ZerotoBillion

Zero To Million Turns 4!

This blog began as an idea to share my views about certain stocks and market positioning in general back in 2021. Over the past four years, a lot of what I have been writing about did turn out to be true and I am only eternally grateful to Lord Ganesha for his blessings as we are nothing without his desire!

A reminder and a full disclosure is warranted. I have at times discussed stocks and written what I would believe to be their fair price and value and of course I have been invested in most, if not all of them. So at any point if I comment on a stock, it must not be treated as a buy or sell recommendation as I am not a SEBI registered advisor but a private Investor managing his own funds.

So what has been the flavour of the season?

The Capital Market play has finally started. I have always felt that the capital market stocks- Exchanges, AMCs, Brokers, etc are a decadal play and they are most likely to outperform everything else in 2020s and the markets have finally woken up to their existence. All the AMC stocks have finally made new lifetime highs and they are finally catching up with their peers in the industry.

I strongly believe that when a sector is picked up and rerated positively on the upside, the stocks don’t go up 50-100%. They go up 5-8-10x in a year or two. Please go back and check prices of PSU banks from 2021-2024; defence and railway stocks in the same bracket and also the likes of Dixon and Kaynes in preceding five year period.

Thus anyone having a fear that AMC stocks are expensive at 40x trailing PE should check price of Kaynes which is still trading at 125+ PE after having corrected 40% from its highs or Zomato which is still at 100X + or even some Defence names. That the runway for growth is large in AMCs is an established fact. I totally agree with Ridham Desai when he says that the retail money is not going anywhere. We have had 26800 crores of SIP in May itself which is a cool run rate of over 325000 crores annually. The FIIs can sell what they want but the retail is pumping enough to keep buying in droves every single day.

Also, as the markets will rebound eventually, the AMCs will benefit from both higher AUMs due to mark to market gains and also higher inflows which will lead to higher revenue and profitability. Thus, at close to 20-30% PAT growth, the 40x PE will easily be 80-100x PE in three years and at double the PAT levels, they can easily be 4-6x in similar timeframe. Nestle, Page, Eicher are numerous examples of how such plays unfold in markets.

Most importantly, the people are yet to understand how big the numbers can look like. At an AUM of close to $850B, the ratio of cumulative AUM to GDP is just around 0.2. Even if India grows slower than expected, it will be a $8-10T economy in 10-15 years. At that point, with incremental household savings moving to stock markets, if the ratio grows to around 0.5-0.6, we are looking at cumulative MF industry AUM of close to $4-5 Trillion. At that rate, the larger players will go from managing $100B to managing $800B-$1 Trillion. At any rate, the amount of sales and profits will grow faster than the AUM because of operating leverage which kicks in beyond a certain size and it will not be a far-fetched idea if these stocks begin to trade at 5-10x of current prices.

Every sector which begins to catch market’s frenzy first rise 2-3x and then goes up 5-10x from there. Unless the Nifty 50 or Sensex 30 have these stocks, the rally can continue. These are not one month stories but decadal stores. We always under-appreciate how big 5 years out can look like but if we can force ourselves to think harder, it’s not too difficult an idea.

Further, with dropping interest rates, FD as an investing instrument is fading faster than anticipated. Thus, the current generation have no incentive to park excess funds as FD and assume it to be an investment idea.

And now we come to BSE!

The last we talked about it was in March when it had corrected to 4000 levels and I was giving my clarion call to buy at the top of my voice. What unfolded then has truly been divine. How else than a stock can go up almost 2.5x in three months! Everything which could go right did go right and market finally woke up to its reality and BSE hit a pre-bonus adjusted price of 9090! That’s a without bonus price of Rs. 27270! Let that sink in. My first few blogs four years ago mentioned it at around what was then a Rs. 600 stock. From there it has gone up almost 45x! What do I think about it now?

A. A lot of people have hated BSE for one simple reason. They missed it, period, So now they go on twitter and TV and diss about it as to how its a costly stock and how its a rigged stock and how it should go down by half and how NSE is the only king in the jungle, etc. A lot of them are doubly pissed because they have lost their shirts multiple times trying to short it. If you recall, twitter was abuzz with guaranteed price targets of upto Rs. 2200 in March 2025 when it had corrected from 6000 to 3670. Well, it did not hit 2200 but more than doubled from there to hit 9000!

B. A lot of media voices are clearly paid mouthpieces of NSE when they over-amplify everything which is bad and underplay everything which is good about BSE. My point is simple. There are two exchanges in India. NSE is a clear 80% leader in F&O and the amount of efforts it has put in to try and dislodge BSE’s growth in F&O is a testament to the fact that its getting hit where it hurts. It was the exchange which began the F&O market in India and introduced weekly expiries on almost all days of the week. So it’s kind of rich when it now cries foul about having too many expiries and why India should only have one expiry. Also, the zeal with which it wanted to have a Tuesday expiry made it evident that it has got not much idea as to how to counter BSE’s growing market share.

C. The panic of NSE shareholders is now getting real. They have now enlisted brokers to dump their unlisted NSE shares to retail in lots as low as 10 shares. It only demonstrates that they do not have faith in any IPO related pop of their shares and also have not so high hopes of an early IPO either. Everyone in this market is to make money. Nobody buys or sells out of their love for humanity. So if the retail public is being bombarded by their brokers with a get rich quick offer of buying unlisted NSE shares, it is only at behest of large holders who want to dump them as soon as possible. I never heard anyone sell their SpaceX shares to retail.

D. On the point of BSE being expensive. I agree that at 80-90x, it is indeed not cheap. Well, there are over 80 stocks with a PE greater than 75 as on today with a market capitalisation of more than 10K crore. I generally don’t hear much about Trent or Titan or Asian Paints or Dixon or Solar Industries or Hitachi about being too expensive. Titan has been a 90PE stock all its life. Even Shree Cement is at 95PE! So just because of high PE a stock should fall is a bad idea. As long as the market believes that BSE can compound at over 20-25%, this high PE can easily sustain and can even grow.

For those of you thinking Ive gone nuts, let me illustrate. Zomato has a PE of 120 and market cap of 245000 crores. PB Fintech has a PE of 250 at market cap of 88000 crore. Solar Industries has a PE of 193 with market cap of 1.93lakh crore. Last I checked, no fund manager came on TV from Singapore and called them rigged stocks!

E. And finally, a lot of stories do go around comparing NSE and BSE valuations and how NSE is a steal at current levels. NSE is being valued at close to 6 lakh crore in unlisted market which means its trading at close to 50 times earnings. It’s easy to understand that its losing incremental market share to BSE and when it eventually lists, if it manages to hold on to 50x PE, no shareholder will make the listing day pop.

So my limited point is that when something is a decadal story, it’s only realised in hindsight. If the Indian story is intact, BSE will do as much revenue as NSE does today in 5-6 years. It will be fair to imagine second largest stock exchange of India making $1 B in profits in 8-10 years. It did $150M last year. So even if it is then valued at 30x, it can be a $30 B stock which means it can more than double from here. It might not make as fast returns as it did in the preceding three years but if it can compound at 20-25%, and market values it at 50PE, it can be a $50B company.

I am holding on to it with clear understanding that it will definitely give multiple 40-60% corrections through the next 5- 7 year period but that’s the part of the journey, isn’t it!

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

The Clarion Call to Buy 2.0

There are two views in the markets. One is that the markets have entered a long phase of a bear market with low recovery possible over the next few months and there is still some more pain left and the other is that the markets have gone through a lot of pain in the past six months and its time for the bull run to resume its upward leg.

I for one believe that we are still very much in the decadal bull run which started post Covid though Ramesh Damani likes to date this since September 2019- with the corporate tax cut and I am of course nowhere close to his wisdom. Anyways, I believe that our markets have had two serious downturns since Covid bottom- one beginning October 2021 when indices fell 20% from 18100 to 15800 and two year nifty return was zero. The second is the current phase when we had fallen a little less on the nifty but broader marker bloodbath has been massive.

With one year nifty returns already hovering around zero, it is very much probable that our nifty might take some months to retake the 26k top but it is more probable that our markets rebound and take off the losses which we have seen in the past six months quickly.

Ive to be clear on a few points- everyone is a buyer of BSE at 6000 predicting 8000 and a seller at 4000, predicting 3200 or I heard someone on TV at 2200. It’s okay in ether ways because a lot of people in markets are speculating. I am in the business of slow compounding with reasonable expectations of returns with associated volatility. For me, BSE at 6000 is a moment of joy and at 4000, a point of despondency but, I neither sold at 6000 nor am I selling at 4000. If a stock corrects 40% in 12 trading days, I get hurt on my notional portfolio valuation but beyond a point, it is immaterial. The fancy words like drawdowns, booking profits etc are only valid in hindsight.

When a stock makes fresh lifetime high at the peak of a bear market, everyone and their uncle was ultra bullish giving targets of 7000 plus. In three weeks, the targets are back to somewhere below 3000. What a credible source of investment wisdom!

This only indicates one thing- we went from extreme greed to extreme panic in three weeks! The same thing happened with Trent, Kaynes, Dixon and now even Zomato. Not that I am a buyer in any of them but people were lining up to buy Trent at 7500 and are looking at it with disdain at 5000! The same facts are being used to sell which were earlier used to justify ultra rich valuations.

It explains why most people who are in markets do not make real wealth. When you basically try to justify your opinion based on price movements, you are a speculator. And speculators make money on some days, lose on others and sit out on the next day and enter the next and so on and so forth. And, the charts! I have nothing against the charts because they do have some real value in terms of market positioning. The chartists, on the other hand are a dime a dozen. Every other person begins to talk of a rising candle in a bull market and eventually gets that candle home on his way down when the markets turn.

I am a student of market psychology. I was ultra bullish on markets and remain so but did feel a lot of scare when the drawdown happened. I generally am not affected by a 10-20% portfolio drop but a 35% drop is scary. On the other hand, as a student of market, on days when I am scared, I know the panic has peaked. When you want to further sell a stock which has already corrected 40% in two weeks which was happily a buy at 80 P/E 12 days ago since the earnings were going to compound massively, it signifies extreme fear.

And the trigger? NSE shifted its expiry day to Monday. I mean please give me a break! If a stock should drop 40% because of one action by a competitor, then if it also changes its expiry to Wednesday or to Thursday, will it go up 40% in three weeks? No, right! People need some reason to panic and a lot of selling happens due to other factors- someone wants to make up for a loss somewhere else, somebody had a margin call, some fund faced a redemption, etc.

My point is that in markets, these things happen. As you progress further in your investing career, prepare yourself for a lot of 20-30-40% drops every second year. This is what you have signed up for. If you want to make 50% in a year, be ready to lse 30% in a month also.

Here is what I am doing.

I have reiterated it consistently that you are here to generate wealth and not to beat an index. For individual investors, the absolute amount of capital which they make is all that matters.

You should buy only what you can understand and be very limited in your holdings. Unless you take a concentrated position, you don’t really make that much money is a lesson I have learnt in this market. Also, the money which you finally have after a bear market is your true net worth! Peak bull market valuations are only a good reference point in life. Masayoshi Son went from a net worth of close to $100 B to $2B in a matter of one year! Meta fell 50% almost overnight; Nvidea is down 30%, Netflix fell over 70% a few years back, Tesla is down 50% currently and falls 20-30% every now and then. Does that mean if you sold any of these, you would ever make that much money ever again in your lifetime? And these are the biggest companies in the world. And we in India do not have anything close to them yet.

Anyone who sells out their winners because it’s too high or falls 50-60% after a massive run actually loses a lot of money in a long run. Meta was available at $90 a few years back when nobody touched it and it recently went up to $700! You have had a seven bagger in the fifth largest company in the world in less than three years!

We have to understand that now our markets are so deeply liquid that when someone has to sell a large position, they can do that in less than an hour or a day at max. All of this took multiple weeks or even months a few years ago since our markets weren’t that liquid. Now you can sell 10000cr worth of shares on the market in a single trade. So whenever the fall happens, it will be brutal and you won’t have a chance to blink. Like IndusInd bank recently.

This my friends is a sign of strength. Our markets are now as good as the best in the world in terms of liquidity and trade technology. So whenever such fall occurs, look at them through the prism of opportunity.

I might have felt deeply scared but eventually I did what I do on these days- add to what I already own and let the markets do their thing. BSE for me is a hold till at least it does Rs. 5000 crore in revenue and close to 2000-2500 crore in PAT. After that, I will see what the situation is like.

Here is what I am seeing-

I can’t believe that the Indian AMC stocks are trading at these levels and they are to me a screaming buy. They are currently in the neglected zone and generally that’s where the maximum juice is. Anyone who thought that the Indian retailer will give up on mutual funds must have been shocked to see almost 26000 crore SIP figure for February 2025. This is an irreversible unidirectional move which will define the decade we are living in ten years from now. Our MF industry AUM is now close to $700 Billion. US MF industry AUM is close to $34 Trillion, which is 1.6x of their GDP. Out number is one sixth of our GDP. In the next few years, even if it moves to 0.5x our GDP, the number will be closer to $2.5-3 Trillion since the GDP is also rising. At that rate, even conservatively, the revenue of our mutual funds companies will be close to $25-50Billion with PAT ranging from close to $10-20Billion dollars. At that rate, the industry should then be valued at something like 350-400 Billion. Right now, the entire industry is valued at less than $65-70 Billion. It means that the stocks should go up somewhere between 5-10x without doing much.

Add to that a lot of rising dividend yield since these companies are cash generating machines. This is my clarion call to buy 2.0!

Wires that did catch Fire

A horrid day at the Dalal Street; every wire and cable company caught fire and left none of us any safer. The BSE rally from 5000 to 6000 is now over and its back to 5100 in a hurry. The feeling of fear and misery is pervasive and when even looking at your portfolio takes courage, you know that the shoulders are down and moral lost.

This is humbling for all bulls including me who have claimed that the best time to buy is now and it may even be. The problem is that when every rally fails and the shares which shouldn’t have fallen 10% have fallen 40 and more, it hurts. The name of the game is patience and everyone is left licking their wounds.

I have had a feeling since the last couple of weeks that the market is ripe for a turnaround but that view has failed to find any favour with the market. This has taught me an invaluable lesson- timing in market is next to impossible and trading is injurious to health, especially on a well formed logical view because when the markets wish to punish you, all the logics fail and the technical and fundamental indicators are out of the park.

The point of solace is that I have never traded or wish to trade so the only thing which is down is my moral and that too because my view of a reversal hasn’t panned out. Well, there is nothing called a hope trade in the markets, isn’t it.

So what we are seeing here:

If my reading of stock market history is correct and with the overall belief that we are still in a structural, decadal bull run whose crazy end game is yet to play out on the upside, we are somewhere at the absolute panicky bottom where every bull is down and out, licking its wounds. Everyone, including myself has tried to buy on the way down, buy the dip as they say and have seen the prices fall another 10%. We are left wondering as to what the hell is wrong with us that we should have waited for some more days. And when the bulls are so badly beaten that they stop to add any fresh positions on the upside, voila, who’s left to be sold to.

So looking at my own psyche, when I was petrified throughout this week and especially today to even look at the screen; I guess we are very close to the point of absolute capitulation. Well, the thing is Ive said the same thing for the past one month and all of you will accuse me of being a broken record but in my humble opinion, the fall cannot sustain anymore. It may still fall another 5% on index, 10-15% in stocks but the more it goes down, the more ferocious the rally on the way up will be.

We might never see some of these prices again and one to two years later, those of us who are looking foolish to ask all of you to buy whatever and whoever you can, will be richer beyond belief.

There are of course strong sector rotation in play. Every wire company was on fire today, thanks to Ultratech’s announcement of getting into this business. This is on lines of the paints business wherein Birla and JSW have screwed up the margins of Asian and Berger paints. It was bound to happen, one way or the other and it happened today.

My take is that for individual investors, all one should do is to buy companies which have reasonable valuations and comfortable balance sheets and let the markets do the rest. I have never been a believer of catching the fads so have not had any exposure to Polecab or Deepak Nitrite or Pharmaceuticals or cement or the tomato or the likes. Yes, it is still possible to make a lot of money without having any exposure to the latest market fad.

There is a fund manager, Chuck Akre who runs his fund on similar lines wherein his top holdings include Mastercard, KKR, Moody’s & Visa. He runs a very concentrated fund of financial firms, something which Ive done organically on my own. By the way, ICRA is the Indian subsidiary of Moody’s and is a new holding for me.

An individual investor can own less than 10 companies, with good dividend yield and still make a hell lot of money, especially if the fund size is less than $10 M or close to Rs. 100 crores in India. The key to investing is to be very sure of what works for you and what you are comfortable owning for the next three years, with a lot of inactivity along the way.

Like for example, I have a friend who buys Pharma a lot and I on the other hand, hasn’t owned any Pharma since exiting a very small position in Sun & Lupin in 2018-19. So even if I get that very cheap, I might still like a mutual fund company better.

What works best for me is a company with zero debt; great profit margins; very neat and clean dividend policy- you do a EPS of 100, give me a dividend of at least 70 and even better, raise that every year; and of course something which is aligned with the idea of a richer India. What I think is that in today’s India, every Billionaire or a startup founder wants to own a piece of India’s retail/ capital markets. So all the companies want to open a mutual fund house or want to bring groceries to you in 10 minutes. I don’t think that the consumption theme has one or two players I can bet with the comforts of hefty dividends so what is left is the financialisation theme.

What I am trying to say is that if you can simplify your process and become part owners to businesses which will grow over time, you might be very wealthy in the process. Instead of trying to trade in and out and owning and not owning metal or Pharma or oil or quick commerce will not take you very far. Trying to catch every swing on the up and being able to get out in the nick of time is impossible.

Regarding the fall in portfolio, well that’s the nature of the beast. If you can’t stomach a 20% drop from the top, every year or two, you don’t deserve to make 3x in three years either.

Remember, the most money is made by people to bought and held and did not so much for a long time. Everybody else was lost in the noise. This view of selling small caps and buying large caps or gold or this and that is for someone who has a family office and is trying to protect his wealth. For us who are trying to first get rich, the only place is equity and that too in owning pieces of great businesses which you were lucky to identify and simply held for five-seven years.

Every stock market downturn is marred with pessimism and sadness. Everyone who is now asking you to run out of the market is going to say this was the best time to buy. Don’t forget, people who now say Covid was fantastic time to buy were petitioning to shut down the Stock Markets! Nobody, not even a single person I remember advised to buy in March or April of 2020. So all these experts are nothing but salespersons, who are only trying to sell you their PMS products. Read a lot of stock market history which will keep you in good staid in times like these. Bottom, I believe has been made but I can very well be humbled badly tomorrow!

The Time to Buy is Here and Now

The past six months have been pretty tough for the Indian markets. Everything which was going right, did go wrong and some more. It’s one of those times when everything which you believe to be true, turn out to be false. India, which was going uphill as the worlds’ fastest economy took a pause, the Industrial growth slowed; inflation went up and corporate earnings dropped. Indian market which looked cheap at 26200 are suddenly too expensive at 22800, size months later.

So what are we seeing here.

First of all, some myth busting times. A lot of the gurus on TV and X are incessantly telling us that we retailers who came during or after Covid haven’t seen any fall and thus, are inherently prone to a downside risk. Well, people have short memories in the markets. The Nifty which peaked out at 18000 in October 2021 gave absolute Zero return for two years, until it took that point out again in September 2023. It fell all the way to 15800 and all the post Russia-Ukraine, Nasdaq meltdown, Crypto frauds, etc happened during that year. Well, that’s just 17 months ago.

Second, people are crying over the fact that the equity will give negative returns and how the SIPs will turn out to be a dud, etc. In summary, Indian markets are up just around 90% in 5 years, which is from just before Covid to now. So, it’s not that we have had some 40% CAGR for five years and the markets have gone to bubble territories, etc.

Thirdly, a lot of this S Naren kind guys have been crying about valuations being too high for more than two years. The wolf will eventually come one day and then they claim to have prophesied the fall. It’s kind of nonsensical to keep predicting every year that the markets will fall and of course, in one or the other year, they do fall. This is nothing but rabble-rousing to popularise your asset allocation mutual fund product.

Let me put this straight. A retailer is here to first make some money. He does not even have assets to put in an asset allocation fund. This all financial planning nonsense which is being served by influencers and mutual fund touts telling us to buy gold and real estate and FD and equity and how to allocate x% to Large caps, Y % to mid caps is pure bullshit. You are telling this to a guy in his 30s who is only trying to put 10-20k in markets to buy gold? I mean, will he buy 2gm gold with that? And will he buy handle of a door of a flat with 20k? How do we even allow such gobbledegook in the name of investor awareness.

Asset allocation is right but only for someone who has at least a million dollars to allocate. For everybody else trying to make some money of their hard earned savings, the only thing which works is equity. It has the highest liquidity, maximum transparency, lowest cost and taxation and above average returns. You don’t trust me? Try buying a plot of land or a bar of Silver and show me the contract note you received on your email. Oh you didn’t receive it. Yes, that’s the point.

So the first thing you must do is to remember that we are in the biggest wealth creation two-decade period this country is going to witness in the next 50 years. We will go from 3 to at least 12 Trillion Dollars, even at the slowest possible growth rates and the absolute amount of money that will be made will be stupendous. So the only thing you’ve to do is to remain in appreciating assets- Equity, Either through buying good quality stocks directly or through equity only mutual funds. No bonds, no asset allocation nonsense until you’re above a Million Dollars.

One more thing which Im sure the folks are wrong are regarding the small and mid-cap universe. They’re such hated these days that nobody wants to even touch them by a one meter pole. And friends, the first rule of investing is to buy what’s hated. And buy when there’s blood on the street and right now, there’s a huge spillover around.

I generally avoid predictions because it’s a fool’s errand but Id assume that the excessive selling has taken every last ounce of froth out of anything and everything. Any stock which could have fallen has fallen; anything which was expensive is not anymore; anybody wanted to dump $10B in a stock has done that. So the only thing left is for the markets is to go up.

Id take you to one more myth. When the markets hit 13K in January 2022; it fell around 10% so sharp that the bets were off. We forget such moves because we are being told they never happened. And then the rally to 18K happened in six months period. Please remember, the markets will fall 15-20% every year or two and these people who ask you to buy at 26k will beg of you to sell at 22k. They’re in the game of stock entertainment and commissions, you are here to make wealth and change your life.

Don’t even think of getting off the boat; it might have already sailed ahead!

A Clarion Buy Call

What a week it was! Everything just went down and out and then some more. Mid and small cap index lost close to 10% in a week isn’t a joke. Everybody who manages public money is running over each other to come on TV and say that they were the ones who spotted froth in the mid and small caps and that they were smart enough to allocate to only large caps.

There is a line to claim who went to cash the earliest and how they’re the smartest fund manager and anyone who was still invested is a novice; someone who hasn’t seen a market cycle and how only someone who is touting asset allocation and has been here for 30 years is the true guru and so on and so forth.

The amount of pessimism is unbelievable. Ive been in the market for close to 7 plus years and except Covid, I don’t recollect any time when the pessimism was so stark. The difference is that there isn’t an obvious reason to attribute for the fall and the relentless selling by FII and now even by HNIs is strangely without a visible backing. In 2022, it was Russia-Ukraine, or the rise in yields in the US; in 2018, it was the LTCG or the loss of some election by the BJP. Here, there is none.

Everybody is unanimous in believing that the market can and will go down but everyone is still looking for a way to intellectualise this opinion. I mean, if India was expensive, then it is less expensive now; if our growth was slowing down, RBI has infused a lot of liquidity and cut rates and also the CPI number was lower than expectations; if the earnings were terrible for September quarter, they are less bad in December and so on and so forth.

So the point is that there is no one reason on which everyone can unanimously agree to blame for the crackdown in portfolios.

What am I seeing here!

I was and until am a believer in psychology of the markets. I claim no special insights into prediction the tops or the bottoms but I believe in cycles of the markets. I also am a strong believer in the inherent growth of India and still believe that the bull run which started during the depths of Covid in March 2020 has a lot of legs to run. That market saw us go from 7500 to 18000 Nifty in October 2021 to a drop of close to 15% to around 15k and from there to 26k nifty in September 2024 to now around 23k nifty. A mere 3x in 5 years isn’t a mega bull run, especially if you take it on a five year just before Covid low basis, index has only gone from 12k in February 2020 to only a double now.

I was getting a lot nervous in late December when my stocks were going up pretty rapidly and was wondering whether a top was being made. The top, however, is not even close.

Friends, tops are made when everyone is bullish and has made a lot of money; when you are not thinking of nifty going to 20k but betting your house on it going to 50k; when the worst stock of your portfolio is up 20% in a week and you’ve made 5-10x on stocks you don’t know much about. Its counterintuitive but the top is made when there is no seller left in the market and everyone simply want to buy. That’s when the final hurrah is made and the stocks can’t go up anymore.

Similarly, the bottom is made when there is no buyer and everyone only wants to sell and run away.

This is what I am seeing right now. We have gone down sufficiently for any or all froth to vanish and one thing which all of us can agree is that there is no pockets in the market where there is any kind of froth is left- F&O trading frenzy has died; PSU- defence and railways are mostly down 35-65%; so are EMS, PLI type or even capital market stocks. TaMo is down 45% and RIL, HDFC Bank and Nestle have given zero returns for 3 years. So what else do you want now!

As the next week unfolds, we might see further downside or markets can go up, who knows. What I know for certain is that when there is blood on the street, you go out and buy and baby there’s an absolute carnage on the street. Everyone is certain that all rallies will be sold into and whenever there is a bounce, the markets will fall down to even lower levels and all starts on the upside are false. Only until when they aren’t and then the rally which will start will be so ferocious that people won’t even believe that their portfolios have doubled in no time. I was extremely scared till today first half but the way the bloodbath continued, it made me remember the days of April 2020 when I went all in while the smart people still predicted nifty at 6000 in June 2020. Well, it never happened.

I don’t know if the markets will stop going down. All I know is that if it does, you’ve to turn even more bullish and if market falls another 10%, start putting every penny you have in stocks. This is a clarion call to buy, buy and buy. Your friends and neighbours are now running around to buy gold; it’s time to buy stocks like there’s no tomorrow.

The next phase of this bull market will take us to places we can’t even imagine. The amount of wealth which will be made will make the believers rich beyond belief and I am sure we will look back at February 2025 as the time to buy when we got scared and sold out.

The Point of Capitulation

I was writing this in my journal yesterday that the point of capitulation was either yesterday or very near. And I believe we have just hit that point in morning trades of today. Market sold off massively from the word go and all bottoms fell off in the small and mid cap before a sharp recovery pulled certain stocks way back in green in the second half.

What I mean by the title is that when markets fall significantly and relentlessly; when no logical explanations to describe the carnage sounds reasonable; when all buying the dips fail and the entire world is shit scared to take the name of the word Stocks/Equity; that is the exact point when major bottoms are made.

So imagine this scenario- S Naren of the ICICI MF went around the town dissing the SIPs in not just Small and Mid caps but in equity itself; fear was being spread that the SIP Sahi nahi hai and you’re going to lose all your money in SIP to a public which has just put in 26000 crore plus in January 2025 through SIPs! Imagine the BCCI stopping kids from playing cricket.

Ive had a thumb-rule to predict the market. When the Hindi newspaper Dainik Bhaskar puts the fall in Sensex on its front page, it’s the bottom or we are almost there. What I mean by this is when a general newspaper not interested in stock markets to sell itself wants to tell its readers who are not the regular consumer of financial news that there is panic in the markets, the panic has basically hit the roof.

So that aside; here is my views on the markets:

India is undergoing a massive shift from being an also ran economy to a major first world type economy with extreme pockets of wealth driving the opulent and luxury consumption through the roof while the aspiring middle class will try to a- imitate the rich by buying better goods and services and also thanks to the structural shift in savings behaviour, will put a larger portion of their disposable savings into market linked products- MF, Direct Stocks, Insurance, etc.

Ive also learnt a few things in my journey of now seven plus years of investing that an individual investor is inherently advantaged against a fund manager trying to beat an index due to sheer compliance issues and as well as compulsion to mirror/beat an artificial index. So an individual investor can very well buy one or two good stocks and compound at superlative rates and beat the pants off anyone else in the markets.

Also, and this is entirely my opinion that you have to have larger stakes in what you own. You can hardly follow 10 companies in detail and are best suited to hold less than 10 stocks at a time with good concentration in each one of them to allow yourself to move higher up the value chain, as the stocks do well. It makes no sense to have 20 shares of a stock which went up 20x.

So Ive been pretty heavy in concentrating my portfolio as you’ve read all this while and Im also trying to examine what my style actually is. So for me, the most important thing is to buy and hold really profitable businesses with simple operations, zero to near zero debt, high dividend payouts and good margins. This sound pretty easy, isn’t it.

Now look around and count the fanciest stocks which have ruled the roost in the last two years- Dixon, Kaynes, Zomato, Waree, RAdico Khaitan, Ethos, ManKind, PB Fintech, etc. Add to this the railway and defence PSU and some metal stocks. I owned none of them. Not a single share.

And how have I performed? Well, my portfolio was up 100% in CY 2024 and 120% in CY 2023; zero % in 2022 and close to 100% in CY 2021. How’s that for a simple idea.

The logic is simple. One stock can and will change your life. For me, it was BSE. Now some of you will argue what’s so great about owning a stock which went up 30x since Covid bottom? The patience to hold and not selling your winners when it fell over 60% during Covid, 60% again in 2022 and over 35% in 2024 isn’t that simple, is it? That’s the boring job of looking at the stock through the eyes of an owner and feeling that you partly own a business that’s doing well and stock price will eventually recover as long as the business does well.

Now a lot of my friends ask me what exactly a full time investor does when you only trade once every few weeks, if not less than once a month? The simple answer is that to allow your businesses to grow requires patience and the time at hand is utilised to simply learn through reading.

So right now, as the blood on the street is pretty warm, here is what I am trying to do over the next few years, hopefully:

I would love to own any business which fulfils the above criterion of either catering to India’s luxury consumption or financialisation theme. I would, however, not own them unless the price is at a range wherein I can at least hope for a 2-3x in 3 years or less. Anything which has run up a lot or is too pricey is a big no. Plus, anything which doesn’t payout good dividends is a no. The idea is simple- if Im putting my funds in a stock for two-three years and I generally don’t book profits, dividends is a way to generate some real cashflow. Also, it’s the only way to examine the truthfulness of a company’s financials. If the EPS is real, dividends will flow.

So currently, among all the financials, I am most bullish on the AMC stocks. They have got zero returns for the past 5+ years while their PAT have gone up close to 2-2.5x. This means the P/E has contracted substantially and is in a zone where earnings are going up 25-30% Yo-Y with rising dividends ( NAM and HDFC AMC trade at 2.5-4% yield currently), even the slightest re-rating will result in the stocks going up 2-3x in a short span of time.

Will this mean that I will miss a lot of Dixons, Bajaj Finance, Page or other multi-baggers? YES! Totally. The key, however, is to think like a businessman. If only one of your stock does well, you will be a very wealthy person in 10-15 years. So why try to buy 50 stocks and act like a fund manager. Remember, you are here to generate wealth, not to beat an index!

Life of a Concentrated Investor

My investing journey began over seven years ago with some stocks picked by my father for me and what a journey it has been. From zero to here over seven years, it’s been a phenomenal run. Ive had my fair share of ups and downs but over time I have become what in investing parleys is known as a concentrated investor.

I own only seven stocks- eight if you believe Jio Finance and RIL are two separate companies and the top stock is well over 70% of my portfolio. Well, if you ask any investing expert, he will say my portfolio is extremely risky and Ive absolutely no idea what I am doing and I should sell part of it and rebalance it and make it more diversified to reduce risk. I have a different opinion to that.

When you see it from the point of view of a professional fund manager, a typical fund scheme has 50-60 and even more stocks with weightage mirroring or at least hugging the benchmark index. If lets say a fund has Nifty 50 as benchmark, it will generally have more or less all the stocks of nifty 50, give or take a few here and there. How it tries to beat the market, ie, to do better than the benchmark is by going overweight in a few stocks and underweight in others. So it Reliance has 9% weight in index, if it owns 5% Reliance, its called being underweight and vice versa in case it owns 12% Reliance. And then it comes on TV and justify oh we are overweight financials and underweight IT because the rate cycle is moving south or because Donald Trump has won the election and so on and so forth. They measure their performance by beating the benchmark. So if Nifty 50 is up 15% in a year and they are up 16%, they will celebrate and be feted as the man who has beaten the market and so on.

On the other hand, I as an individual investor is not in the game of beating an index or market for that matter. I am here to make money and to sustainably generate wealth for myself.And serious wealth is not made by owning everything the market has to offer today morning. It’s made by staying invested for long periods of time in businesses which compound their earnings and hence their share prices 10-5-100-1000 times.

So when I was beginning to get serious, I had 15-20 stocks with some stocks doing good and some doing worse. It was only in 2020, post covid when TaMo and BSE really took off. So in the process of natural selection, I was smart enough to not sell my winners and what eventually happened, as you can read my blogs beginning May 2021, I began a process of elimination. I sold my PSU stocks after making 2-3x my money and bought more and more BSE and TaMo and the like. I understood the power of quality, low debt, good yield and then I understood the concept of decadal themes and 100 bagger stocks. This is when I narrowed my theme to two simple iterations- growing consumption in India and financialisation of savings. And financialisation of savings would be led by non-lending stocks was my biggest learning.

That I was extremely bullish on BSE is an understatement. I also grew as an investor and began to average up and have bought BSE and others at all prices. My most recent purchase would be at 4500 BSE and 4700 AMC. So in the end, the results have been pretty staggering.

My portfolio is up 90% this year. Almost up 400% since bottom of March 2023 and is up 50% since Budget 2023. I also have seen drawdowns of over 5% a day, regularly since the largest stock is so heavily influencing that the entire portfolio is skewed.

So what am I trying to say here. I am making you see that I am having almost a VC like mentality when the biggest winners are funded in every round at higher valuations with almost unlimited runway and distant exits. There’s a reason why sequoia has been what it has been. It had such brilliant 10000 baggers that its returns are better than any other person.

So when you are running such a concentrated portfolio that your entire networth is directly proportional to one or two companies, then your behaviour and psychology goes through a paradigm shift. You start to think in terms of where the business will be in three-five years and not how the stock price has moved up or down because of what SEBI has done or what election results tell you. It is so much easier said than done. Your heart pumps and you begin to sweat looking at 10% drawdowns in two days because just 5 such occasions and you’ll be left with less than half of where you were just a few days ago. You begin to doubt yourself when out of nowhere the price tanks and you are being told by some technical analyst that it was overbought and fell from a resistance.

So the journey to make multi bagger returns only look good from the outside. Since you are so lonely in your belief that when the things go south, the world tells you that you were just lucky earlier and the time to pay for your sins are here. The wealth destruction is at times so brutal and so furious that you simply can’t react.

The returns are exceptional on the upside though. I have been blessed to have beaten every possible index over the past one, three or five year period. The vision for some of my stocks remain the same and I am sure that what I am trying to achieve in my life is a moonshot- zero-to-billion and it can’t be done by playing small.

My life as an individual investor is going to be very, very different than any of you because I am trying to be big enough to buy percentages in companies I own. Just like RJ bought 5% of Crisil or 5% of Titan and made his Billions. Every successful investor has made 95% of his wealth by owning huge quantities of less than 3 companies; everything else has been sidekicks

Weekend Musings- November 2024

Indian markets have finally made a semblance of a bottoming out formation with a massive short covering 500 points rally today. So what are we seeing

Over the past two months, with relentless FII selling, our markets have corrected just over 10%, technically entering the correction territory. What I’m seeing is that with a lot of froth being taken out and most large caps down close to 20% from their all time highs, markets are definitely a good place to be.
I certainly have remained an India Perma bull and in any case, in my humble opinion, we are in the middle of a multi year bull run and this is somewhere in the middle when we throw away the skeptics and move on to higher highs.
Psychologically, most people have been waiting for a correction and people don’t wait for such days in the middle of a bubble but in the skepticism phase. So going by the logic of market cycles, we are nowhere close to a top.
The FII selling, for whatever reason has made valuations a lot reasonable which means whatever the amount of cash our people had on the sides can now be deployed.
It has also proved the fact that in this bull market, most Individual investors have made a ton of money and every supposedly smart investor has not even come close. The dumb retailer has certainly been the best performers .

Further, it’s evident that our great experts have only been momentum chasers because they were very happy to buy whatever went up and then come on TV to intellectualise their purchases.
Now coming to what I feel is the undercurrent all about.
Just look at what’s happening to stocks which are within 5-10% of their ATH – Capital market plays which refuse to go down since the party has only begun. With low float and huge outperformance, these yesteryear’s small caps are now knocking on doors of the large cap indices and the funds have to buy them at higher prices, which Keeps the price afloat. What sustained fund buying from passive funds can do was best evident in case of FAANG and now Nvidia so this is just the beginning in many of our names like BSE type.

Also the last decade heroes are finally biting the dust one by one, with Asian paints being the newest of the lot. This only proves that their cycle was over at the peak of Covid and history always rhymes in market. This lot Will possibly give next to zero rerun in this decade and money, especially index money Will make an exit fast.

Anyone who wants to make money needs to remember that index investing doesn’t make any money unless you really stretch it out for five-seven years to average the volatility out. I’ve been extremely blessed to have owned BSE for six plus years now and it’s not even a question that it’ll at least be a triple from here in two-three years. Simply because the earnings Will compound massively. It did 345 crore PAT this year which is close to 1400 crore annualised! At current market cap, it’s just 45x almost trailing earnings growing at 25% Q-o-Q and 100% Y-o-Y. Even with all the regulations on F&O, just because of the sheer size of our market, it’ll do at least a Billion Dollars in Sales in three- four years . To give you a perspective, the Intercontinental Exchange which owns the NYSE does over 3.3Billion Dollars in a quarter. So the runway from here is massive. No doubt BSE Will be a $25 Billion company soon and maybe a $100Billion company in next ten fifteen years! The time to sell BSE is still 5 years away!

So to wrap things up, it’s an unbelievably good time to redeploy in the markets since every year we have this 10-15% drop when people say it’s getting all doomed but it never does. India continues to remain the fastest growing economy and we are getting incredibly rich as citizens. A lot of that money Will find it’s way in luxury spends and a part Will be financialised through stock market. That’s all the theme there is! Stay invested, stay bullish!

BSE- to the 🌙

What a run this stock has had over the past week- up well over 40%! It’s up over 80% in less than two months and of course, with the hype in media, we all know that it’s the most buzzing stock of the moment.

I have been a perma-Bull on the stock, not from yesterday but ever since I discovered it in 2018. So what is that I am now trying to convey which I have not yet said multiple times over.

First of all, this is a loud scream to say that it’s the biggest stock since the Covid lows, up over 44x from the now adjusted price of Rs. 75.

So today I am trying to gauge what’s lying ahead of us and how the market will play out the FOMO in the stock.

BSE, as I have said earlier is on track to do well over a 1000crore PAT this year with a revenue of roughly 2500crores. Even at current levels of trading, it is poised to grow the revenue multifold over the next two-three years and in no time, by FY2027-28, it should be a 5000crore revenue company at the very least with close to 2500 crore PAT. With the kind of multiple expansion which generally follows in such stories, it will command the valutation a Dixon or a Trent does and the very early signs of that were witnessed this week.

This week was an indication that the PMS type, the HNIs are getting restless and are finally throwing in the towel and buying the stock. One Amit Jeswani who jumps around on TV with a lot of such fancy names gave a five minute pep talk about the virtues of the stock and how the stock will make so much money and then confessed that he bought it at 3400! That was on Tuesday.

This is the point I am trying to convey- retailers have already made 5-10 times their money in the stock and the biggies are just about to get in. FOMO in stock market is the biggest wealth creator for long term investors. These people who claim to be the greatest investors can’t embarrass themselves by admitting that they missed out on a stock which is 40x since Covid, 10x since March 2023 and up 40% in a week! So now they will fall over each others to buy some quantity and run on CNBC claiming that they have discovered BSE!

Just the way that Ramdeo Agarwal still claims to have discovered Hero and Bharti. So the thing is, BSE is most likely going to be the stock of the decade- the poster boy of the rise and rise of Indian Capital Markets- eloquently capturing the power of Indian retailers. And all these funds managers who in my mind are nothing but momentum chasers will sell their kidneys to claim that they have always been the first to discover BSE!

This is that moment when the gush starts!

Imagine the bell ringing before the flood-gates open in a dam. After some time, the flow of the water takes control of itself and everything else. This move from 3000 to 4000 in a week is that moment when BSE has joined that league of stocks which were seriously missed by the big boys.

Imagine Tesla in 2020 or Jockey in 2010 or even Bajaj Finance in 2015. Once the big money gets in, there is no looking back because all these people will redo their models to add BSE’s past performance to claim, of course falsely that their funds have always been the best performers. This is how the game is played and all I can tell you guys is that every single share of BSE is going to be worth its weight in 24 carat gold.

Let me add one more point. The float of BSE is very limited- there are only 13.5 crore shares of the stock. So once people begin to buy and hold, a smaller additional demand results in greater price movement on the upside. This was visible in Nestle, OFSS, Jockey, Eicher and so on. So every share you have and are not selling is a share less available for someone else to buy. That pushes the price up each time there is additional demand.

Now the thing is, most of these fund managers are over 1000-5000crore types. So even if they have to add 1% of their portfolio to BSE, they’ll buy close to 50 crore of BSE shares. That is roughly 12 lakh shares at this price. And when the price moves up, they are compelled to add more because relative to the market, it’s performing even better. And thus, the shares vanish from the market and the price moves in a parabolic trajectory.

If you don’t trust me, go see how a mega cap like Apple or Amazon or Nvidea over up 20-30x in two-three years. BSE is still just at $6 Billion market cap.

With the kind of PAT coming in, it won’t be a big deal if it’s $20B by the end of this decade.

So I can only say one thing- hold on to your shares, let someone else take credit on TV. It doesn’t matter to me because as long as the price moves up, I am making real money!

September Musings!

The last month and a half has been extremely kind. Portfolio recovered over 20% plus since the budget day lows and what a smart recovery BSE has shown.

Even the benchmark indices have hit record highs with Nifty scaling Mt. 25K and Sensex cruising past 82,000. So what are my views and what are we happy about today!

A lot of people have been talking about the markets having moved up a lot. I have a different view in this- a lot of times when people think that the markets have moved up, they compare it from Nifty 7500 in March 2020. They assume that we are up over 3.5x in four years and thus we are bound to falter. They conveniently forget that Nifty was 6000 in October 2008 and was still 7500 in March 2020. So in effect, zero return for 12 years! In that way, we are only up 4x jn 16 years which is worse than a poor FD rate!

So for Nifty to even deliver its annualised compounded returns of close to 14-15% over long term, it is obvious that this decade will see bountiful of returns, only as a reversion to mean. Even at 60000 Nifty in 2030, it would only be 10x in 22 years! That will only be 11% CAGR over 22 years! So by the same logic of people saying markets should fall, I’m saying markets will double and double again in the next 7-8 years and still be cheap!

Now coming back to BSE. Like I’ve said in the past, with the kind of volumes it’s generating, its revenues can easily compound at 50% plus levels and which will only mean its PE being rerated to a much higher levels and sustaining for a long, long time. It’s an at least 10x in this decade, If not more.

Now let me come to something very close to my heart! Three of my companies have finally hit the coveted milestone of ₹ 1 lakh crore market capitalisation this week- OFSS, Colgate and HDFC AMC.

All three have either been a doubler or a tripler for me and the fine rerating melted my heart away! Colgate in particular has Been the star this year, already up almost 80% without even being mentioned in any news publications!

The moral of the story is, if you do good research, stick to your companies and avoid the temptation to buy the hottest defence PSU or the latest Chemical stock or the new Zomato; you will make a lot of money! It’s important to make money, it doesn’t matter if you buy Paras defence or Colgate!

One of my friends wanted to buy Paras defence because it was going up but unfortunately went down. It all happens when you latch on to the latest fad at the last leg of a bull rally and can’t get out in time. This, happens but the best is to avoid being stuck, take a loss and redeploy capital elsewhere where you know what you have bought.

So I would urge all of you to remember the good old adage, don’t eat junk! If you can sit tightly though this mega, mega, multi year bull run, you’d do exceedingly well by the time we are in 2030 and nifty itself is around 80K then!

Stay bullish on India! Stay invested