Author Archives: ZerotoBillion

Here we are on day 46 of the US-Iran conflict with the Strait of Hormuz firmly shut under a double blockade and the US markets about to hit 6950 on S&P 500 tonight. To put this into context, the ATH for the S&P 500 is 7002. Thus, after 45 days of a 3 day war which the USA had decisively won on day 1 after completely obliterating the Iranian Navy, AirForce, Army, Air-Defense System and then losing at least 27 jets including at least one F-35 and multiple F-15s along with heavy bombing of its Aircraft Carrier which caught fire in its laundry system, the US Markets have effectively erased the war from its memory and the war has gone missing!

So, there are two parts to today’s blog, and the first one pertains to the:

1.     Art of the Deal- 

The US military might in the middle East comprised of its 13 major bases along with deployment of its Central Command HQ which also included at least one aircraft carrier. This created an environment of peace and tranquility in the Gulf and in return, the Monarchies pumped in billions of dollars into the US buying weapons by using proceeds of their oil sale which was to be denominated only in the US Dollars- thus the concept of Petrodollars. As the monarchies grew richer, they also deployed hundreds of billions into the US markets through their Sovereign Wealth Funds such as Mubadala, ADIA, Kingdom Holdings, etc. You take any US Asset Manager- Blackrock, Blackstone, Fidelity, etc. and you will see that a significant part of their money has flowed in from these Funds in the past decade or two.

Now with bombing of every major GCC country and their prized assets- Qatar gas fields, Dubai Airports, Saudi Pipeline, Bahraini refinery and so on, the bluff has been called by a third-rate power which in the words of the US President has got no navy, no Airforce, no nothing. We might not understand the significance, but it has been noticed in power corridors across the globe. If Iran can hit the aircraft carrier of the US and destroy 27 of its jets including the Unkillable F-35, if Iran can ambush the US into destroying its own jets after the fake rescue of a pilot which Trump has not talked about ever since he rescued him, does the world really think that the US is still the superpower it used to be?

Will the US be able to provide military guarantee to its NATO members against Russia when it threatens to pull out of NATO itself every second day after almost threatening to attack a NATO member over Greenland? What do you think the Germans and the French would be thinking after effectively outsourcing their defenses to this country for over 70 years since the Second World War. 

So let us see what has already happened during the 45-day period

A.    China hosted Taiwanese Opposition Party and called for reunification

B.    Australia and the UK publicly disowned the War more than once.

C.    Every NATO member has publicly disowned any joining of the war against Iran and most recently publicly denied any efforts to blockade the Strait of Hormuz

D.   The USA engaged Iran at the highest level since 1979 and still did not have a deal. Who exactly send its sitting Vice President to negotiate with a country you had defeated conclusively on day 1 of a 45-day war and still can’t have a deal which you were so benevolently offering?

E.    The Strait of Hormuz remains shut since at least March 5, 2026, which has never happened in Modern History- not even during Iran Iraq war or multiple US invasions of the Gulf.

F.    The US unsanctioned not just Russian oil but also the Iranian oil 

G.   The USA has now been literally using every means to end the war at any possible terms and has not been able to even send one of its major ships through the Strait despite having at least two Aircraft Carriers in place! The USA may claim to control Iranian airspace (which they don’t) but the Iranis certainly control the waterways!

Thus, this art of dealmaking has left Americans bruised in more ways than none and this will be remembered in more ways than one the defining moment when every minor and regional player realized that the price to stand up to the Americans is high but not impossible!

2.    The Missing War

As I write this blog, the S&P is at 6955, literally less than a percentage point away from the ATH effectively dismissing the following effects of the war, majorly:

A.    Disruption of at least 11 million barrels per day of oil after adjusting for release of Strategic Petroleum Reserves and alternate re-routing through the East-West Pipeline of Saudis.

B.    Every major airline in Asia Pacific undertaking some form of price hike and flights curtailment as price of jet fuel hovers above $220 per barrel

C.    European airports reporting potential shortage of oil beginning April end 

D.   Hundreds of petrol pumps in Australia and in France running out of at least one fuel- diesel/petrol, etc.

E.    Brent Futures price up at least 50% since prewar days, even after the fall on positive news

F.    Spot Price of Brent- the price a buyer pays to book a tanker of oil for delivery hovering around $140+

G.   Force Majure declared by Qatar Energy for contracts along with official confirmation that it had lost around a fifth of its production capacity for next 3-5 years. Please see Al-Jazeera videos on YouTube depicting the extent of damage.

H.   Every sensible head of state- Modi ji, Putin, German Chancellor, Australian PM on record cautioning that the effects of this war will be felt for long time to come.

3.    What do we see here:

If you had read my earlier pieces, I had opined that as long as the war is in place, the entire world will focus on it and the moment it goes away, the world will rejoice and the same has happened. What’s interesting is the absolute disgust with which the markets have treated this incredible phase when the realities of the physical world have worsened while the equity markets barely blinked.

The consensus view is that the moment the war ends, the world will be a happy place, and the effects of this war are so transient that it only entailed a 10% correction in Dow while the Asian markets fell around 15% and have now recovered. I do not believe that the markets are manipulated but have a clear-eyed view that the physical realities of this war are yet to be felt for the following reasons:

A.    The world has not yet run out of oil which means that the shortage is felt in some parts in some forms as the floating oil along with inventory has kept the world humming even when the prices shot up. Countries have rushed in to cushion the consumers from those prices while deploying state policy apparatus to bring in supplies in some form

B.    The futures price of Brent has not reflected the spot price, and the gap is close to $30-45 per barrel. The dinner has been served but the bill is yet to arrive

C.    American state will try to do whatever it takes to keep the brent prices down so that when they declare victory for the millionth time, the price of oil should reflect that. 

D.   Once the war is over and Trump moves on to other issues, we will be staring at the physical realities of physical oil running out while the oil in transit is stuck. I detailed this void in my previous blog so you can please refer.

E.    This is not a co-incidence that every airline which has curtailed its flights have done this for those flights which take off beyond May first week. It is also not a co-incidence that Japan plans to release 20 days’ worth of its oil reserves in May, and it is also not a co-incidence that every nation is calling on to its citizens to brace for tougher times.

F.    If the end of the war was an end to all troubles, which airline will announce their shutdowns after the announcement of the ceasefire!

4.    To sum up:

Investing is simple but not easy. Everybody claims to have foreseen the 2008 crisis or the 2000 dot com bubble and so on but not many people had the courage to sit out when the music got the loudest towards the end. We are at a junction where every bear has been thrown out of the door and the price action is so bullish that the world is willing to discount everything as “transient.”

The world has seen this movie before. It was called Nifty 50 in the 1970s; the stocks had reached a permanent high plateau in 1929; internet will change the world in 2000, and the American housing prices will never fall in 2008. 

Once the era ended, the nifty 50 stock fell 70-90% and S&P didn’t recover to its 1973 price for 10 years; Dow made a high of 300ish in 1929 and was in 40s in1932 and did not cross it until 1950s; Nasdaq which peaked at 5132 in March 2000 and it took just over 15 years to reclaim that level in 2025. 

On the Indian side, the great quality companies of 2019- HUL, Asian & Berger paints, Nestle, Bajaj twins, HDFC bank and HDFC Ltd and so on have all given negative returns over the past 6 years and inflation adjusted prices are zero for close to 10 years.

The same mania is being seen in the midcap universe, and we know the world always rhymes. 

The higher and longer this rally lasts, the worse will be the fall and what I writing is only a reasonable reading of the current market behavior. Everyone who is bullish now will feel fantastic until the landmines- private credit quality in the US, AI capex narrative and the valuations, rate cut hopes in the US for a soft landing amid rising inflation do their work as the world stare at a supply void of oil and gas. I was half bearish until February, very bearish in March and now am equally, if not bearish in April because we are not here to make money on a daily or weekly basis but to make outsized returns when the world offers us an opportunity on a platter. 

The world will soon present the greatest buying opportunity of this decade, but the question is, who will hold cash at that point!

I believe some of you might have seen a reel wherein a group of tourists are having breakfast in scenic mountains, and some snow begins to move. For the first few seconds, either the tourists ignored it nonchalantly or tried to take photographs of a memorable moment, only to realise a few moments later that an avalanche had hit them and theres no exit. The only chance to save themselves was a few seconds earlier. Something similar is happening in our markets and though I am not a doomsday prophet, I believe that the markets globally are still busy taking pictures of a scenic moment.

If you have read my earlier blogs, I had talked about three different bears trying to destabilize the markets globally. The first being the absurd valuations AI related stocks have attained which took us to the 1999-2000 dot com crisis. The second was the private credit flowing into the AI related play which was showing stress on the Private Equity books leading to a subprime mortgage type situation, reminiscent of the 2008 Global Financial Crisis. The third was the price of oil and supply shock of gas which had hit us due to the US-Iran war which took us to the 1973 crisis. (https://zerotomillion.business.blog/2026/01/15/sell-regret-and-get-rich/ ; https://zerotomillion.business.blog/2026/01/26/sell-regret-and-get-rich-episode-2/ ; https://zerotomillion.business.blog/2026/02/24/winter-is-coming/ ; https://zerotomillion.business.blog/2026/03/07/oil-on-the-boil/ )

I also wrote that for the very first time in the history of markets, all three independent variables are working in collusion and even if the war ends in a huff, the damage it would do would be sufficient to help the other two existing bears wreak havoc globally. That was almost three weeks ago. So what are we seeing now!

1.     The clock is Ticking- As we speak, the world is waking up to the geography of oil and gas supply chains. The gas crisis is real and is felt across East Asia with petrol pumps running dry in Australia to an energy emergence in Philippines to the Koreans asking people to shower a bit faster and Japan releasing the massive Strategic Petroleum reserves, etc. India is juggling an endless treadmill of diplomacy to escort gas tankers through the Strait of Hormuz which is giving a breathing space for one additional day at a time but the clock is ticking. 

With the destruction of oil infrastructure in the Gulf and closure of the Strait, there are a number of ships stranded in the gulf, waiting to cross the strait, as and when an opportunity arrives.

A rough calculation told us that every tanker which had left the Strait before the closure on March 5, 2026 has already reached its destination in Asia as per journey time of 3-4 days to India to upto 20-25 days to Japan. Now if the Strait opens today, it will take around 5-7 days for all existing vessels to cross it and will then take additional journey time depending on the destination. 

If we assume that in an ideal situation, the moment Strait opens up fully, every ship moves out immediately, the production resumes immediately and other ships begin their journey towards the gulf for future loading, it will take at least one week for the fresh ships to reach various ports in the GCC and loading of oil cargo from onshore storage facilities. They will then take their respective journey times to reach their destinations across Asia and other parts of the world.

So if you look at the timeline, there would be a period when existing ships would have reached their destination and fresh ships are on their way but no ship is arriving anywhere due to the lag in journey time. This is a void nothing can fill in global supply chain. This may be a few days to any number of days the war continues.

Now once the war ends and everything opens, the fresh ships will first load existing oil stored onshore at various ports which amounts to roughly 20 days to supply. Unless the storage capacity frees up, no country can resume their production for lack of storage and thus, for a few more day, a second void will hit the global supply chain which will cause a period where no ship containing oil and gas is arriving at any port anywhere in the world. That is the second void the world will have to witness.

Here is part of our analysis which I worked out with Claude:

The Eight Variables

Symbol

Value

Name

Meaning

Day 0

March 5, 20206

Clock start

The last significant convoy of loaded tankers cleared the Strait of Hormuz. From this point, no new cargo enters the global ocean pipeline from the Gulf.

T₀

Variable

Strait reopening date

The day on which the Strait formally reopens to commercial shipping. Three scenarios are tested: March 25, April 1, and April 7. Every downstream date is calculated from T₀.

X

4 days

Backlog clearance

Approximately 330 tankers were immobilised inside the Gulf and a further 400 were anchored in the Gulf of Oman. Under ideal conditions, 4 days are needed to sequence them all out of the Strait safely.

Y

1.5 days

New ships enter and berth

Empty tankers waiting near Hormuz navigate in and berth at Gulf loading terminals. Time from gate-open to first new ship berthed and ready to load.

Zₗ

3.5 days

Load one ship

Time to fill a single Very Large Crude Carrier (~2 million barrels) from existing coastal storage tanks. Multiple berths operate in parallel, so this is the per-berth loading time.

C

20 days

Coastal storage duration

Gulf coastal terminals held 60–90 million barrels of pre-filled oil at the time of closure. At normal export rates this inventory sustains approximately 20 days of continuous loading before meaningful depletion.

K

6 days

Upstream production restart

After coastal tanks drain, oil wells, pipelines, and gathering systems require approximately 6 days to safely restart and pump fresh crude to the coast. During this window, tanks cannot be refilled fast enough to load ships.

J

4–17 days

Journey time (port-specific)

Days for a loaded tanker to sail from the Strait to its destination at 14 knots: Mumbai 4d • Vizag 6d • Singapore 8d • Shanghai 13d • Seoul 15d • Tokyo 17d. J shifts calendar dates but does not change phase durations.

 

The Seven Phases of the Supply Shock

From Day 0 onwards, every destination port passes through the same seven phases in the same sequence. 

Phase

Name

Duration

What is happening

1

Pre-war ships arrive

Day 0 → Day J

The tankers that loaded in the Gulf before March 5 are already at sea and still arriving normally. This in-transit buffer lasts exactly J days — 4 days for Mumbai, 17 days for Tokyo. Once the last of these ships docks, supply at that port drops to zero.

2

Main void

Day J → T₀+J

Complete blackout. The pre-war ships have finished arriving. The backlogged ships have not yet cleared the Strait. Ports receive nothing. Nations draw on strategic petroleum reserves. This phase grows longer by exactly one day for every day the Strait stays closed.

3

Stranded ships arrive

T₀+J to T₀+X+J  (4 days)

The roughly 730 tankers trapped inside the Gulf and in the Gulf of Oman finally transit the Strait and deliver over 4 days. This is not fresh supply — it is oil that was already loaded and stuck in traffic. The jam clears; the factory has not yet reopened.

4

5-day mini-void

T₀+X+J  (5 days)

After the last stranded ship departs the Gulf (T₀+4 days), new empty tankers need 1.5 days to enter and berth, then 3.5 days to load from coastal storage. For exactly 5 days nothing departs the Gulf. This hits every destination 5 days after the stranded ships finish delivering.

5

Coastal storage supply

T₀+9+J  (20 days)

Gulf terminal storage tanks, filled to capacity before the war, supply a continuous stream of ships for approximately 20 days. This is genuine, meaningful relief. Oil flows. But these tanks are finite. Once depleted, they trigger the most severe phase of the crisis.

6

MAX DISTRESS — 2nd void

T₀+29+J  (6 days)

Coastal tanks run dry. Upstream oil wells are restarting but cannot yet deliver crude to the coast fast enough to fill ships. For exactly 6 days absolutely nothing departs the Gulf. This is the worst supply void of the entire crisis and cannot be shortened by any diplomatic or logistical intervention.

7

Full restoration

T₀+35+J onwards

The first freshly produced oil completes its full journey from wellhead to destination port. Normal supply resumes. This is the earliest possible date for genuine, self-sustaining normalisation under ideal conditions.

 

Why two voids and not one:  The gap between Phase 4 and Phase 6 exists because Gulf coastal storage tanks held 60–90 million barrels of pre-filled oil. When the Strait reopens, new ships immediately start loading from this existing inventory — providing 20 days of genuine supply. But once those tanks drain, ships have nothing to load until upstream oil fields have had 6 days to restart and refill the coast. That restart lag is Phase 6: unavoidable and uncompressible.

 

2.    Inflation is here to stay:

The global markets are still pricing a soft landing and a transient inflation which means that the Fed will cut rates in 2026 and there will be a soft landing without major disruption. The price of oil and supply shock has thrown that out of the window two weeks back. Every major global voice, from Modi ji to Putin to energy experts across all asset classes agree that the supply shock is much bigger than the 1973 Arab oil embargo which brought the US to its knees through a decade long stagflation- high inflation and low to negative growth and the US markets fell 48% from their peak in 1973 and the returns over the next 10 years were so bad that the media was writing about the “Death of Equities” in 1979! (https://ritholtz.com/1979/08/the-death-of-equities/)

Funnily, the markets are hardly down 10% in the US and even in India, they are down less than 15% down. Now here is something I want you to ask Claude/ Gemini when you read this article-  Consider everything which has already happened in the global markets beginning January 1, 2026 beginning with Venezuela, Silver and Gold attaining massive heights before collapsing like a pack of cards and swinging like small cap stocks, bitcoin down 50% from peak, Leading PE players gating redemptions across their private credit funds and crisis building therein, US-Iran war now on day 30^th with multiple GCC countries nursing their wounds across oil and gas infrastructure, gas crisis a reality across East Asian countries, brent oil price above $110 despite multiple Trump TACO moments. Can you explain to me how much the markets should be down in any normal year only to price in what has already occurred by considering how markets have behaved over the past 100 years under similar situations. 

The reason alone is sufficient to scare any reasonable person to not listen to the idiots on TV who are claiming a bottom with every 500 points rally on Nifty.

3.    The baseline Analysis

I have been maintaining that in a normal scenario, a 40% drawdown on Nifty is a highly like scenario. With what has happened over the past two weeks, I will be glad if the markets only fall 40% and no more because historically, in any severe correction barring Covid, the US markets fall atleast 48% from All Time Highs and Indian markets invariably fall more. So if by the end of this year, we have Nifty at 16000 and doesn’t fall further, Gods will have been mighty pleased with India. 

That aside, the current bear market which has technically not even started ( a bear market starts with 20% drop from ATH which is around 21000) is not going to be like Covid when everything fell quickly and we recovered and made a fresh high in 2020 itself. 

Most investors, including myself have never seen a market when the indices fall 20%, recover 10% and people call bottom, it falls again and people lose money only for it to recover and new set of people calling bottom before all hell breaks lose and everyone loses their shirts. Be prepared for a very painful 2026 and even considering the speed at which markets move in today’s world, a six-eight month downward journey to sub 16K Nifty is underway.

4.    What gets hurt the most:

The PM of the country stood before the Parliament twice in two days and invoked Covid times. The next day, Government sacrificed excise duty on fuel to save consumers which basically mean that the government fiscal side is under severe strain and the capital expenditure will shrink. Add to that a falling Rupee making imports dearer bringing inflation and declining Forex Reserves due to the pressure on the RBI to cushion the fall. The macro picture has turned outright ugly.

In such a scenario, the market darlings- power, PLI, infrastructure players which depended largely on government orders will suffer the most. Please go back and see the 2008 Nifty names such as JP Associates, Rcom, RInfra, Suzlon which all went to bankruptcy once the tide turned.

Also, companies with leveraged balance sheets/ low margin will suffer once the cost of capital rises and the new age players with funny accounting will all be caught naked. You can not run a loss making business in a high interest rate scenario.

Once the Global Central Banks begin to raise interest rates almost in a panic struck environment, the private credit stress will move from Private Equity books to Wall Street and everyone from Jamie Dimon to Larry Fink has seen how this unfolded in 2008 and I am sure the full blown crisis will then unfold. 

5.    If I can give you a pictorial analogy, please go and watch The Big Short. Go to the moment when the Shorts are calling the Banks as to why their prices aren’t moving favorably and then they realise that unless the Banks build a substantial short position of their own, it won’t budge. And once that happens, to which we are very close, its Armageddon. And if you want to ask me what to do, go watch that famous clip from the movie Margin Call when the boss says- sell it all before the world knows that we are selling.  

Six years ago, on Sunday, March 8, 2020, Saudi Arab decided that it has had enough with its OPEC partners and declared that it will flood the world with oil. Brent crude which was already under pressure at around $45 a barrel opened at around $36 on Monday, March 9, 2020 and in a week, the WTI crude traded negative which means, people were being paid to buy oil!

Cut to today. March 7, 2026, same weekend. On Friday, we saw oil finally catching up with the destruction in the middle east and raced towards the $95 a barrel, closing just around 93. The world is bracing for a complete shutdown of Strait of Hormuz and Qatar and Kuwait have either cut off or about to cut off their entire oil and gas production. Trump tried to talk oil down by unleashing everything- unsanctioning Russian oil, shorting futures by the US treasury, offering US naval escorts through the Strait but oil fell marginally to 80 on Thursday before racing towards the 90s. We don’t know what happens on Monday, March 9, 2026!

If you look at the above closely, oil is showing an absolute mirror image of its behaviour in the past market crash. It went down from 45 to 0 in no time because the world was gutted with supply and the buyers were loaded with inventory and couldn’t find ships or tankers to keep any more oil and thus, fall in prices did nothing for incremental demand. Today, the world production is dwindling, people are desperate to buy oil but the physical supply is choked so even if the price is rising, there is no incremental supply and if my hunch is right, we might just see oil above $130-140 barrel the next week or so, as Qatari Energy minister predicted.  History is not simply repeating itself, it is playing itself in the mirror! 45 to 0, 90 to 135- same to same, in opposite direction!

2. So where we are in the cycle:

I had, in my January post- Sell, Regret and Get Rich, mused that the world was getting into a dangerous place. It was nothing but my muscle memory which made me get to a 70% cash position by the 20-25^th of the Janaury, 2026, like I mentioned in my previous post as well. I then spent about a month and a half agonizing as to how my body didn’t feel right while the world kept moving up and then, in late February, I realized that the current cycle is a cocktail of 2000 dot com valuations colliding with the sub-prime meltdown of 2008. I was sure that the two are sufficient in itself to take this market down to 30-40% below the ATH and then, Trump happened!

Imagine there was a party of two bears- the AI valuation along with the private credit meltdown which has ignited a chain reaction in the basement of the building. These two bears are silent and are trying hard to suppress any noise before the one final blow-up which takes everyone down suddenly. These two ensured that even though there were blowups and meltdowns in multiple assets- Bitcoin, Silver, individual sectors such as Software, etc., the overall index was unaffected which trapped people in believing that everything is hunky-dory and they can buy the dip. 

Now thanks to Iran, we are now joined by the third bear who is loud, boorish and violent like no other. This is the imagery of Dubai being bombed, Strait of Hormuz being blocked, Airports being hit, empty hotels, people dying, people lining up to fill their tanks, etc. Now funnily, oil did behave very well on the first four days of the last week which made everyone believe what Trump was saying but on Friday, when the markets could not ignore the physical reality of 20-30% of global production going off, it shot up to 90s. This bear has now taken center stage and is doing all it could to bring the house down.

Here is the line which matters- the first two bears are inter-related and are silently working while the third bear destroy everything. Once the war is over and there is a rally, it doesn’t stop the first two bears from continuing what they were already doing in basement! The third has only accelerated the pace downwards and there is a real possibility that what we thought the first two could achieve in 9-12 months, the trio will take half of that!

3. The correlation on the way down is always 1:

Kospi went down 8 and 12% on Tuesday and Wednesday before recovering 11% on Thursday. European markets fell well over 3% on single day in the week while Nikkei also went up and down 3-5% on two-three days. Add to this the behavior of Silver, Gold, Bitcoin, multiple sectors such as software, private equity, metals, etc and they are all showing violent swings on the slightest of the news, both on the way up and down. This, my friends, is the truest sign of a crisis. In no normal circumstances, so many asset classes and leading indices behave like penny stocks and most importantly, whenever such behavior is observed in some asset classes, the asset classes which are still holding up and showing signs of strength almost always follow their peers on the way down. The correlation always turn out to be 1 on the way down.

So Nifty which is hardly down 7-8% will join the party very soon as well as the US markets on which our basis stands. With the amount of news flow coming out of the private equity side, it won’t be surprising if the Lehman of this crisis is some legendary Private Equity firm. Who is going to be AIG is to be seen with a lot of curiosity.

4. What do we see going forward:

I believe that in the next one week, possibly by early to mid of the week, the world will wake up to the reality that this war is now beyond the control of US administration. Unless they nuke Iran, there won’t be a surrender and if they do, it’s anyways end of the world for markets, something which Trump so dearly loves. As Iran keeps bombing its gulf neighbors, the oil supply gets choked and there is one point I want to make strongly- if countries can buy oil at 120 or 130 and still meet their demand, it only results in higher inflation and budget deficits which most countries can still tolerate. If the price rises and still you can’t buy as much as you want, it results in domestic chaos and rising inflation and weakening currency and everything else which is bad, almost like Sri Lanka a few years ago, something no country can tolerate!

As far as the markets are concerned, if I had a hunch in January that the markets will fall 40%, I now take this as a certainty that we will see markets fall at least 40% this year. We sat on cash and looked absolute foolish in February but when God’s on your side, it even causes a war for your position. We are incredibly blessed by Mahakaal that we could sell as much as we wanted to while the world partied and like we write on our website, when there is blood on the streets, we will buy with all our might because the World Doesn’t End That Easily!

It took me a month to write this blog because I was grappling with a complex puzzle- Where we are in the current market cycle and Which previous cycle does this resembles most with. 

For those of you who would like to understand the significance of the question and my quest for its answer, here is a primer; Equity markets move in cycles. There are larger cycles which last multiple years; it generally originates from the bottom of the previous cycle and lasts until it meets its end over several years. For example, in the global markets, the US markets had a long bull run from early 1980s until the dot-com crash in 2000-02 which remains one of the longest uninterrupted bull runs since then. Then it was the 2003-08 global bull run in which Indian market went from Sensex 4000 to Sensex 21000 before the Global Financial Crisis burnt it down alongside the US housing bubble fuelled by subprime lending. 

To make serious money in investing, history is your most important teacher. Since the human sins of greed, fear, hubris etc remain the same, all markets eventually follow a larger pattern as indicated above. The current cycle traces its origin from the dark days of Covid in April 2020 and since then, it was marked by global liquidity infusion at unprecedented scale, the AI story, the small cap mega run in India fuelled by domestic money etc. So if you have read my previous blogs posted in January 2026, you would have understood that I had feared of some correction in this market and I had been grappling with that puzzle ever since. Here is my assessment-

A. The cycle we are in has only one similarity with 99-00 which is that the absolute visible leader is tech/AI. Where it differs is that back then, the rally was entirely equity and the junk which went up did not have much debt on its balance sheet and it collapsed on its own due to gluttony and not indebtedness; the real issue today is that the market has already moved past the rotation from Nasdaq to Dow over the past one year and the alt assets- commodities, BTC all are not making fresh highs so the last refuge of the bull is slowly fading. Also, the real parallel of this market is the very genesis of this bull market- Mag 7 have pristine balance sheets and they can fund forever. 

However, the PE funds have all taken up the role of subprime lenders and the investment banks who are now exposed to negative cash flows of their borrowers- much like NINJA loans to strippers in Vegas. Once the contagion picks up pace, the direct lenders take heat alongside their borrowers; if it gathers steam, the borrowers of the PE funds will face the music and then the bond holders of Mag 7 might also not be in a position to buy debt because nobody opens shop to buy $100 B of Mag 7 debt and nothing alone because that’s the Manhattan of 2007- pristine. But any lender which loans for Manhattan also gets the lowest return and thus needs to invest in Vegas and Florida to generate return. 

 

B. The above assessment indicates that the time we are in resembles very much like late 2007 to early 2008 when the Dow had already hit its peak in October 2007 while Sensex went on to make fresh highs in January 2008. So if you map that today- Bitcoin made its peak in October and is down 40% plus; Silver too has corrected, Indian markets have made a fresh  all-time high in January 2026 and are now breathing heavy and so have the US markets. A closed ended fund of Blue Owl capital recently halted redemptions, much like BNP Paribas in August 2007 while the AI bubble is now being unraveled one sector at a time by AI itself- Anthropic killing software, brokerage etc. Thus, the Indian IT stocks which were already down 30% from their highs are now falling like penny stocks and the IT index is down 20% in a month- something which has NEVER happened in history. TCS is falling more in a day than it did during Covid while the global PE Giants- KKR, Blackstone, Apollo, Carlyle are all down 40% from their all-time highs.

C. Thus, the equity valuations of dot-com bubble- concentration in few names, excessive narrative about AI is now meeting with the credit crisis of 2007-08 and the market now moves at 5-10x the speed of even 2020. Thus, what could take 18 months back then can happen in six months or less with sharper corrections, ferocious short-covering sucking everybody in before resuming the downward spiral. It’s not a possibility but almost a certainty that we are going to witness a carnage as severe as last seen in 2008 but on a bigger canvas fuelled by lightening velocity of algo-driven trading. How much the markets will fall, how long will it take remains to be seen but I have zero doubts that the Winter is not coming but has already started.

D. The great Indian decoupling myth-

1. The SIP story: Every time there is a rally in Indian markets, we are told that India is different, and the market has decoupled from global markets, and we will be saved by the SIP flows. Let’s stay here for a minute. These people believe that the people investing through SIPs are not worried about negative returns over long periods of time. This is like saying 9 crore Indian investors will keep pumping money irrespective of the rate of return in the markets without natural greed and anxiety! The SIP was sold to millions of households as an instrument to make 12-15% CAGR over multiple years and once the 3-year return turns to low single digits, any reasonable person will first rush to stop his next monthly debit. SIP was an instrument to bring household savings into markets and not to create an artificial floor to allow FII and Promoters exit at stupid valuations. 

Just look at the Mutual Fund ads from early 2020s to now. First it was SIP as a medium to dream home, dream car, 15% at least over long term etc. Now it is- please continue your SIPs. The veterans know what’s happening. The same pattern was played with ULIPs in 2006-08 when millions of Indian households were sold assured return type plan which made the entire generation wary of any insurance product. I don’t know if the SIP will become such a word but once the Nifty falls below 21000, the three-year return will be zero and then who knows!

2. In every major global correction, the Indian markets fall with a lag and fall more on the way down. In 2008, we were first told that Indian banks have zero global exposure, our domestic consumption has no relation to US subprime lending etc. but when the tide went out, US markets fell 50% and Sensex fell from 21000 to 8000! Nifty went down from 6500 to 2500. During early days of Covid, we were told Covid is only for cold weather, Indians drink turmeric and ginger so it won’t matter etc. but while the S&P 500 fell 34%, Nifty fell 40%. The Indian markets are decoupled ONLY on the way up- we may not rally while the world rallies but on the way down, the correlation is not just 1 but greater than 1! If the US market goes down 20-30%, rest assured that the Indian markets will fall 25-35% at least.

3. If the decoupling was even remotely true, ask yourself this question- why did Indian IT stocks fell like a pack of cards when they had already time and price corrected over the past three years. Now replace IT with Indian markets and read that again- the so-called market experts are saying that since we have already corrected over the past 18 months, we will not fall much. Say that to people who bought TCS at 3000 after the India-US trade deal only to see it fall to 2550 today. Only till such time when the Indian markets do not take cues from the US markets, the theory of decoupling has some semblance. Once the mother ship catches fire, our markets will have no place to hide

E. To Conclude, I believe that we will witness once in a generation market correction over the next 12 months. The top has most likely been made sometime earlier but nobody knows how markets will behave. One thing is for certain, the winter has begun its onset and is going to be brutal and frosty. Our cash position which looked foolish post the US trade deal announcement is beginning to look decent and if Lord Mahakaal blesses us, we will remain active buyers when the street is soaked in blood and for those of us who are prepared and are willing to remain sober, this will be the generational buying opportunity!

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,Govind Parekh 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.