Author Archives: ZerotoBillion

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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My liking for this stock goes back to 2018, when I picked some of it at 735! It is now inching back to where it was but why do I ask everyone around me to lap it up, even when it’s up 2.5x from its March 2020 low! Let’s try and see where I believe this one’s headed
My thesis is simple-
1600 crore of cash on balance sheet is ~350rs per share. That leaves another 350 rupees to pay for it, net of cash available. Also, the building it owns is one of the most iconic heritage building in Mumbai, whose valuation can be anything between 1000-3000crore, depending on what you think it may sell for. PS- ADAG headquarters in Santacruz recently was sold for 1200crores. And this building is much bigger and located in plumest of the plum location in Mumbai. So, take your call. Also, CDSL is now valued at 8000crores market capitalisation,of which BSE owns 20%. Even after allowing for holding company discount, you get close to 1000 crores value left. Add all this, and the company’s liquidation value is not less than 5000crores, which is close to Rs. 1100/share. Also, the iconic brand which BSE owns can be atleast worth a 100crores.
Now you come to the present business of the firm. It does close to 100-150crores profit every year, and even at 15 times earning, it is atleast worth 1500 crores( on the conservative side). The peer NSE trades at 10 times book in gray market, while BSE is still 1.1 time book. Further, it gives back 95% of standalone profits back as dividends and needs zero money for capex- thus it has no threat of a potential dilution of equity and the per share value will only rise in the years to come.
So the base case is that it should be valued at close to 7000 crores, or close to Rs. 1500 per share. Let’s place some more facts here:
Zerodha has been raising stake in BSE steadily over the past three quarters and now owns 2.16% as on end of March 2021 quarter. It’s StarMF platform is being valued at close to 2000 crores, as the firm looks to divest it’s stake partially. And most importantly, for any of you who has been bamboozled by IEX’s dream run, BSE has also got approval for its own power exchange-Pranurja.
The reason why I believe BSE can be valued north of a Billion$ is that if NSE is ten times BSE, and if NSE is being valued at close to $11 billion, BSE can’t be less than a billion.
However, the real juice is hidden,in GIFT City- the India INX, owned by BSE has 78% market share in there. Also, it is not yet being monetised and is making operational losses. This is a startup clamoring for attention, right before our eyes. If all these startups, burning cash left and right are being termed as unicorns by Private Equity guys, I see no reason that a real market leader, almost a monopoly can be valued as low as $40million- yes, ICICI Bank bought 10% in INX at 300crore valuation. If at any point we get lucky, and we must hold it like a long shot, and INX gets its true calling, this can go up 10 times in 5-6 years. I know this sounds crazy, but big bucks are made by crazy longshots, not staple Levers and HDFCs.
We all only took notice of Bitcoin when it was north of $5000-when the guys who bought it for a dollar were already billionaires- read this fantastic book “The Bitcoin Billionaires by Ben Mezrich”.
So here’s my two cents- the downside in BSE is next to nil and upside is atleast a double. But, and it’s a big But, if the hunch is right, you can make big bucks. Tell me what do you think!

ps: today it’s trading at 865 and feels very sweet to know that I have even bought it at 283! Anyways, this is still the beginning. Who knows, five years down the line, this might be up 5-10x from here and we’ll all look at it and say, waah modiji waah!

One can fool others but not oneself. It’s an old adage with deep meaning, especially if you’re in the world of stocks. You can call yourself an investor all life long and still never make it big. Why? For you were a trader in mind and punter at heart.

It’s essential to know who you are and what you are trying to accomplish in the market. It’s okay to know that you are trying to make a quick buck to fund your new iPhone or simply acting on a tip your colleagues passed along with a coffee in office as long as you don’t begin to intellectualise your gambling as Investing. The word investing has only one meaning- buying a growing asset which generates cash flow over time, at a price you find reasonable. Whenever you look at a stock, what you’re buying is future value of all cash generated by the underlying company which will lead to price appreciation and dividends.

Where people confuse this is when they look at price and say oh Reliance is very expensive at 2000, let me buy Adani green as it wil go up to 1300. Chemical stocks are doing well so let me buy whatever amine and make 15% in ten days. Whenever you’re chasing price as the soul indicator of risking money, you’re not investing. It’s termed as trading, if not plain punting and is a perfectly legal and legitimate way to earn money. However, most people will never like to be called as traders. Investing sounds classy, trading sounds cheap. Hence, they themselves falsely fall pray to this trap and confuse what exactly they have set out to do.

When you begin to lie to yourself, you’re sure to be screwed. You don’t know if you’re buying Tata Steel at 800 because you are sure that the steel industry is on a genuine upswing or just because the momentum indicator green flags the stock. This works well as long as the market is rising and most punters come on Twitter to rain applause on how fundamentally sound Jain irrigation was or how DHFL is the new HDFC as both went up close to 10x in a good market. You don’t want to be associated with someone buying HUL or SBI when the junk is shining more than gold. As long as the markets are rising, and the occasional dips are bought with vengeance, the system is sound. Everyone buying Vakrangee and PC jewelers and MS Shoes is in the same league of investors buying stable well bred horses.

One fine day some NBFC defaults or some promoter is sacked or something else goes wrong somewhere in the world and the music stops. You are so high on junk that you’re sure it’s just like the most recent dip which was followed by a rally that you don’t care. You have long sold Reliance and TCS for Adani green and some fancy chemical company and are now a true believer in their potential to make the world a better place. You are absolutely certain because your broker has confirmed that it will keep going up and you don’t have to worry a bit. CNBC analyst confirms that there is some massive breakout waiting to happen and this is a technically strong stock. Until it isn’t!

The market cracks 20% in two weeks and your portfolio is down double that. Since you’ve long forgotten that all you were trying to do was to ride the upswing in a bull market trying to make 30% and have falsely believed yourself to be a long term investor, you are now in a fix. You don’t want to sell in a hurry. You are sure that this is just a shakeout from weak hands to strong hands and you have diamond hands! Dewan housing is bound to be the next HDFC. You just can’t be wrong on this one. To this day, you have never held a stock for more than two months but now you suddenly dig up ten year charts, confirming your belief that it has always bounced back from 200DMA. It is a blue chip after all. Half your office owns this stock. It can’t go wrong.

However, it’s different this time. The market falls further and your favorite stock quickly goes down in lower circuits. After its down 80% from its peak, you and others finally realise what it was- horseshit. And since you didn’t sell it at 100, you sure won’t sell it at 40,30 or 20. The stock then languishes in your demat account forever. You finally accomplish your true calling- becoming a long term investor.

In this age of technology, you can learn from best of the minds, both in trading and in Investing almost free of cost. The key is to choose your God’s wisely and be honest with yourself. If you’re honestly gambling with ten thousand rupees, you’ll quietly book a loss and get out at -20%. Don’t make a trade or a label a matter of prestige. As long as you are sure and certain of your limitations, you’ll not go broke. As Mark Twain has said- it’s not what you don’t know gets you into trouble, it’s what you know for certain and isn’t!

I’m an India optimist. In times like ours when there’s gloom and doom all around, it’s bold to make that call. For me, it’s not bold, but a way of life. Some people willl forever want us to live like a third rate country while I have faith that we will be a $10 trillion economy in 20 years. I’m also placing my money where my mouth is, and if the bets go right, the rewards will be outlandish.
First, for the naysayers. There is a growing tribe in our country which is professionally pessimistic. Besides, they also hate most things Indians and are perennially trying to bring out the worst in our nation to somehow pin us down. They report that the people are suffering due to Covid-19 not because that they care, but because it tarnishes the India story. Oh, Indians are dying and the government is helpless. I am sure if 1962 were to happen today, they won’t pitch in for help, but be happy that India was losing the war. Just because their political opinions aren’t aligned with the party in power currently, they go at lengths to pin the blame for everything on government while carefully avoiding the fact that every single developed country was on its knee before Covid-19, not until too long ago. I recall a TV serial Khichdi when Babuji would say “meine to pehle hi kaha tha ye ladki Raju ke liye theek nahi hai” for everything wrong in this world. Replace Modi with ladki and Raju with India, and you know what I’m saying.
Coming back to our discussion. India is currently closing on to a gdp of $3 trillion. Over the next ten years, even at 5%, we will be close to $5 trillion gdp. However, the incremental growth will not be evenly distributed, like it’s the case with all economies. Some businesses which are well run and can reap the rewards will be benefitted beyond belief. On the other hand, those struggling to survive will either be forced ro shut down or merge with the bigger ones. HUL currently sells close to $5 billion annually in India. However, Unilever global sales are close to $150billion thereabouts. The combined AUM of Indian MF industry is close to $400 billion whereas Fidelity or Vanguard individually handle more than $500 billion each. Diageo has market cap of $105billion while United Spirits is
hardly $5b. The profits for some of the companies are going to be mind boggling,
Indian household savings are slowly moving towards the financial sector. Non lending financial companies, such as brokers, stock exchanges, asset management companies, etc. will see their revenues grow 10,20,50x over the next 10-15 years and profits growing even 50x, as they require little to no capital for expansion. Since there is no likely dilution of equity, the share prices will grow 100x and maybe more. This is one sector you must put some money to work.
Second, as I mentioned earlier, the consumption companies are going to grow like anything. This FMCG story is still in its infancy in India. As our per capita income rises beyond $2500, we will see discretionary consumption shooting trough the roof. Well run leaders will be able to capture even larger market share and they can deliver steady returns, even at these lofty valuations.
India still has a large rural market where people are slowly moving up the economic ladder. In these markets, buying the first two wheeler,or the first car is still a big play. So atleast for the next few years, market leaders in these sectors will only grow bigger.
Electric vehicle is a long shot on the future. Now that Tesla is down 40% and most fancied EV stocks in the US like battery companies are also less frenzied about, this market is slowly maturing. Nobody should have a doubt that the biggest car makers of the world, BMW, Merc, JLr won’t be able to make and sell electric cars just because they aren’t first off the bloc. JLR is already selling half it’s total sales in electric vehicle and this is only going to go up from here.
I’ll give you a number. In 2010-11, Tesla sold close to 5000 ev in US, and was valued at close to $10billion. Last year, it sold close to 500,000 sales and is now valued at over $500billion. Tata Motors sold close to 5000 EVs last year and is currently close to $15billion. If it manages to sell close to 100,000 electric cars a year in let’s say 5 years, which is still going to be a small part of India car market, and if it remains the leading player with over 50% market share, just imagine the kind of valuation it can have. Why I belive that it will be the largest player is common sensical- Maruti has no electric car, even in pipeline while Hundai Kona and MG ZS are too costly at close to 25lakh. Mahindra sells e-Varito but it’s anyways a fringe player in sedans. Nexon EV has first mover advantage and if Tata can bring Altroz EV close to Rs 10lakh, sales can grow exponentially.

However, it is important to know what not to do, what is that you should avoid. In a market when junk has begun to go up everyday, don’t punt with your money on debt laden stocks. In a low interest rate environment, highly indebted companies rise up the most. However, when the tide turns, the downfall is equally ferocious and without an easy exit. When the music stops, it’s always a stampede on the way out. A man who doesn’t owe anyone anything, can not go broke. Give up on the temptation to make quick returns in a bull market and preserve capital for the rainy days. Bet big on India, it has always worked, it always will