units. Further, the liquidity is extremely low. Thus, neither can you get in nor get out when you want and thanks to the low liquidity, if there is a panic, the 100rs unit can trade at 80rs in three trades. On the other hand, the publicly listed INVITS offer extremely good liquidity plus very good yields (10-12%) which will most likely go down as more interest emerge from larger public. Recently, in PGINVIT, a foreign investor sold 10% of the total shares in one bloc and the stock hardly fell 3% at the day’s end. Imagine this with Akzo Nobel block deal when similar size deal led to a 20% price cut for the stock. Thus, liquidity is not a problem for a normal guy trying to buy 5-10l worth of shares. Also, I believe that as invits become more popular, they will yield somewhere in FD rate + 2-3% range due to excessive demand and not FD+5-7% currently. That the drop in yield will most likely be due to a rise in price from current levels and not due to drop of dividend pay-out is my bet. 

5.         Gems and Jewellery– Tanishq announced yesterday that it’s foraying in Lab Grown Diamond (LGD) space with its Beyon stores. This is a massive development for some of us who track a few stocks in this sector. If Tanishq, the king of genuine diamond jewellery is sensing a demand of LGD, then the demand and acceptability of such gems is likely to explode in Indian markets. Thus, a company supplying 66% of global certificates will only be making money hand over fist in years to come and a 1000 cr sales can easily become 4000 cr sales in 3-4 years, who knows!

6.         Is AI in a bubble– The entire media narrative is that AI is in a bubble and NASDAQ is likely to crash big time soon and then India will be a huge beneficiary of such event. In my opinion, this argument is utter nonsense. A bubble is not made when there are articles after articles and brokerage reports predicting a crash. It is made when everybody who was bearish turns a believer and there are global voices telling you to buy because the price is only going to go up and it does 2-3-5% every day. The people who made money get phenomenally rich and you feel stupid. So, in my view, the closest we are to a bubble isn’t in AI but in Gold and Silver. The amount of money chasing them is insane and everything which will be good is already in the price. One bad news and the crash will be so bad that those paying 2.15 lakh for a kilo of silver won’t touch it at 75000! 

 

As we end this year, I believe we can agree that we know so little about so many things and do not know anything about everything else. We have the humility to accept our ignorance and also the confidence that we will not relent in our pursuit of knowledge, ever. Happy New Year!

 

Stock markets are a continuous discounting machine. The proponents of the efficient market hypotheses will want us to assume that every news or event which has a material impact on the prices are continuously discounted or built in the price by either upwards or downwards movement in the stock so that at any given time, the price truly reflects the impact.

While I don’t really subscribe the hypothesis like a true believer, my years in the markets and readings of the history has made me realise that the markets discount at least six months into the future and even though it does react to the daily news flow, the bigger price movements happen with an eye on the way ahead, not in the rear view mirror.

Let’s s go back to some history on this. In 2008, the markets bottomed out in March of 2009 when the entire world was in shambles. The US was officially declared to be in recession only in June of 2009 whereas the markets had already moved ahead. Similarly, the market famously bottomed a day before India announced its Covid lockdown in March 2020 when the vaccine was nowhere in sight and the world still didn’t know what exactly happens in a lockdown. So the price impact on the way down happens much faster than we imagine and the bottom, though can never be predicted, happens sometime when you are actually sure that there is enough downside ahead.

So why am I talking about this topic today. I have two major talking points; one concerning with the larger market movement and the second with regard to the uncertainty on the F&O weekly expiries.

First, the Indian market has basically been negative for the past one year with relentless FII selling. Every good news has been ignored and every Trump, Dick and Harry has caused major drop on the downside. We first had the tariffs, then the 50% tariffs, then the H1B rules and now the pharma bomb. Overall, we have failed to meaningfully cross the previous year’s highs in multiple attempts.

Second, the uncertainty on the F&O expiry has caused severe price damage in broking and exchange stocks and they are moving down with every negative news which generally is source based and reported majorly on CNBC in the afternoon, leading to an almost synchronized fall in the stocks after 2PM on multiple days. The same news is later denied through other sources on other news channels and even Nitin Kamath of Zerodha publicly called out such rumor mongering recently.
While I totally believe that any strict implementation of F&O rules will lead to lower volumes and therefore revenues for all such players, I also am reminded of the fact that the market discounts the future and not the past. 

Remember how in 2022, the price of oil boiled upwards when Russia Ukraine conflict started but has since remained in the 60-70$ range even when two more wars in the Middle East are ongoing. The market kept moving up even when the vaccine for Covid was not in sight and the lockdown were in place for far longer period than originally intended. So this tells us that one piece of news causes price damage once and not repeatedly, even when the severity is higher.

So how does these stocks and the market keep falling repeatedly on the same news flow almost in sync? What I believe is that the retail has made a lot of money in the past five years and the bigger players, the institutions and the UHNIs have missed the bus as they were ill advised by their brokers. Thus, for the first time, a larger pie of the Indian market is owned by retail while the FII ownership is at multi-decade low. So, in my limited view, this is a clever tactic by large operators to tire out the retail into selling their stocks which still have a huge runway ahead by causing repeated price damage so that the stocks can be bought for cheap. Please see how the mega multi-baggers in Defence, Power etc went down 40-50% in a couple of weeks and were back to life highs soon enough.

Similar play is at work, in my understanding, in the broking-exchange stocks as well. The STT and Capital Gains tax is now a prime contributor to the central government budget especially with large reduction in GST and Income Taxes. If you think that the government will kill its golden goose with such ease that the entire fiscal math goes for a toss when major elections are around the corner, you may be reading too much. So even with all the noise around the weekly expiries, the F&O business isn’t going anywhere in India also because this is a stated policy of this government to make India a global financial hub. So, you can’t kill an industry which is torchbearer of the national flag. 

The point of maximum pessimism is also the point of highest return. The hated sectors today include the likes of IT, broker-exchanges and now possibly pharma. I would only point out to the time when for Rs. 100, you could buy almost 10 different Public sector banking stocks which later all went up 5-10x! similarly, the hated PSU stocks delivered multifold returns in not-so-distant times.

Let’s keep our eyes open and see what the price action is telling us and hopefully we can look back at September 2025 as another great time to buy in three years from now!

 Disclaimer:

The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.

I’ve been an investor for eight years and an entrepreneur for two months. One thing I have learnt as a student of investing is that if you really think through, living a successful life is eerily similar to having a successful investing career.

Living a successful life has a lot riding on not blowing it up through drugs, crime or a combination of debt and splurging. If you can avoid these three, you are guaranteed to avoid a lot of self-inflicting misery but that does not guarantee that you will be successful. The first rule of investing is about making money and making lots of it. Everyone who is in this market is here to make the highest rate of return possible without blowing it all up in the process. If you avoid a lot of over-activity, leverage and panic, you are bound to not lose a lot of money but that also does not mean that you will make a lot of money either.

So what am I trying to convey here? I mean that if you study the richest investors in this world, you will realise that the absolute bests in business cant make more than 25% a year for about 20 years period. There may be an exception here in Jhunjhunwala or a Jim Simons there but at the end of the day, if you can make 15% a year for 25 years, you are a king in this world. 

Also, the best way to do this is to buy great quality stocks when there is blood on the street and sit quietly for the rest of the time. Let market go through its motions and overprice and underprice your stocks for a while but you think like a true minority owner of this business and do nothing much except adding when its selling truly cheap. How do I know this work? Well, you don’t have to look further than think of Buffett and American Express, Jhunjhunwala and Titan, Nick Sleep and Amazon and you’ll have your answer.

This is all right but what do you do as a full time investor then? If you aren’t actively buying and selling or trading the news or actively researching 20 ideas for the week and how GST cut will impact the FMCG or autos and if you aren’t going underweight this or overweight that,how exactly do you call yourself an investor? If you cant tell your friends which stock will go up because Trump did this or how some sector will collapse because theres a war in Ukraine, are you even in the markets?

Well, this is what I call the over-productivity syndrome. Every serious investor knows that the best way to invest is to do nothing during the market hours on 90% of the days but they cant keep their jobs if all they did was to buy a few stocks and did nothing. So they have to invent the newsletters, stock of the month, portfolio-constructions, conference calls with companies, calculate alpha beta delta of the portfolio, how much did the portfolio beat the index over the past three days, etc. Otherwise, the world will think that they are not serious!

What we do at Caelis is what I have termed as Sustained Productive Inactivity. Its not that fancy but since I like to play with words,its something  Ive coined to justify myself reading a book during market hours. What I mean is that those who measure productivity by the amount of paperwork they did don’t really understand that productivity in any field and specially investing requires long hours of deep thinking. In order to think through a lot of noise, you need to ingest a lot of great work in the form of books and other material of which Youtube is my favorite. The more you read and learn about the world , the more you are able to remain rational in your decision making and that’s how you generate what is called the investing gut-feeling.

What I have learnt from my reading of the greats is that deep-work is required to make serious progress in any field. Your work should be so deep that you know the A and the Z and everything around it as well. This is how Elon Musk has changed the world and this is where the genius of Nvidia and Apple and the likes have come to shape our worldviews. Deep work cannot be measured by anything except the outcome and that outcome in our case is the rate of return on invested capital. If you are able to produce serious rate of returns for long periods of time, you are on the right track. Everything else is plain noise.

As a full time investor, you are thinking about your positions 24/7 and there is no way you aren’t scared when the stocks fall and aren’t elated when they rise. The most harm you can do is to try and react to the price movement during the market hours as you are either too happy or too sad. In other cases, you are just too bored of not doing anything much and end up either trading or random buy-sell stuff. Everything in this category kills your returns. I have tried my hands at day trading for about 10-12 days in my career and in the stocks which became 20-30x for me during my holding, I have lost money every single time when I was day trading them! So much for my genius!

So now what I try to do is to remain productive by reading a lot through the day and that’s basically what I do for a living. The investing returns are made when you don’t disturb the compounding process, and this is what I am learning better by being an entrepreneur. The Indian market gives enough opportunities which if you can invest well and do nothing much, you can beat every single index or fund manager possible. This is what I call productive inactivity. As you do it for long periods of time, through sustained efforts, you are able to broaden your horizon and produce returns which are beyond imagination. 

Ben Graham, Buffett’s mentor in every sense was able to produce about 20% CAGR through 1935-1956 period which also had the worst recession and a world war! Stocks do come back to their reasonable prices even in the worst of the times. This is essential to remember especially when the markets are falling. People did survive 2008 and 2020 and every time, good businesses did see a rise in their stock prices. Panic selling and exuberant buying are the two most dangerous activities in stock market, after possibly leveraged trading.

So the next time you see me posting a book on my status, you know that’s what I do for a living!

 Disclaimer:

 The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.

I have been reading the Berkshire Hathaway Annual Letters recently and cannot recommend the same to you enough. Anyone who wishes to take investing seriously, even casually on his own must put in some time to read what the maestro has to say. They are easily available in pdf online or in a book which is my preferred medium. Also, before you jump on to the letters themselves, I’d recommend you to first watch a few Youtube videos featuring Buffett and Munger so that you are familiar with their style. Then, you can read a fantastic book titled Buffett and Munger Unscripted which will help you understand why these two gentlemen were the true epitome of investing and life genius.

Why am I sharing books at the beginning of my blog? This is because of the lessons I wish to revisit and share with all of you which I have learnt from the books I mentioned. First and foremost, investing is about buying minority stakes in living businesses and is more than the stock prices which quotes everyday. Most of, myself including, get a lot happy when the prices move up and are traumatized when there is a sustained bout of selling in our chosen names. The biggest advantage of having an active stock market is its biggest drawback- you are yelled the price of your holdings non-stop for 6 hours 15 minutes, 240 days a year! And youre bound to get nervous when things aren’t what you thought to be.

Here, if you think of yourself as a minority owner in the business, your philosophy changes. You realize that businesses and their stock prices may not be the same thing. A company can easily go along on its own and keep doing what it does even though the markets sell its shares down mercilessly. If you’re the owner of that company, you don’t really sell just because the price went down.

Let’s take the example of Exchange Business. Before we begin, let me give the standard disclaimer- me or my company may have interest in what stocks we discuss here but have no intention to solicit or to give any buy or sell advice from or to any of you. We do not provide any investment advice and have no such registration. So, whatever I write here is purely from the perspective of knowledge sharing. 

There is a huge buzz regarding weekly F&O expiry and what SEBI will do with them and so on and so forth. The listed player gets a beating whenever any news gets reported from Sources just like today. People are claiming on social media that it might fall 20-30 or even 80% in worse case scenarios. On the other hand, if you purely look at its business, it has gained market share from its bigger unlisted rival and has also managed to do more business on notional turnover basis on their respective expiry days after the weekly expiries were exchanged beginning the first of this month. It, thus, has been able to achieve more than any of us or even the management envisaged a year or two ago. 

Now lets also read through the tea leaves. The unlisted player had 100% of the market share two years ago and commanded huge premium in gray market. There are large well known investors who have invested in the stock and is currently a huge hit with those dealing in unlisted markets. Since the listed stock exchange introduced its derivatives product, the bigger guy has lost almost 25% of the market share and thus, isn’t growing at the breakneck speed it used to grow especially post-Covid. Also, the regulator is yet to give it the go-ahead for a listing. Thus, there appears to me a panic in large investors/operators who are stuck with the unlisted stock because none of them caught the rally which made the listed exchange a 80-90 bagger from Covid lows. 

So there is a swarm of brokers who are enticing public to take unlisted stock shares in small lots as a sure-shot ticket to heaven. On the other hand, there is a concerted effort to get retail sell their existing stock holdings by planting news from this or that source. This has been going on since at least March 2025 when it went down 40% in three weeks! Similarly, whenever there is a small rally in the stock, there is a source based news which is followed by a large bout of selling in the stock which goes down 5-10% in a day or two. This, to my mind, is a classic operator play. The large sharks want to corner the retail into selling their holdings somehow while also unloading their unlisted stock simultaneously. 

Lets also analyse a few news items on this topic. There is a large private equity and related consortium which wants to invest thousands of crores of rupees to start equity derivatives trading on two other exchnages- the Metropolitan Stock Exchange and the NCDEX. These two exchanges have already/ undergoing large fund raising exercise and are expected to commence operations by later next year. If the regulator is really going to do away with all the F&O expiries and Indian exchnages will lose all their businesses, why do you think these private equity guys putting in thousands of crores to gain 1-2% of the Indian market that too through currently moribund exchanges?

Either these guys are dumb or they are thinking like business owners. I would like to believe even though at times PE guys do act dumb but this time they are sensing the future. The Indian capital markets are at the point of take-off as our economy gets to $4 trillion. Over the next one-two decades, our markets will go from $5 Trillion market cap to well over $25Trillion market cap and where will all this money be raised and put to work at? The Exchanges, of course. So if you think that the exchanges are going out of businesses because CNBC reported that through unverified sources, you may not be thinking through it. 

I was recently talking to a few colleagues who wanted to start a mutual fund distribution business because the commissions are huge. All the major houses- Reliance through Jio, every PMS owner wants to get into the mutual fund business where unless you are in the top league, you don’t really make meaningful amount of profits. Amidst all this, you are being told that the listed players which are already managing $100 Billion plus of AUM with 55-60% PAT margins will go out of business and you sell your shares because one random analyst on TV told you so?

Always remember something. There are a lot of people in the markets who by the very nature of their job have a vested interest in trying to make you an active player. The news channels want TRP so they tell you so much news that you are overburdened by it. The CNBC guys aren’t investors, they are news sellers. They themselves aren’t in the market investing for 20-25 years but just covering the news on a daily basis. Similarly for all the analysts etc. Please understand if any of these people really invested their money for the past 10-15-20 years, will they still be doing a job for a living? No! anyone who has been invested is already a multi-millionaire owner of these people. So the next time someone advises you, please ask yourself whether the person is already a multi-millionaire or is working a job and want you to trade actively in order to make commissions.

Being a long-term investor requires a lot of patience and counter-intuitive inactivity. Its hard looking at your portfolio down 2-3-4% a day and decide to not do anything. Its harder to stay invested when the news channels are selling down your holding predicting the doomsday scenario. Its very easy to sell when it goes down and buy when its going up because you are with the crowd. And anyone telling you that investing is not a full time job because there is a lot of free time available doesn’t really knows what he is talking about.

I will end the piece with my favorite line from the recluse Invstor- Seth Klarman when he was mentioning the 2008 Lehman crisis and why he invested when there was blood on the street- “ We did not think the world was ending, We did not see how people think that the world was ending, the world doesn’t end this easily.”

 

Disclaimer- The views expressed are entirely mine and am not a registered Investment Advisor. I or my company do not provide any buy/sell advisory and have no vested interest in writing this blog except knowledge sharing!

This has been one of the most brutal months in the market in terms of sentiments. The amount of real negative newsflow has been massive- Trump raising tariffs on the Indian exports to unprecedented 50%, incessant FII selling and falling markets. Markets have corrected yet again and there is a lot of pessimism on the street.

The yearly SIP returns have turned negative and so have India’s Nifty and Sensex returns. Every positive news has been shrugged off and the negative one lapped up by the indices. Is the Indian story finally over and we should go home and stop expecting returns?

For someone like me, there is a clear sign of contrarian buying emergence. I was smelling a lot of over-valuation in the past few months and we did speak out of the lack of opportunities with everything fairly overpriced. This correction has at least taken care of that part of the story.

Now you have to understand something which is more real. Indian GDP grew at 7.8% in Q1 of the current financial year, beating the most optimistic expectation by a wide margin on the upside. We are experiencing stable low inflation after years of sticky high inflation environment. The government is also finally waking up to push the consumption story, first through personal income tax cuts and now the GST rationalization. Yes there are challenges to exports but please understand that India is largely a domestic consumption economy with total merchandise exports constituting less than 10% of the GDP.

If our $4 Trillion GDP starts to grow at 7%, it means we will add close to $300B in a year and this increase in wealth creation will finally nullify every negativity which currently clouds our judgement. 

Most importantly, the Indian entrepreneurship culture coupled with equity craze is here to stay. People now understand that a dip is a buying opportunity and the stupid retail isn’t that stupid anymore. He also includes people who are either hiring professionals to manage on their behalf or putting in serious self-study hours to understand what it means to be an investor in the markets. The amount of money which is going to come in this market is only in its infancy and the final gush will surprise even the most optimistic amongst us.

The old adage that you bet on India in the face of all adversities stands true. The glass may only be half full but its going to finally be filled to the brim and more in years to come. I, as a student of the market truly believes this is the time to bet big on India and start buying what you truly think can have more value in the coming years.

One disadvantage of the equity markets is that everyone knows the price of its portfolio every minute. You may want to buy for the long term but a 10% crack in two days shake your conviction to the core. What was selling for 100 yesterday and looked cheap may sell for 80 tomorrow and still look expensive. Moreover, the pressure of trying to beat the markets can overwhelm anyone including the seasoned investors.

The key to investing wisely is to buy what you truly understand, something with strong tailwinds at its back and then hold on to whatever quantity you have if you can’t add. After this, remember that the first 10% on either side of the portfolio is market’s wish and can come or go in a day. Your portfolio can and will fall or rise 15-20% in a month and you must live by that. Unless you can stomach that much of volatility, you also don’t get to experience market beating returns of 30-40% a year which make you truly rich over time. 

What we are doing is to hold what we own and buy what we can. Like everyone else, we also run out of money, doesn’t matter how much we try to keep as cash as like every greedy investor, we love accumulating our stocks when the prices are low. They of course fall further and we look like fools, but we are ready to face that situation. I truly believe that with the froth largely off in most loved sectors, especially the ones we have liked before, its time to be aggressive and buy, buy and buy. 

What was the bottom in April may not be repeated but I think this is only a temporary blip in markets journey from 21800 bottom and a lot of stocks which are up 40-50% since then are only taking a breather. The cycles are short and volatility heightened. What you must do is to have deep conviction in the stories you like and own them through thick and thin because that’s how the returns are made in this market.

Stay Bullish on India, it works!

The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.

It’s been a difficult period to be in the markets, especially in India. The mid and small cap rally has faltered and the headline indices refuses to go up. Some attribute it to Trump and his tantrums while some believe the earnings hasn’t kept pace. What are we thinking?

Firstly, I have had the fortune of incorporating my new venture, Caelis Ventures Pvt. Ltd. ( https://caelisventures.in )in an attempt to institutionalise my learnings and have a serious, formal attempt to go from zero to billion. Now that Caelis is in existence, the tone of this blog will move away from discussing individual stocks to themes which we prefer in the markets. It, ofcourse, now comes with a disclaimer that anything I write here isn’t a buy or sell advice as neither I nor my company is registered to provide any such advice. The purpose of this blog is to engage in meaningful market related discussions, only.

Firstly, it is a difficult place to be. The stocks which are relatively cheap aren’t growing and the ones which are growing aren’t cheap. You can still get an ONGC or other PSU stocks at sub-10 multiples but there is an overhang of some OFS or some policy intervention which might dampen the mood. The PSU oil marketing companies are a case in point. They have been selling their products at a constant rate for almost two years now which damages the shareholder interest as you can’t decide when the profit cycle will pick up, if at all.

Second, there is still a nostalgia about buying large caps as they’re termed as cheap compared to their historical averages. Well, how can someone justify a 0-2% growth for a nestle trading at 75 x trailing earnings? How is it justified for the likes of HUL or an Asian Paints etc. So just because the stock hasn’t moved an inch for three years doesn’t make it attractive. The problem is that people talk of ITC doubling from such levels in the past or an SBI going up 3x. Well, it took ITC 8 years to take out its previous highs and in absolute terms, the stock is hardly up 25% from its 2014-15 peak. Similarly, SBI did triple from Covid lows but it took it 12 years to take out its previous peak in 2007-8. Do you really want to hold something for the pedigree or are we trying to make some money?

Third, the headline index is now biased towards banks and erstwhile performers who haven’t delivered any returns for close to  years and thus, if the index was more broad based and included other performers in mid-cap segments, this Nifty would have been something like 32000-35000 instead of languishing here at 24500 thereabouts. So we are at a situation where even though money keeps chasing large caps for supposed safety, the actual returns aren’t made in there nor do I see any meaningful upside in there. Ofcourse, if the buying resumes and we have a massive short covering, even the nifty can go up to 30000 in six months time, who knows!

Let’s discuss the capital market stocks, our all time favourites. There is a lot of buzz about SEBI barring weekly expiries, etc. Well, the amount of pessimism is growing multifold everyday. The exchange stock is down 25% from its peak which isn’t bad because it does take out a lot of froth which got built up in anticipation to bonus allotment. My take is simple. There are only two exchanges in India. If there is a market wide disruption, the more hit will be taken by the bigger exchange as it has close to 80% market share in F&O. So if the pie does shrink, there will be repercussions for both but please understand, the exchanges have existed since 1700s and will always remain such. People will eventually develop some other methods to trade as unless you ban equity trading in India, the exchanges will continue to mint money left and right. The reason why you get this exchange at 25-30% down in two months is because of news which to my mind I noise. When things get clear and the dust settles, do you still think the share price will remain same? Also, I was also getting a bit uneasy with 90-100 times PE multiple. It’s a good thing that it is now down to 70x trailing. If you simply do the math that its earnings will likely to go up 3-4 times in 5 years time, you are looking at a sub 15 times multiple going forward and even if the stock gets de-rated to 30-35x earnings, it should easily double in 4-5 years period which is not bad at all. 

Also, we do underestimate the long term impact by share price movements. The amount of money which is going to come in the Indian markets over the next 5-10 years is significantly higher than anything we have seen before. So the only thing you should do is to hold your stocks and ride the volatility. Unless you go through regular 25-40% downturns, you will never see multi baggers in your portfolio. Some stocks are not to be sold and these capital market plays- exchanges, AMCs are exactly those.

Finally, are there significant opportunities? The clear answer is no. Unless you buy junk in the name of value or join the bandwagon in some power, Pharma, maufacturing theme, there is nothing to add right now. The IT sector is beginning to look attractive as there are only two possibilities- the AI juggernaut kills Indian IT sector and we lose whatever we own or the sector finds a way to stay relevant. The massive layoffs in the largest player is a signal of a significant churn happening therein. I as a natural contrarian is getting excited and am following it closely but there isn’t anything worthwhile to discuss. 

So when there is nothing much to do, one must wait. As Charlie Munger has said and we put this up on our website too- The big money is not in buying or selling but in waiting.

The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.

I would be lying if I said that we are in a deep value market with opportunities galore. With markets having moved significantly from the lower levels of March- April, 2025; people like me are finding it increasingly difficult to put incremental cash to work in the names I like.

What kind of stocks do I really like? I prefer extremely predictable easy to understand businesses where the bottom line is capital protection. I do not want something miraculous to happen in order to make a killing. I just am not wired that way. So, I do not find it easy to invest in companies with low dividend yields, ie below 2%; rather I like companies which are under owned and are hardly covered in the mainstream media; where institutional ownership is low to negligible or where due to some reason, the FIIs have sold irrationally.

There is another thing which I have begun to detest and that is the opium of diversification. I find it stupid to buy 20 companies in order to diversify and manage risk when you do not really understand what’s going on in at least 15 of them. Some people take the extreme step of buying 40-50 companies which is worse than buying an index fund. 

Please understand that we are here to grow our capital significantly in order to grow rich and create wealth. We are not in this market to manage beta or diversify or do asset allocation etc as most of us have less than $1 M in capital. Most my friends are still below $250K capital ie they have less than Rs. 2 cr in the markets. When your capital is so low, all you should do is to allocate it in the best possible way to help it grow faster. Buffett became the legend he is because he was growing his capital of $500K at the rate of 40-60% a year before he hit the $10 M mark in late 1960s. He is on record saying if he can manage less than $50M, his investment returns will again be north of 35%.

So the myth we have been sold is that markets give 12-13% returns annually and this is what our expectations should be. Let me clarify- markets meaning large stocks like RIL, HDFC Bank etc give that much returns because they are already so large in their market capitalisation that it is difficult for them to grow faster than the gap growth on a sustainable basis. A company with 2 lakh crore market cap might find it difficult to grow at 50% because in the absolute number, the difference is 1 lakh crore. On the other hand, a 10000 crore company can go to a market cap of 20000 crore in a year because of its low revenue and profits base where even a small change on the upside can lead to multifold growth in profitability. This is the reason why so many stocks have gone up 20-50-100x since Covid lows on account of massive revenue growths on a very small base.

For people allocating less than $1M capital, liquidity is not a problem as we are only buying 500-1000 shares of a company and can get out even on a very bad day. Also, if we get two or three opportunities where the upside potential is large, its better to put in 50lakh than 5 lakh as our position will be very small compared to the market cap, even for a 1000 crore company and thus, we will get easy entry-exit opportunities. So even when we get cold-footed putting 10-20 lakh in a stock, remember that in the larger scheme of things, its peanuts and we shouldn’t be afraid of backing our best ideas with whatever we have.

If you like a good plot of land with 2 crore, you would even take a loan to buy it. You would not say, oh I will only put 20lakh in this plot and will buy 10 more such plots because I want to diversify. 

So what I am now doing with my portfolio? Along with the standard disclaimer that whatever I write here is not a recommendation and I have a lot of vested interests in my positions so please do not buy or sell on this blog’s discussion.

Currently, I find the ideas of InVits extremely attractive. They are pseudo-cash positions as the yields are north of 10% which limits the downside and provide a lot of cash and since they’re much less volatile in bad markets, can act as a cushion in times of distress. Also, when the markets do turn rocky, we can easily redeploy that money. I have never held a cash position but am increasingly holding 15-20% cash in the form of Invits. They’re much better than traditional FD or liquid funds due to the underlying yields. The added magic is quarterly payouts so that you don’t have to wait the entire year for your dividends.

It won’t be a surprise if I go up to 40-50% cash in two years as the markets make new highs. Even though Im a perma-bull type of an investor, I do appreciate the logic of markets cycles. Every one to two year, we fall 2025%; every three-four years, its 35-40% and every 8-12 year period witnesses a deep crash. The beauty of these crashes is that the old winners fall the most and are never the new leaders. HDFC Bank, Bajaj Finance, Page etc all haven’t done anything significant since April 2020 while Dixon, BSE, Solar etc are up 50-100x. So once we go through that fall in 2027-2032, god knows when, the fall will be magnificent.  

The only people who make money in such times are the ones sitting on cash before the crash. It is impossible to predict when the fall will be and in the meantime, the loss of returns on the upside at the culmination phase of a decadal bull run can be massive. Thus, the key is to have enough invested through all times while having significant capital to buy.

The only thing which will help you survive long years in the markets is recurring cash in the form of dividends. Once you have enough cash to stop worrying about making excessive returns or fall in markets, you can remain rational and deploy in times of extreme duress. It also allows you to hold on to your conviction ideas when the going gets tough or even when the returns are very high. 

The views expressed in this blog are personal opinions and are shared for educational and informational purposes only. They should not be considered as financial, investment, or legal advice. I write primarily to document my own learning and thinking process. I am not a SEBI-registered investment adviser, research analyst, or financial influencer, and no part of this blog should be seen as a recommendation to buy, sell, or hold any security. Please do your own research or consult a qualified professional before making any financial decisions.