Author Archives: ZerotoBillion

In my earlier posts, I have dealt with the advantages an Individual Investor has vis a vis a professional fund manager. However, there are some challenges one face while managing a growing portfolio on his own.

Most of my friends who invest begin by putting one to five lakhs on an ad hoc basis. Let’s say they realise they have some spare cash and want to buy Tata Motors because it’s down a bit too much. So they put in money and buy whatever number of shares they can, generally to the nearest round figure. Next month, they buy another stock for similar reason.in this manner, over a period of time, they end up owning six to ten stocks with no defined strategy in place except- अच्छा लगा, ले लिया। For a very small amount of money, there is no value in digging up portfolio weights for each stock or worrying about the case when IOC is 40% of your holdings.

However, once you get the discipline to put in more money to work regularly, you’re at times not sure what to buy and how much to buy. Hence, I am sharing my own approach to solve this puzzle.

Let’s say today your portfolio has close to 10 stocks and is worth Rs. 10 lakh. If you divide market value of each stock to the overall portfolio size, you’ll get weightage of each stock in the portfolio. This will help you to know if you’re owning too much or too little of a stock to your liking. My thumb rule is having less than 5% of my portfolio in a stock is meaningless. I don’t want to research a stock, dig up financial statements, spend time analysing it’s prospects and make it 1% of my portfolio because even if it doubles, it won’t make much difference to the overall portfolio. Like I said earlier, the biggest mistake is committed after doing the hard work and buying Ten shares of Reliance.

If you believe that the stock is worth a lot more and it will grow both in price and in value, Don’t buy ten shares, buy ten thousand shares if you can afford to. Once you’ve zeroed in on a stock, owning a thousand shares is much better than owning hundred shares. Unless you put in your money with conviction, you won’t make big money. The stock may move from 100 to 500 in one year and we all made 400%. However, someone owning 100 shares will only make 40000 while the other guy who owned 1000 shares will make 4,00,000/-. This is the difference between being a small Investor today and remaining a small Investor forever.

Coming back to our portfolio sizing. Once you’ve identified the stock weights for your current portfolio, you now want to put additional money to work. In this case, project a likely size of your portfolio two years from now. You may say, by the end of 2022, I’d be putting in another 15 lakhs in stocks. So your likely size in two years will be 25 lakh from 10 lakh currently. Now ask yourself a question. Are you happy with the stocks which you own now in the same weightage as today or do you want to change something about it. Let’s say you own 2lakhs worth of ITC. It’s 20% of your portfolio today but if you don’t add anymore, it will be 8% two years later. So if you think you want ITC to be close to 15% of your future portfolio, you should buy 1.75 lakh worth of ITC more.

In the same vein, there might be a stock worth 30/40/50k in your portfolio today. You bought this without any thought and it’s languishing in your demat eversince. Currently, it’s 3-5% of your portfolio but if you don’t want to add to it, it will be 1-2% of your future portfolio. In that case, all it’s doing is to block your capital as we have already seen owning so little won’t move the needle much. In that case, it’s best to sell it today and use that money to buy more of what you’d want to keep two years from now. You might say, of its down 10%, how will I sell! My answer to that is, by not selling today, you’re wasting the remaining 90% capital which you can grow over time in some better stock. Also, booking a loss will help you in two ways. One, you’ll never buy just like that. You’ll be more careful in what and how much you’re buying. Two, you can square off capital loss with future capital gains and avoid paying tax.

So, next time you’ve some free time, do this exercise for an hour or two. You’ll learn a lot about the way your money is being put to work. Also, when the next time Nifty is down 500 points and you’ve money to buy, you’d know exactly what and how much to buy. Remember, you’re the fund manager of your own money!

The past few days have been terrific to be in the markets. Indices are hitting new highs every day, broader stocks have begun to perform and portfolios are looking good. However, I’m currently facing a problem which I guess would be faced by some, if not all of you. It is, how do we deploy additional money to work when the prices have moved up significantly from what they were, not just in March-April of 2021 but even in January 2021 when the last time market had peaked.

Last bear market was party time for investors. I remember literally running around with joy as the prices fell every day and you could buy the best stocks at throwaway prices. Reliance was 900, SBI 150 and ONGC 50. Anyone who was courageous enough to invest when the markets crashed, made a significant amount of money in close to one year or less. Someone who was prepared with research on stocks to buy, had cash to average down as much as possible and to hold a portfolio which was down 40% found it exciting to be alive in those days.

The tables have turned now. Some of the stocks have hit fresh lifetime highs and are going North every week. Let’s say a broking company. If you thought it was available at 10 times earnings and was a steal, it moved to 25 times earnings in a month and you’re not sure if you want to buy more of it. This is the classic Bull Market dilemma: Do you want to invest more and find out it was the top and you’ve no money left when the markets turned? Or, do you want to hold some cash for the elusive correction and see the markets double from here and miss on the biggest bull market in history( if it turns out).

People who have seen a bad bear market always face this dilemma. Listen to veterans who said they were afraid consistently to buy stocks in 2004-05 as the prices had doubled in two years and didn’t know if it was the top. Same goes with US markets as the bull run which began in 1982 lasted until the dot com crash in 2000-01. This was the longest bull run in American history, only intercepted by Black Monday crash of 1987. Our Sensex went 5x in 4 years between 2003-07. So the dilemma is not without parallels. We can only be wise in the hindsight. As long as the cycle lasts, you can only do as much. This is why investing is simple, not easy.

People say bear markets are the time to relook at the portfolio, get out of junk,do more research and so on. This sounds anachronistic to me. I believe that a bull market is the time to be concious. You mustn’t be fooled by rising prices as being correct or being an expert stock picker. You should always remember that a twenty percent crash can happen any time. So you must not buy junk, at any point, at whatever price. This will help you sleep peacefully when the portfolio is down 30% because you know that the underlying businesses are sound and making money.

As prices move up, you are forever torn between the temptation to buy more or holding cash. I personally have found it against my nature to hold any cash with me. There are big guys like Seth Klarman who held close to 40% cash( for his portfolio, it was almost $10billion) for over seven years before finally deploying in 2020 Covid-19 crash. Why I don’t keep cash is because timing the market is a bit speculative activity. Being proven right has 50% chances. If I can identify companies which will grow bigger and better over the next 5-7-10 years, I should be willing to see their prices go all over the place for three-six months because the underlying business will work out well.

The fear of not having cash is also real. If the markets go down 20%, you’ll be able to average down even more and will have more quantity of the stocks you own. However, in case you can’t do that, all that you’ll miss is a transient opportunity of owning more at less. This is life. Nobody has limitless supply of money to keep buying whatever you want when the prices fall. You are not the Fed, period.

The saving grace is my belief that this is a long bull market which is yet to even mature as more and more prominent voices remain sceptic. As an Individual Investor, you’re free to underperform the market and hold a minus 30% portfolio for two years without losing your job, as long as you have conviction in your holdings. The joy of making money in the long run is always the ultimate objective. In the short term, the tug of war continues between Fear of Missing Out vs Is this the Peak!

I’m one amongst those who watch every possible interview of Rakesh Jhunjhunwala with much excitement. Today morning, I viewed his interview by Prabhu Chawla on YouTube over breakfast and couldn’t but resist myself into looking at awe how anyone who’s bullish on India is looked at with disdain and how most prominent Indians are so extremely pessimistic on our growth prospects.

Today’s Business Standard features a piece by TN Ninan( the only editorial worth a read) wondering if India is on verge of becoming another under performing Latin America. This is in addition with multiple reports quoting prominent Indians reportedly depressed as how the market is making life highs when there is death and tragedy all around us. Recently, Nithin Kamath of Zerodha also wrote a blog saying how he was sad to see the disconnect between real economy and markets. Ironically, the same guy tweeted yesterday that his company will do a buyback at $2billion valuation because it’s been the best year in business and he, his brother and his wife( all employees of Zerodha) will take home an annual salary of Rs. 100 crores this year. Hypocrisy, anyone?

Now let’s look at the facts for ourselves. The Covid-19 pandemic led to a nation wide lockdown last year with immense uncertainty all around. It was supposed to be the end of the world and people predicted millions of deaths in India and said how we’ll collapse and never get up again. However, within six months, uncertainty dwindled, we ramped up our testing mechanisms multifold and demand came roaring back. Every major company reported multiple year high growth and profit numbers, which led to rerating of share prices. The foreigners who are generally more bullish on India than Indians put in $80 billion plus FDI in the last year. All this is real money. The cars which were sold are real cars and not wild imagination of some vulture journalist reporting fake news.

The reality is, that despite challenging situations, Indian companies, especially the large ones have had a not so bad, if not great year. If the retail investors have flocked the market in droves, the broking companies would not have said, please come back later as this is not the right time to make money. The results are for all to see. ICICI Securities reported a net profit of over 1000 crores last year. This is in a country where we don’t have more than a 100 companies with higher annual profit than that. No doubt the lockdown has been damaging to our country and the second wave has resulted in real loss of lives. This, however, does not mean that the world is coming to an end. The word doesn’t end this easily. It never will.

I have two limited points. One, anyone who’s bullish on India has made a lot of money. This is true for any period of ten years or more since 1980. If you go back in 1990, the country was about to default on its loans but that was accompanied by the biggest stock market gains in Indian history ( the Harshad Mehta bull run). That led to liberalisation and India is now a $3 trillion economy. In 1947, the world predicted that India will break into multiple countries with chaos all around within no time. We have faced partition, four wars with Pakistan and one with China, multiple years of state led socialism which scuttled our economy for forty years, and multiple such events which have hurt us in the very short term. In the long term, we are now the fifth largest economy in the world, and will soon be the third largest in the world. That may take an additional couple of years but it will happen. Things move slowly in India. This elephant, in the end, does dance.

My second point is about behavioural finance. There are four stages of a bull market. First is pessimism. Things can’t get better at all. This was what we saw last year when the entire analyst community kept predicting 6000 on Nifty when it made a bottom on 7500 and rose up to 10000 in July. People who acted on what the experts said are still sitting on cash, waiting for the perfect buying opportunity. Next comes scepticism. The markets are going up but nobody wants to believe it. They somehow want to negate the gains as it doesn’t look nice . People who are making money do not want to believe this themselves. They think that the rising market is a myth, a lie. This is exactly where we are today. So they write posts pointing to a disconnect between markets and the economy and all such nonsense. The bull market, however, grows stronger with each passing day. This leads to the third phase of Optimism. The economy seems to rebound and newspapers publish reports of higher growth rates in future. The guys who are predicting doom today will publish articles as how India story has revived itself. The bull market now matures into its final stage of Euphoria. People believe that the market can only go up, forever. And the cycle repeats itself.

So for my friends reading this blog, it’s still the second stage of a multi year bull market. This is a tremendous buying opportunity to buy and hold quality companies and make a ton of money. The India story was never dead. It never will be! Bet big on India, you’ll end up very rich!

I know a lot of people who are convinced that equity investing is basically buying the newest IPOs and selling out for listing gains. I, on the other hand stay away from most, if not all new listings and let’s build my case why you’re better off not putting your money in the next big thing.

An IPO( Initial Public Offering) is a way for the promoter/existing shareholders to offload their stake in a privately held company, either partially or fully by selling a part of company’s equity(shares) to general public on a stock exchange. This money is either used by the company to fund growth or more so is an opportunity for current shareholders to sell out at a much higher price.

If you’re an owner of a company, assuming it to be well run and a profitable enterprise, what is the sole motive for you to sell 10% of your shares on a stock exchange to general public? To maximise value of your remaining stake so that your networth can be multiplied publically if your company’s shares go higher. And for this, you want to sell your existing shares at the maximum possible price. Assuming you sell 10% of your company in a 1000 crores IPO, the remaining 90% is worth 9000crores! And ofcourse, if the stocks double, your remaining stake will also double to 18000 crores.

Now let’s see how this IPO works. The owner wants to sell 10% of his company and try and raise let’s say 1000crores. Since he is a normal guy running his business, let’s say a food company, he doesn’t know anyone who will buy his 10% for 1000crores. So he hires one or two Investment Banks, let’s say ICICI Securities and IIFL. These two banks promise to underwrite this issue for 1000 crores. This means that they promise to find sufficient buyers who are willing to pay a total of 1000crores(atleast) for 10% of this company and if they find buyers only paying upto 900crores, they promise to buy the remaining 100crores worth shares ( this is called underwriting) from the company. Ofcourse, they will charge 1-2% of the total issue, if not more, as their fees for this transaction.

Now as a retail investor, you can’t buy the entire 1000crore issue, even if you and your entire family sell everything you have. In case you can, you’re not a retail investor anyways! So most of the issue is sold to Big Banks, Mutual Funds, Foreign Investors etc.

The rest of the cake, hardly 2-10% is reserved for the entire universe of retailers. Let’s say the quota for retail investors is 50crores. Also, assume that the issue price is 500rs. So the maximum number of shares retail investors can buy is 10 lakh. The minimum application per retail guy is let’s say for 25 stocks(Rs. 12500 per application). So a total of 40000 investors can buy the total stocks on offer, reserved for retail investors. Now you know that there are close to 1 crore active retail investors. Assuming 10% of them apply for this issue, which means 10lakh investors apply. So out of 10 lakh, only 40000 people will get the allotment of shares. This simply means, out of 100, only 4 are lucky enough to get their hands on this issue. So your chances of success is anyways very low.( 4%)

Now assuming you’re the lucky one and you get your 25 shares at 500. The stock is a hot cake and it lists at 1000. So you quickly sell it out and make 12500 for little to no work. Congratulations! You feel like the Master of the Universe and can do no wrong. Now let’s work this math out. You have made 12500 Rs. After paying 15% short term capital gain tax, you’re left with 10625 Rs. Now ask yourself as to what all can you do with this huge amount of money. Not too much, actually. This is the typical छोटी छोटी खुशियां trap one fall into! You can argue this is free cash but this is too less to matter. This won’t even pay for your one month’s living expenses.

On the flip side, this seduces you to treat the stock market as a giant casino. You lose the incentive to think big, invest long term and create wealth. Assuming you’re always the lucky 4%, the probability of listing gains each time is miniscule. Remember Reliance Power? SBI Cards? For every IRCTC, there is always an RVNL.

However, in Indian markets, there are times when IPOs can make good money. This is when the seller is in distress. Our good old Government of India always sells it’s family silver at throwaway price to keep up with the budgetary divestment targets. In this race to bottom, it divests it’s stake at very low prices. These can be good opportunities to lap up stable quality companies.

My limited point is to warn you from falling for the short term small gains while you can safely put money in good quality stocks and build substantial wealth over time. Anyone who sold Maruti on listing gains misssed out its journey from 200 to 10000 in 15 years. The stock market is not a casino. Don’t gamble with real money. You’ll regret when it’s too late in the day!

What comes to your mind first when I mention the word junk? I bet most of you would say junk food. Some of you who have been on this blog before would say junk stocks. Well, both of you are right, and yet partially. This caption, don’t buy junk, is my new adage which I will try and incorporate in my life going forward and let’s see why.

On a day when there is absolute carnage in the world of cryptocurrency, most down between 20-40% of their price( not value, for sure) and the voices clamoring for “buy on dips” grow louder, partially sarcastically though, it’s a good time to see the difference between price and value.

Price is what you pay, value is what you get. I heard it from Ramdev Agarwal, not Buffet. Anyways, this sums it all nicely. If you believe that Bitcoin is worth a $100,000/- or more, it should be party time for you tonight. Go buy as much as you can(read, value). However, if you want to buy because the price has fallen from $65k to $30k and since Elon Musk has tweeted and it will rebound and shoot up again, you are only looking and chasing price. Which, basically means you are a punter. आप सट्टेबाजी कर रहे हैं।

This is true for cryptocurrency, stocks, or food. When price of anything goes up significantly in a short span of time, it attracts interests. The naysayers turn into cheery approvers, the neighbours join the party, your son’s best friend who is in class 12th claim to have made money and everyone is excited to be a part of this once in a lifetime opportunity. The vices are shushed, virtues extolled. This thing is for real. It can be said of the Adani group stocks which went up 50x, Bitcoin, real estate in India in 2002-07 or anything you can think of. Till the point the tide is rising, everyone is enjoying a good surf. When the tide turns, a lot of people are caught to have been swimming naked. Price fall 90%, people lose money, party gets over, people lap on to the next one.

If you can safely conclude that what you are buying, and we hope that it’s an investment and not just a bet chasing price, and are convinced that the underlying stuff is worth a bit , if not a lot more than what you are paying for it, buy on every dip you can. That’s what all investors must do. If you think this thing is worth a $100, and due to market volatility you get it for $50, buy it more, simple.

However, don’t buy junk, even if it’s for free! Have you ever experienced a bad gastric commotion after a binge junk meal and cursed yourself of falling into the trap? I guess all of us have. We all agree that eating junk food will lead to health issues, if not immediate than towards the other side of 50s and it’s not going to end well. However, eating a bit junk and exercising a lot can minimise the impact it can create. Similarly, if you buy a lot of junk in your portfolio, in a rising market( in a bear market people are too afraid to even buy the absolute gold quality), you may not get hurt at all.

On the other hand, it can create a lot of money for you in a very short term. You will feel like the guy who cheated and didn’t get caught, and ofcourse who also passed. Most guys who punt begin with miniscule sums of money. They say, I know RPower is shit, or Yes Bank is doomed, or Jet will never fly but I am willing to bet 10-20k on this and if I lose everything, I won’t mind and my life will still be the same. Some of them go a step further, they buy a bouquet of junk/penny stocks, and bet that even if one of them goes up significantly, it will cover all my losses and make me some more.

Fair enough, not much harm done. You do this and it’s a bull market, so the junk fly high. You make money the first time and your initial hesitation gives way to inner peace. You tell your wife, hey it works. It’s not such a bad deal. Maybe this author wasn’t right. So you say, let me try another time. If you are still lucky, you make some,lose some but still are financially sound. The shiny junk now smells like pure gold. You hear people on telegram selling multibaggers for just a subscription fees. They bombard you with past profit and loss screenshots and you realise, this is the evidence I was looking for. Since so many people are doing this, it’s safe. Why to waste my time buying Nifty stocks which will only go up 10-15% in a year when I can double my money in three months or less. This thought, this very moment is the beginning of the end. The moment you fall to the trap of “Making money quick is easy without much risk and a desirable behaviour” you can rest assure you’re on your way down.

Ofcourse the bull market can go on for a long period of time and you can be plain lucky to come out relatively unscathed in the ensuing crash, that doesn’t mean you’ll be lucky the next crash as well. One fine day, this junk ends in misery and tales of He sold his house, he went bankrupt, he’s down 50lakhs are heard around us.

If you can take one point from this blog then take this- don’t buy junk, howsoever big is the temptation, the peer pressure or how lucky you think you are. One fine day, when the tide turns, and markets fall, you don’t want to be left holding yellow stuff which is not gold. It is worth nothing, even if it’s of highest quality. It remains what it is, shit!

Not many people can claim to have solved what I call the cyclical stocks’ dilemma. If market is a mystery, these stocks are right up at the top for exhibiting wild gyrations most investors find impossible to unravel.

Let’s look at the current market rally in metals. This began sometime late last year when after hitting decadal lows, metal prices, both ferrous and non-ferrous began to appreciate sharply in anticipation of the global unlocking. Add to that regular China stories, and some environmental concerns related to pollution and global warming and you have the birth of a new commodity bull run. This later leads itself into what we are hearing as the Metal Super Cycle. Copper lead the rally, duly supported by Steel and Iron ore while Aluminium has only recently joined the party. Price of related stocks began to climb up at a rapid pace and you have Hindalco, JSW and TataSteel hitting life highs while literally junk stocks like HindCopper shooting through the roof.

So far so good. What happened last week is critical to our discussion today. Out of nowhere, stocks went down 10-15% in two days and associated paper wealth shrunk considerably. They have made a comeback today but you never know if the party is over or if it was just a minor blip. This reminds us of the folly of extrapolating recent rally over the next two-three years when every expert sounds bullish and brokerages run over each other to raise price targets and experts line up on TV to sing paean to metal counters as the land of honey and milk. We, at this point can only speculate of future. This is the nature of the beast. When they fall, there is no bottom.

A well run company like NALCO, which is a rarity in metal pack to be debt free, was trading at .5 times book and nobody cared. It was available for 30rs not until too long ago and made significant profits year in and out. Suddenly, the stock shoots to 75 and it’s the prodigal son. I’m lucky to have been contrarion enough to buy last year that I have made some money in it. However, there is no sure profits here. You can’t hold it for five years assuming it will go up steadily. It may go up to 140 and fall back to 30 in a matter of a year or two.

So this is what I have learnt from this trade. Buy cyclicals when they are hated, booed and ignored. Like last year ONGC was available at 60rs which was hardly 3x earnings and .4x book. It is still much below the fair value but is up 70% in a year. And remember, you are in this game to make good 15-18% a year on capital because if you can do that for 15-20 years, you will be a very rich person. So if you get an opportunity to make almost double the money in one-two years, don’t let go of it.

However, please don’t be greedy and less, smart. Don’t fool yourself that you can sell right at the top or just on the day when market turns. When the price turns, it goes down so quickly that you can’t sell at any price. NALCO went from 82 to 69 in two days and you just couldn’t blink an eyelid.

Going forward, I will be less greedy and try to steer clear of them. The urge to make a quick, sure double or triple is a big temptation to resist. It’s the perfect Biryani you have to eat. However, you miss a beat and the profits evaporate quickly. You didn’t want to sell it at 80 because you were sure it will go to 90. Now you want to sell it at 80 but the price is 75 so you hold it out. Two weeks later, you are dying to sell it at 70 but it has gone below 60. And you finally end up selling it at 55 in despair, even after making good 30% on your investment because you could have made much more. This, my friends, is the dilemma.

Nobody wants to make 15% in a rising bull market because you’ll look like a fool. You want to own the latest fad, most rising stocks feted on Twitter and amongst your friends, the ones you read in newspapers and in which your neighbours have made money. You know doing the same might be risky, but who cares, Risk hai to Ishq hai, right?

Some of you do it out of ignorance, some of impunity. The poor retail guy will only burn his hand once in a while and be twice shy. The smarter chap living off the edge, on leverage is the one who will double the money on 10x leverage, and then lose everything on 20x leverage. This can be extremely hazardous to your financial health. Anyone who has been in this market for twenty years, without burning his capital much, even at a very low rate of average return is a rich man. This is the magic of compounding. If you can double the money every five years, over 25 years it goes 32 times. And assuming you also reinvent dividends and add money on the way , you can end up north of 100x in a lifetime of 30 years in this market. This is the boring way to get rich. You won’t be feted amongst your friends, or on TV or on Twitter.

The biggest hurdle to financial wellbeing is the hurry to get rich quick. Nobody wants to get rich in twenty years, but in twenty months or even weeks. That doesn’t happen anywhere. People selling virtues of cryptocurrency aren’t true believers, but true gamblers. They don’t believe that this has any value or can replace fiat currency or anything. All they care is that it goes up 10x in a month and want to partake some of the spoils. And since I don’t participate in the frenzy, I am labelled as too risk-averse. Maybe I am, perhaps.

I have realised the underlying volatility of cyclical stocks is too much to handle and now that I have made some money, it’s best take profits home and reinvest into the themes I truly believe can work out in future. Like I said, whether this is the top or not will only be known in the time to come. Till then, take care of your capital. You don’t know if it indeed, was the top. PS: Bitcoin is also down 30% from its top. Whether or not if it has peaked, we don’t know. But I am sure most of those investing don’t care, anyways.

Over the past couple of weeks, it has become a recurring refrain from leading market participants that how they are pained from rising stock levels when our country is going through one of the worst pandemics in the history of mankind. They add that their heart pains to see stock markets being indifferent and insensitive to the sufferings of its fellow brethren and how it should fall as a mark of solidarity. Sounds reasonable, right! No. Let’s see why

I will first talk about why the markets rising or falling is independent of the Covid-19 cases and it’s aftermath and then I will address what I believe is sheer hypocrisy of these supposedly market gurus trying to act great. One, stocks rise and fall not because what is happening now, at this moment but what is likely to happen over a period of time in the near future. How near is that future and how much is in the price is basically the collective opinion of all market participants put together, including you and me. There is nothing called a Mr. Market who’s different from anything we collectively are. We are the market.

Now turn around and ask yourself this, markets fell worldwide by close to 40% when Covid-19 was an unknown entity. We had no vaccine, no masks, no acceptable behaviour, anything. So the world moved towards a collective shutdown and markets in its anticipation fell 40% globally. Remember, Indian markets made a bottom on March 23,2020 when it was not even day 1 of the first lockdown. That the lockdown will kill economy was in the price! So ask yourself this, how long do you think the second or the third wave is going to last when we have multiple vaccines and have already administered them to 17 crore Indians. So just because you see there is a crisis situation NOW, and you aren’t feeling good about it, you believe if the market doesn’t fall as much as you are depressed or your Twitter feed wants you to be, capitalism is broken. This is amateurish at best.

Tell me this, Tata Motors earns 80% of its revenue from global markets, mostly China and US-UK. And it is a fact that they either have fully recovered or are likely to do so in a short period. So just because you didn’t buy it at 60, and since it’s likely to do well and is at 320,you say the market is insensitive and capitalism is broken. Sour grapes, anyone?

I was sure in April 2020 that the market has made its bottom and was hundred percent invested on April 22,2020 ( there is atleast more than a friend of mine who knows this is true) and in the hindsight, I look like a genius. That’s a wrong conclusion to draw. A lot of people must have predicted the bottom correctly as the markets only rose since then. It is pretty simple, commonsensical actually. When everyone around you thinks that the world is coming to an end, this is the greatest buying oppertunity. I would quote from a video of Seth Klarman on YouTube which became my go to line during the last crash – “we don’t think the world is ending, we don’t know how people could think that the world is ending, the WORLD DOESN’T END THAT EASILY.”

Go back to 2009 when the market has made its bottom in March and not until July that the US Fed could figure out that the its economy was officially in recession. If you listen to economists, you will always end up miserable. I have a pretty low opinion of them. Please read newspaper reports predicting doomsday last year in April and the same guys went around town predicting double digit growth in India for FY 2022 a few months later. If we are likely to grow atleast more than what we did last year, don’t you think it’s legit that the companies contributing to that growth will report significantly better numbers. And stocks, mind you, aren’t piece of papers but tiny parts of the underlying businesses. The company does well, stocks do well, period.

Coming to the hypocrisy of some of our leading lights. If Zerodha founder is so worried about market’s insensitivity, why doesn’t he shut down his business for the timebeing as a sign of solidarity. It was interesting hearing Sameer Arora saying I just don’t feel like discussing stocks today publicly as people are dying, however,I still am fully invested and making money daily, privately. Nobody will mind if he says I will donate my profits for the month to help India. My point is, don’t just say things to get some brownie points from Twitter followers. You are not Mother Teresa so don’t pretend to be one.

Here’s my big call I am putting my money in- India is likely to experience a multi year bull market as this is the first time in 20 years that markets and economy have made a bottom simultaneously. This happened in the US in 1979 and what followed was the biggest bull run in its history. I am an India optimist, and I believe that once we overcome this transient problem, we will come out stronger and more resilient. In India, reforms happen only in crisis. Finally, we may see our health infrastructure getting revamped, even if we go through tremendous pain in the near term. So, don’t mix your mood swings with those of the market. Stay invested, this too shall pass.

It’s been four years into the markets for me and one thing which fascinates me beyond limit is the kind of specie which is most visible. An expert is not a homogeneous group but a proper bureaucracy. The guy with least money and most opinion is at the bottom and as he rises up the ladder, the situation reverses.

In this organisation, right at the bottom of the pyramid is retail investor- the hapless guy who’s happy making 10% on his 10000 Rs and is forever diffident. To serve this guy, and to advice guys with millions, the first point of advice is our CNBC and Zee Business. You switch on any business channel at 7AM on a working day and you have a bunch of busy looking people selling you everything from sugar to banks to chemicals to what not. And they also have an acceptable hierarchy amongst them. The lead guy, let’s say Anuj or Anil Singhvi sits at the top of pyramid and people around them defer to them almost to the point of reverence. At times when they speak, their colleagues gasp almost as if having an orgasm- Wah Sir, kya bola hai Sir!

Add to this some obese, bald guys or some really well dressed girls and you have an entire buffet of experts serving news and ofcourse, expert opinion. Thankfully, that guy selling H2B2 has recently been barred by SEBI for securities fraud and we don’t have to suffer his foolishness anymore. His current successor is that chartist on CNBC serving third rate shayri which sounds straight from the minds of a tiktok-er.

The next level of experts are the paid chartists and supposedly fundamental experts, serving an advice a minute with opinion on everything from sugar to aluminium to NPA problem to general election and interest rate to Venezuela. The most interesting situation is when the guy goes right, they also play clap music.

Then enter the market veterans, whose networth can be sized by the exclusivity they get on Air. If it’s a daily routine for them to serve calls, they aren’t bigshots. The real biggies are the ones who caveat everything with” we don’t discuss specific stocks” and end up telling us why should we buy exactly the stocks they already own in their portfolio.

Of these, a few are worth mentioning. This guy Saurabh Mukerjea has been around selling stocks and books for about 6-7 years. I first remember him heaping praises on Page and Eicher and how the entire country was going to wear Jockey and ride an Enfield so we must buy them in mid 20000s a share. When Page turned back and Eicher slowed down,he concocted his thesis to say how Indians only drink Nescafe and Asian Paint there houses so buy them. Currently he is also selling Relaxo and Alkyl Amine. If Indians rich enough to buy Enfields are now lining up to buy Relaxo ,I don’t know if we are growing rich or going bankrupt as a nation.This, is basically momentum chasing intellectualised to the power infinity. You keep buying stocks which are going up, with other people’s money and sound cool while doing so.

My limited point is this- Investing is serious business. Don’t get fooled by some smart sounding guy who is cocksure in his predictions. The flip point to all this is that in this world, any serious investor can learn so much from listening to the real experts- guys who have made real big money and are happy sharing their views for free for people like me. The key is to choose your Gods carefully. And ofcourse, to avoid mixing this up with a casino. You have won half your battle if you aren’t greedy and ninety percent of the remaining half if you have patience. Investing is all about trying to make ten-twelve percent a year, without losing capital over ten,twenty years and leading a better life. Till then, watch experts as your guilt pleasure- like I do!

So I had this conversation with a friend of mine who has gone from being extremely bearish a year ago to almost as bullish as one can be, that led me to this article. I take my cues from people around me and decide as to where are we in the market- is it a rising tide which is going higher, or have we made the top and may be on the way down. My answer to that is- we are yet in the beginning of a big bull market, which can continue for a long time to come. However, all bull markets are marked by sharp, painful and brutal corrections which throw you off quicker than you can react to.
So what does a rising market do to a man? When prices go up for a stock you bought, it leads to a big seduction that can alleviate all problems you have in your life. You feel like a winner, someone who knows what he’s doing and has arrived in the big league. Stocks go up, you make money, life’s good. However, there’s a bit of an issue here.
That the price of the very stock which you have bought has gone up does not necessarily means that you have bought something right, or your process was right in it’s selection. In a rising market, everything goes up and junk goes the highest. Look around, in the current metal rally, Hind copper, a garbage level loss making company is the biggest gainer. Also, Adani group is rising as if they will make the next Amazon selling renewable energy. I may be wrong but there’s enough froth around which just doesn’t seem right.
The investor memory is blissfully short. The end of last bull run led to bankruptcy of its biggest stars- RCom,Rpower, Bhushan group,Essar Steel,Unitech etc. Go a bit further and veterans will tell you about M S Shoes being the hotcakes of 90s.
In a bull market,people buy shining junk at the price of gold, thinking that they have the next Titan at hand. However, when the market turns, real gold sells at the price of lead while the junk, well it anyways was meant to be. Hence, the paper profits vaporise quickly and you are forever out of the market, crying foul and calling it a Den of Thieves. Worse still, newer group of people then begin to punt with the real junk and you hear stories about the bankrupt stocks going up twice a day- if you don’t believe me, look out for people still buying Yes Bank stocks believing that it’s bound to go up again.
In the bear market, people who enter then begin to buy stocks which have fell the most and have limited potential, trying to make a quick buck. People trying to buy spicejet and lemon tree for a quick twenty percent are punters and not investors. I almost always look in awe to a PVR still trading at 1000rs when the company is shut for the past one year and no respite in sight.
As the bull market progresses, people become fearless and surely, a lot greedy. They are not content buying a HUL for steady ten percent growth or an hdfc giving steady returns, they go down the quality lane and right into the gutter- buying Dhampur sugar, mahrashtra bank, and worse, loss making PSUs, obscure chemical companies and the hottest IPOs. There are two type of people displaying such behaviour- one, who truly believes that they are buying hidden gems, the new multibaggers. They are our true retail guys, buying only to lose but are ignorant about it. They are cute. The other ones are like my friend I mentioned- those who know that they are buying shit but believe themselves to be able to sell just before the judgement day, while enjoying the upside which comes their way. They are idiots.
The real task in a rising market is to not get swayed by the green on the screen, and instead of giving in to the seduction, you should at least mute CNBC Awaz, if not totally switch it off. Do not listen to the experts selling you garbage calling it the new HDFC Bank. Also, don’t get swayed by someone else making a lot of money in a short time. There is no bigger enemy to your mental peace than to see your best friend getting rich, quick.
Instead, in such times, prepare yourself for the next downturn. When shit hits the roof, you must be confident that the shing object in your hands is real gold, not horsedung. Go up the quality lane and research more of what can last through a bad year and come back strong.
Most experts say that bull markets are to enjoy while they research harder during the bear market. This is bizzare. You should be absolutely certain of what stocks you hold when the prices are going up and work harder to ensure you don’t compromise on quality when the music is still playing. In fact, it’s always good to sell out when you get some portion of your money back. And when the market turns, you should be the kid in the Disney World- buying things you always wanted but the prices were high.
So, don’t be so High that you have to pay with your life savings someday.

So most of my friends have been making a ton of money in metal stocks, which we had picked during the crash of 2020. This metal rally has been termed variously as the Super-cycle, Great Metal Run etc. The point I am arguing is a bit contrary- this might be a good time to sell out!
That the price of all metals- ferrous and non ferrous have rallied to all time highs is known to all. Good quality firms- TataSteel, JSW, Hindalco are hitting life highs while plain bogus, garbage companies such as HindCopper, SAIL have risen to stratosphere.
NALCO, my contention is,has some 20rs upside left- however, I must admit that once a rally starts, calling the top or predicting it’s bottom is impossible. It can double from here, crossing it’s earlier life high and go up further- please remember : There’s no top to a bull market and no bottom in a bear.


Just a cursory look at the two charts below will tell you that the two charts are similar, if not plain congruent. Share price of NALCO moves in tandem with price of aluminium and there is no rocket science. So by drawing a straight line between today’s aluminium price and checking 2011, which was when it hit this price the last time, we can quickly figure out that NALCO should be close to 100rs if LME Aluminium stays at this level. There is no more, no less maths to this
However, here is why I am saying it’s time to get out, atleast in parts. You never buy at the absolute bottom and can never sell at the absolute top. So most of us who have doubled their money or more, must realise that it’s under two year’s time that the money has doubled- cagr of close to 70% plus. This is insane and must be celebrated with abundant caution. Be proud of the fact that we bought it at 30rs when nobody wanted to touch it and we’re brave enough to hold it through. So pat yourself on the back and book some of it now.
There are proponents of a consistent upswing who say this will last two years or five years or what not. Basically that’s all nonsense. These so called big guys basically chase momentum and nothing more. They buy the most fancy stuff and intellectualise it. Like the most recent fancy of chemical stocks. I am a Chemical Engineer by training. I still remember that no chemical engineer wanted to work for these chemical companies for it’s a dud business. This is nothing but the sugar rally of 2010s . I find it funny that as a chemical engineer and someone who wrote UPSC with chemistry optional, I can’t understand half the names of chemicals NavinFlourine or Alkyl Amines or SRF makes, but these commerce graduates on CNBC preach the prowess of 2-benzene-3alkylnitrophosphate.
Similarly, we all know that the price of aluminium is rising because of current tensions between Australia and China. So if you can predict that when the two countries are going to announce a truce and you will be able to sell a day prior to that or that China will go to war and the price will rise forever, I think you are smoking a lot of hash. The simple answer to this question is- I don’t know and Nobody know.
There is a difference between cyclical stocks and secular stocks. The money in cyclicals s made by buying early and at bottom and selling at fairly high and also, early. The famous Barron of Rothschild said- fortunes are made by buying low and selling early. I guess I should be out of it over the next week or so, when the music is still on and people are dancing. I will get out when people are still coming in, not when there’s a stampede on its way out.

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