Author Archives: ZerotoBillion

Isn’t this been a phenomenal run on the markets- Nifty is finally above the 20K mark and Sensex also made a new life high of almost 68K. In this scenario, why are we so nervous?

People who have made extremely large sums of money are horrified with the potential drop in their portfolio going forward- every expert and his cousin on TV, Twitter, print is predicting a mid cap correction. People saw what happened on Tuesday when a lot of these stocks went circuit down and are largely down anywhere between 10-25% from their peaks. People who were lining up to buy Railway and Defence stocks are now afraid if the Winter is Coming!

How I see this is the other way round. My investing beliefs have cemented themselves on reading the psychology of the crowd- read what’s written or is being spoken about the most and try and avoid doing what’s the safest advice. If most people are worried about valuations being too high, we are nowhere even close to the top. Nobody complains while getting rich. If people are worried that their portfolio stocks which have gone up 10x in three or two or one year are overstretched, they’re not enjoying their riches and this is the most important evidence of a bull market still maturing.

When people make money hand over fist, they cry out of joy; they don’t read negative news in the newspapers and get scared. When stocks correct when everyone wants a correction, it’s mostly not going to last. Do you remember how Adani stocks did when they corrected sometime in 2021, circuit down 30% before going up 4x towards the ultimate top. If a stock is going to go up 10-20x, it is first met on its way up by the non-believers. They want to deny the run. Oh it’s all operators, this story is false, etc. Then are the skeptics- the valuations are too high, the company isn’t making as much money as is being told, etc. In the end, everyone is a believer- the stock is the greatest gift to mankind. We are still in the skeptical zone for most stocks.

The experts, the MF walas can’t believe that they didn’t own a BSE which has gone up 13x since Covid and now can’t justify retailers outperforming them by a margin. They are not sure how they can claim to have not bought PSU Banks and Stocks when they have made decadal tops in last one year. So the ecosystem somehow wants to take stock out of retailers hands and then turn around and prove their wisdom in discovering the might of a PSU Bank or a BSE or a Cochin Shipyard. Most experts are index-huggers who buy what’s rising and then come out with a backtested study proving that they knew this ten years ago and how they are the true sons of Buffet and always buy stocks for long term- decade plus.

The funny thing is they come on air and talk about discovering a stock like NTPC, or a Dr Reddys or an ITC as if they had founded the company. Most large caps go through periods of under and over performance and if you are smart enough to hold through the troughs of pessimism, you’ll outperform by a margin.

So my two cents on this are- do your own research and ignore the market noise. These experts are only good for entertainment value- to have a sense of the crowd and nothing more.

Look at that joker Saurabh Mukherjee- he started with Ambit claiming to have discovered Eicher and Page in around 2017-18. He then turned around and sold this story of millions of mothers feeding their babies Nestle baby milk powder and how HDFC Bank and Kotak will outgrow everyone. When that bogey failed to run, with HDFC Life and Kotak and Nestle and all others underperforming big times, he began to punt on illiquid small stocks which only went up as long as someone was buying- classic operator style. If their are only 100 shares traded, and you buy 20, that the stock will go circuit up is no rocket science. It went on for a while till market began to correct. He then sold ITC only to see it double in a year. Now last I saw one of his cofounders telling why the market is wrong in valuation of his chosen few. He also began a disclaimer of his parents money being invested in his funds. The guy who began as a coffee can investor- buying and holding for decades is now down to running a quant fund- basically a momentum trading strategy. Like Modiji says- hypocrisy ki bhi Seema hoti hai.

There is one more thing I want to discuss- how to book profits. Leaving money on the table is the biggest problem we face while growing as investors. If you believe in the story and it is playing out over time, selling at the first double or even a subsequent double will possibly change your car but not your house. If I had sold BSE when it went up from 400 to 800 or even to 1600, I’d have missed the run to 4000+. If you had 100 shares, and you made 40k when you bought at 400 and sold at 800, or you made 120K selling at 1600, you missed 2.4 lakh by selling. That is you sold at a 4x only to lose another 6x you could have made without investing another penny.

Not everyday you get a stock which can go up 10x. And only once or twice in your lifetime investing career so you get a potential 100x stock. So if you’re looking to book profits, calculate not how much have you made but how much are you leaving on the table.

This has been a significant run for the broader markets- the small and mid cap stocks of the world while the larger indices have taken a breather. The PSUs are on a tear, especially the railway and defence types. So are the mid cap IT and pharma who have gone from neglected to redundant to fashionable, all in the space of two years.

The new age stocks are back to being toast of town from being roast of town in less than a year and a half. Zomato has moved from ₹40 to around ₹100 while Paytm has rallied similarly from ₹450 odd to around ₹900. This has made everyone sing plaudits for them as to how they are on path to profitability and why they are the new thing which must be owned. Suddenly, just as the price has moved up, so has all the experts in unison agreeing as to how they are much more reasonably valued and there is what they call “ a clear path to profitability” leading them to the land of milk and honey. This my friends, is what I call the expert hypocrisy.

Most fund managers who entertain us with gibberish opinion ranging from Ukraine to Monsoon to Elections to cricket World Cup to G-20 have this strong belief that they have this formula of success and they want to bless us with wealth creation. Actually, they only want us to put our money in their hands for their own wealth creation. They are doing nothing but chasing momentum in order to prove as to how they already knew that defence was a theme and how they owned HAL at 600₹ or RVNL at ₹20. This is plain bullshit.

They change their opinions according to the price movement. If the price goes down, they want to remain cautious and when the market eventually turns, they will come out and say how they told us three weeks back as to how big a buying opportunity this was. They end up owning what’s moving- hotels, defence, PSU etc.

Ask yourself if you ever heard anyone recommending HAL in 2020 or even in 2021. Did anyone tell you to buy PSU banks in 2021, except maybe a Rakesh Jhunjhunwala who held Canara bank for almost half a decade before he passed away. Everybody else claimed as to how middleclass it was to walk in to a PSU Bank branch and how they could never compete with an HDFC or a Kotak. Well, three years down the line, HDFC and Kotak have underperformed the market big times while our backbenchers have rallied exponentially.

I must admit that I too was a fan of some of these experts propounding quality investing, value investing, remain invested at all times etc. Well, hypocrisy did come out in open and in some style. Ramdev Agarwal who has been selling the idea that he has never had one rupee invested outside of equity in 40 years recently confessed that he missed the biggest bul run of 2003-07 because he didn’t invest at all! He also went on to buy zomato, praise it, then publicly thrash it and now praise it again- all in the space of one and a half years! How consistent! Anyone who claims to buy only quality- defined by high profit margins, Return on equity/capital employed can never buy a loss making startup who has not made one paise in net profit till date.

The fear of underperformance is prevalent across experts. Prashant Jain who claimed to only buy value when he underperformed big time in HDFC AMC was now explaining to Anuj Singhal how zomato has a clear path to profitability! How cute.

Among this heard, only a few who dare to hold stocks agains the tide have stood out. Rakesh Jhunjhunwala and possibly Ramesh Damani are the ones to my mind. Everybody else is just pretending to intellectualise the process of taking away our money to their offices.

I still haven’t come across one expert who was bullish on TaMo at ₹60 or even ₹120 or even at ₹200. I was, Rakesh Jhunjhunwala was and that shows in holding pattern. I’m yet to find an expert who is bullish on BSE now and also was bullish six months back, yes just six months back. For nobody on TV was.

Being bullish is bullshit if you don’t put your money behind the idea. Unless you have a significant part of your net worth behind an idea, it doesn’t count. There are now a billion people who claim to have held HDFC Bank since IPO. If anyone really held it, he would have made at least a thousand crore and wouldn’t be working as a fund manager at this age asking people to give him money. Because Aditya Puri did sell his shares for over ₹1200 crores because he did hold it since IPO. All these people bullish on Kotak should be owning half the Malabar hills as Uday Kotak said if anyone did invest ₹10k in Kotak in 1985, it would have become ₹300 crores. How many experts are worth a tenth of that!

So my only suggestion is that investing is not a process of listening to these experts who are nothing but punters. The difference between them and retail day traders is that the retail guy bets his own money!

PS: BSE has closed above ₹1250 today. My first post in May 2021 was edited to include a note that I was happy that it had closed above ₹800, which on adjusted basis was ₹266 at current price. The feeling is sweet, and so is the sound of money!

What a move it has been! Exhilarating isn’t a term I use often but it has been one such ride. BSE has gone from 400 odd levels at end of March to ₹1126/- on closing basis on September 1! Am I happy! Of course I am. My liking goes back to the 2018 when it was trading at pre bonus levels of around ₹735. It fell to a low of ₹275 and now on a non adjusted basis, it is at almost 3375/-. Over 12x move in three years is one multi-bagger, isn’t it.

Is BSE the New Game!

I wrote about BSE in numerous blogs over the years and today won’t be much different. I’m now only waking up to the reality that when you hold the stock for one purpose, it can climb over wall of worries and deliver on to altogether new frontiers while on its way to multi-baggers status.

Me or people who have held BSE bought it for the new businesses it was incubating- power exchange, MF distribution, INX at GIFT city, etc. Well, it is now firing on all cylinders in a product we all knew it was dead- Equity Derivatives.

The way Sensex F&O turnover stands today, it won’t be long before it breaks through the almost unthinkable territory of over ₹100 lakh crores on a daily basis, at least on Friday, the expiry day. It took NSE 20 years to get to this level, BSE has finally broken the code in four months, after languishing for over 30 years since Harshad Mehta scam tainted it badly.

The maths are simple- NSE does over 7000 crores of Net Profits, almost everything comes from equity derivatives. So if BSE can breakthrough to around 10% of the market share and even if it continues to charge a tenth of NSE, it’s almost ₹100crores net PAT for a company whose annual PAT is around ₹200 crores. That’s a significant jump in bottom line and the valuation game changes completely. BSE is now moving away from the backwaters to the main beach- the run up is just a reflection of what markets are seeing!

The market cap is still around ₹15000crores. You can’t value the second largest exchange of the fifth largest economy of the world at less than $2 Billion!

If ever there was a play on India’s rising growth story, it is BSE. I’m substantially invested and am more than happy to hold it for all times to come.

Now let’s discuss what else are we seeing in the markets. Indices have not done anything except going down 4% in the past month and people are extremely sceptical of it breaking through on the upside. The regular culprits- market experts are digging out parallels as to why Nifty should go back to 16k or why the mid and small caps running up is a siren song for upcoming miseries, etc but to my mind, all that is bullshit.

If I’ve learnt anything from my six years in the markets, it is that you need to hold on to your stocks through times of extreme pessimism to make outsized returns. I can’t stop telling you how BSE went down over 60% between March 2022 to March 2023 and everyone was so pessimistic on the stock. The rally on the way down was so brutal that it almost brought my portfolio to tears. The gains are for all to see, the pains are felt individually.

Everyone buys for the long term, unless either the stock does well and they sell at the first 10% up move or it does badly and they sell at down 40% and swear to god to never put a penny in the markets again.

My learnings over the period has been to keep buying at every price levels, to hold at all times and not sell either at moments of great euphoria or at extreme pessimism, unless the business has done badly. You buy into a business and as long as the company is doing well, price will come around. It has happened in TaMo, in BSE, ITC, Infosys and what not. It will eventually happen in ICICI Securities as well. In HDFC AMC and Nippon AMC as well.

PS-: here’s my take on this rally in PSU stocks. Please get out as long as the music is playing for once the music stops, you’ll have nowhere to hide. The Government is extremely consistent in value erosion through great moves like OFS, cross selling etc and the value premium your HAL or RVNL etc are getting will erode the moment government throws in additional ten percent equity in the market. This is the reason our Oil PSUs which are worth their weight in gold are valued at their price in lead. Look at IRCTC- it was the hype of 2021 and is down 40% without a buzz. And am certain that it’s going to go significantly from here once some Ministry official decides it’s time to do another OFS for a few thousand crores.

As the weekend beckons, I take a look back at some of the developments which has happened in the past two weeks and are of a lot of relevance to me, personally. Markets are on fire absolutely and the whole talk of Nifty falling back to sub 18000 has slowly fizzled though there are enough people still waiting for that elusive correction we were sure to have gotten in April, then in May and for certain in June. Market still holds up at over 19500 and in my opinion as long as this fear of an impending correction looms large, it is only going to go up to much higher levels.

Classic bull run plays are unfolding. In mega performing stocks, such as ITC or a Reliance, there’s a sharp correction of 5-10% and fear spreads that the top has been made. It goes nowhere for a couple of weeks and then once the retailers have sold thinking they got out on a high, stock moves up another 10%. This is exactly what has and will play out in both ITC and in TaMo and in other stocks.

Let’s discuss a few darlings close to my heart. TaMo came out with fantastic numbers and as I’ve been relentlessly saying, it has begun to throw big cash profits. A stock which made successive losses for five years is now making over 3000crore profit every quarter with reducing debt to add on. What was trading at negative PE to a PE of over 80 till March numbers because of earlier losses has now gone to hardly 20PE even at ₹640/-. And if it does continue on this path, it’s hardly trading at 10-12 times earnings one year down the line. So once debt goes down which is happening, dividend alone will be north of 15-20₹ and stock will be extremely cheap even at ₹4 lakh crore market cap as the PAT will be easily above 20-25k crore. That’s easily a double from here without missing a beat.

Now the second part. Tata Motors must be saluted for getting the DVR shares delisted at such a fantastic premium of 0.7x the normal shares. In its 15 year history, it has traded at best .55 times the ordinary shares. My friends will agree that when DVR was 300 and TaMo was over 600, I was screaming loud that the convergence has to play out to historical levels. And how beautifully has it played out. The TaMo management is exchanging DVR shares at lifetime high valuations with high premium, something ICICI Bank should learn. The price at which DVR is being offered to be extinguished is a level at which these shares have never traded!

On the issue of ISEC delisting, there was not even a word mentioned in the analyst call, investor presentation or alike. I am sure that this is more of a gimmick to move the needle on share price than anything else and personally, I believe that ISEC is an excellent business to own.

Reliance came out with Jio Financial de merger while ITC finally got the hotels business off its balance sheet. This makes us future owner of two more stocks and everybody with some sense of financial history knows that spinoff are the closest to free money in markets.

There’s an excellent intra-sectoral rotation playing out which is furling the rally upwards. Way back in 2018-19, only a handful of HDFC twins. Bajaj twins, HUL, Nestle type stocks moved up. Now even in FMCG, it’s not the HUL and Nestle but forgotten heroes such as Colgate joining the party. United Spirits will also now be a dividend paying stock and the re rating is happening. People who are chasing the last year’s favourites will be in for a disappointment as every bull run is led by a new leader. For this run, it’s clearly TaMo and ITC.

Now how can I not mention of the run BSE has had. It’s up 100% since it’s March 28 lows and now the business is stronger than ever. The F&O volumes at least on Fridays is well over 10% threshold and is only going to grow from here. Mutual Funds business is growing rapidly too. So earlier, I used to value the net cash sum of the part as an indicator but if the F&O turnover results in contributing to revenue, we are in for a multifold jump in the bottom line. One more thing, the buyback price is now within touching distance of the market price and I won’t be surprised if the board revised the buyback price upwards in the range of 1000₹ if the CMP will go upwards.

This has been a very hectic week in terms of corporate developments. Apart from the fact that the market went up considerably over the course of the last few months, Portfolios having moved significantly indicates that people are now waking up to the fact that this is not a false breakout. So even the long pending corporate developments are happening and let’s see how I’m bothered with them:

1. Reliance announcing the record date for demerger of its Jio Financial subsidiary is the latest one today. Anyone who has studied investing knows that the surest form of making money is a spin-off stock. The big institutions won’t own it for its too small for them and the retail will treat it as additional dividend which needs to be encashed. So after a while it might be a bit too neglected if it doesn’t go up circuit to circuit in the first few months of listing. In any case, it’s a pretty decent business and with Reliance’s money power, it can easily grow at 50% for long times to come for the base is so small! If you remember what Reliance did to Voda and Airtel, if it only does 5% of what it did then, a lot of money chasing Bajaj Twins can find its way to Jio Financial.

2. NSDL has finally announced its DRHP and BSE its buyback. How are they two related? Well, NSDL is a subsidiary of NSE and thus can only be listed on BSE, just like both CDSL and BSE are listed only on the NSE. It creates additional volume for BSE as the demand for this business is going to be huge and I’m sure it also retakes the CDSL stock. Now read this with the fact that F&O turnover on BSE has gone up over 13l crore, easily above the 8% mark on Friday combined volumes on NSE and BSE. Remember, BSE started with zero market share in derivatives( F&O) so anything above 5% is like a dream come true. It hits the top and bottom line positively.

Now add to this that the buyback price is ₹816/- which is almost in the range of lifetime high price for the stock. It values the company at 11000 crore while the stock traded at below 5000crore, as early as late March this year. This is a fantastic management returning money and rewarding minority shareholders lavishly. This reduces the share capital by 3.39%, which sounds small but in the long run, enhances per share valuation by a lot. I’m not selling a single share in buyback is certain!

3. TaMo announced an expected free cash flow of £400M plus, roughly ₹4100 crore in JLR for Q1, FY 2024. This means at the current rate, the company will easily do £2B in the entire FY, which means the company is only trading at 10x FY 2024 earnings and that’s a steal! Any company which is likely to grow its earnings from a loss to over 20000 crores will be easily valued at at least twice the current valuation! Why am I so bullish? Well, it took TaMo 8 years to cross its previous highs of ₹605 and the way it did on Friday clearly indicates a huge momentum building up on the upside. Don’t believe me? ITC crossed its 2015 high of ₹367 in February and it has gone up 30% without breaking sweat!

4. ISEC hasn’t even come out with a press release, leave alone media blitzkrieg to discuss and sell its delisting proposal. I mean, it’s the number one Investment Bank in the country and it can’t sell its own delisting! Give me a break! The only reason is that it’s all too non serious attempt to make the market realise what prized gem it’s stock is and the timing is amazing. Its stock was trading at IPO level when the news broke. Now in the middle of a new bull run, June quarter numbers will be bumper because the last June quarter was disastrous. So the market will say, why are you getting a premium company growing at 30% so cheap. And the share will get restated. In the meantime when it tries to pretend to take regulatory approvals, September quarter will be over and with such a market and a huge IPO pipeline, it’s numbers will be much better than June. The stock is bound to go up and react to numbers, once the reality subsides. Also, at the worst, at 0.67 times ICICI Bank, the shares should at least be worth ₹645. So if ICICI Bank goes up 10% with market, the price crosses ₹700. And then the management will quietly come and make excuse, oh that fund didn’t sell or LIC refuses to sell below 1200 and what not. And the delisting will be withdrawn! I absolutely am super bullish on ISEC and can empathise with the frustration of the management with the stock performance.

Look at it from the POV of the CEO. That guy has been at the helm since 2019, developed the app which is kickass customer interface, delivered the numbers but was first hit by Covid and then by a sharp pullback. So do you assume the CEO of the largest Investment Bank in India will convert his ESOPs which is 100% of his net worth at lowest price possible and exchange them with shares of ICICI Bank, trading at lifetime highs! You need to be a genius psychopath to assume this. I don’t buy this. This can’t happen. End of story! If delisting does take place at this price, my belief in common sense will certainly take a hit!

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Today I have so much to talk about. You live for days like this in markets when a gap up is not filled and markets make higher highs, stocks participate further and your favourites are on the top of the charts. Today’s move has buried all the bear talks, of people calling it a fake-out instead of a breakout and what not.

Bulls on the street are always seen as the lesser mortals- for they dismiss the macro mumbo-jumbo as nonsense which is exactly what it is. Bears on the other hands come across as the intellectualised lot- they will tell you the hundred reasons for why stocks are expensive, market is going down and the economy is collapsing. They will throw in numbers- GDP, exports. GST, money supply, inflation, PE ratios and everything else to sound somber. Well, it defies common sense that when in the end the maximum money is made when markets go up, why does people believe the bullshit!

So now that we are experiencing a renewed bull run, it’s not going away in a hurry. The last time Nifty broke out of the 12000 mark, it went up 50% before catching a breath. My best case is that Nifty is poised for at least a 25-27K move. This is the time when networths move, when portfolios quadruple and maximum money is made. I remain 110% invested and the stocks I own are slowly moving to not for sale basket.

BSE had its first breakout today when it closed above the pre bonus 2000₹ mark. Last time it was up there was in Sep 2022 and the trigger is the latest buyback news. I’ve maintained that the management of BSE is fantastically liberal- they dole out 95% of profits as dividends and announce liberal buy backs. The cash they own is almost 3000cr plus and is 35% of the today’s market cap. So just like Apple became a $3T company and the worlds best buyback stock. I will not be surprised if BSE goes up 10x in this decade with a much better business model and hefty dividend yield. It’s finally making the right noise in equity derivatives with month on month growth of 10x and on the last Friday, it captured as much as 5% of the total market share! HPX is doing a fantastic stuff in power market and the proof of that pudding is in IEX’s price- it is languishing at multi year lows in a roaring bull market.

TaMo might have missed on hitting the lifetime highs but that’s only a part of the story. Long time back, in an earlier blog, I had mentioned that Tesla makes a lot of its money by selling carbon credits. That market has just been approved in India. So TaMo with 85% plus market share in an ever growing electric car market will be a prime beneficiary by selling credits to all the supposedly polluting companies- the coal mining types.

Well, my bet on TaMo is on one more dimension. I’m looking forward for a day when India will contribute to its top line just like China does today. It won’t be a surprise if it begins to sell 10k cars in India every month for what beautiful, absolutely sexy cars it makes. Anyone who doesn’t find a Jaguar Hot or a Defender stunning or a Range Rover exotic is either a liar or blind or both.

India is going through the same moment which China had in the early 2000s. Our economy is firing on all cylinders and unless we collectively screw ourselves in 2024, we have a stable government at the centre for a foreseeable future. The biggest risk in this market is the risk of not investing! The bull is back, and it’s running! Are you?

This is the hundredth post on this blog; a culmination of 25 months’ journey. When I started, I didn’t know if I’ll write ten, let alone almost a post a week for two years plus. This is how compounding works- you start small, keep going as far as you can see, reach there and keep moving forward. In a few years, you’ve outpaced even the most optimistic projections and compounded yourself into something you could not have imagined.

So, ICICI Securities today announced the swap ratio- 67 shares of ICICI Bank for every 100 shares of ISEC which effectively means at current price of the Bank’s shares, ISEC is being valued at ₹628/-. I’ve two points to add here:

1. I don’t think the transaction will happen at this price when you’re trading ISEC shares at almost two year’s low with bank’s shares at lifetime highs. It’s a bad corporate governance precedent and will certainly dilute the premium ICICI group commands. I won’t be too surprised if all the group companies open sharply lower tomorrow. The fear will be that the moment ICICI Pru or Lombard shares fall the next time, Bank will get them delisted at throwaway prices. It’s almost as bad a price as Vedanta offered in 2020. There’s no premium at current valuations and is an affront to minority shareholder rights.

2. I do believe that the shares will rally because market will sense that the group has to raise the price as ISEC shares are in effect a warrant to buy ICICI Bank’s shares with the current .67 times valuation being the absolute floor. The arbitrageurs will not allow the shares to fall for simply because unless the Bank shares collapse, markets will not let the arbitrage widen. Mind you, it’s the beginning of a booming bull run and not the depths of a multi year bear grip that prices will be allowed to remain depressed for far too long.

The reason I’m so sure that the price will be revised upwards is because on Monday the 26th, over 1.65crore shares were traded and price didn’t crash a bit. So someone did want to take delivery and raise his bargaining power with the management. Remember, you need at least twice the votes of public shareholders in favour to get it delisted which means ICICI group needs 2/3 of total shareholders to vote yes. So anyone with over 9% total shares can veto this deal. LIC has been a big votary of value in Vedanta deal when it put its foot down and asked for ₹350 per share price. So a big FII and LIC can easily veto this deal if they combined have 9% shares which in this case is a possibility.

Anyways, even at this price, you are not getting junk but a fantastic company which is a big contributor to the India growth story. ICICI Bank is currently $78 Billion market cap and in a ten year period, there is not reason for it to not be a $200B company. I’ve reached a stage where I’m not selling any shares I own currently unless the business is going down the dumps.

You sell a stock if you think that the ceiling has been hit, think Berkshire Hathaway. It’s trading at more that $500K per share and people thought $5000 was a big deal. If you’re as excited about the India story as I am, just imagine how big India’s banks will become when the country is a $10 trillion economy! There’s a fantastic interview of Manish Chokhani on CNBC on this matter and it’s a great watch.

So my hunch is that the bottom has been made in ISEC and in days to come, market will rerate the stock upwards. I will at least want a parity on the swap ratio, a 1:1 to tender my stocks though as you know, I’ve always believed that ISEC is worth a lot more than that.

PS: one stock I do absolutely regret not owning despite always having it on my watchlist is ICRA- owned by Moody’s.

So the mount 19K on Nifty and 64K on Sensex are behind us. The market has made a classical- nobody could guess kind of a breakout on the upside, opened higher, and climbed both the erstwhile life highs and the new highs as I mentioned without much fuss. Anybody who went home last Friday couldn’t have believed any such move was even remotely possible and this is exactly what I have been discussing with my friends and in the https://zerotomillion.business.blog/2023/06/20/life-highs-2-0/ .

And today’s move on TaMo to ₹590, which is almost its lifetime high is a tribute to the inherent strength in this stock and this bull market which to nobody’s realisation is being led by the two duds of the past 8 years- TaMo and ITC. Yes, people haven’t still noticed that TaMo is up 50% YTD, while ITC has doubled in the past one year and still people are obsessing about Asian Paints and HDFC twins and what not.

Though TaMo didn’t cross ₹600 today but I’m sure it’s only a matter of a few days that it breaks out of this eight year range and finally regain the lost glory, just like the cars it produces these days. And am I Delighted? Yes I am! For I hold this stock going back December 2017 and have seen it plunge from ₹430 odd levels to ₹60 in 2020 and then all the way back to where it is today. Here’s a link to my first blog, written in May 2021 when I narrated my thoughts on this issue, reiterated in multiple earlier blogs, especially the Hello Tata and Hello Tata 2.0!

Random Investment Thoughts

Hello Tata!

Hello Tata 2.0!

So what do I feel is happening now! I believe that once a stock breaks out of a multi year range, for ex, HUL in 2014 or Reliance in 2016 or ITC in 2022, it at least doubles in the next one or two years to make up for the lost time on returns. And of course in the meantime, news changes, more positive news and developments happen, company cleans up its balance sheets, restart paying dividends, demerge here and there etc. This all is the accompanying cheerleaders which allow new money to pile in and stock to move higher. TaMo has been a dud for 8 years and just as the company, the stock has to reimagine itself now.

People’s hatred for this stock is legendary, worse than that for ITC. People come on TV and criticise it just like the left criticise the RSS. It is almost intellectually suicidal to buy TaMo. Well, my conviction in it goes back 2017 December and I’m all too happy to keep holding on to what I own currently and possibly buy if I can. The vision to see, courage to buy and patience to hold is easier said than done!

I hold a consistent view that it’s not a ₹2 lakh crore company but at least a $100Billion market cap company, which is ₹8lakh crore company. I might be wrong but even if I miss the target by half, it’s a ₹1200 stock.

I also would remember the legendary investor, Shri Rakesh Jhunjhunwala who came on TV and announced his stake in TaMo with the same belief which made me buy and add- a company with ₹3 lakh crore sales can’t be trading at 20000 crore market cap! The sales this year are likely to be at least ₹4lakh crore and so should be the market cap!

Cheers on a new high!

We all woke up to this 11.52PM exchange filing that the board of ISEC is going to consider a voluntary delisting on June 29,2023. This is a most strange corporate development from the stable of ICICI Bank which has never attempted such a move for any of its listed subsidiaries, let alone itself. So here is my rational and what I believe might be the course or events.

Firstly, for those of us who remembered the failed Vedanta delisting story will recall that the trigger for such a move is depressed price behaviour. Vedanta went up 3.5x in the next one year following the failure of its delisting offer at ₹87/- share. So one primary trigger is that ISEC is horribly undervalued and I have long held that view in multiple earlier blogs.

Now let’s discuss the motive. Vedanta has a promoter who wanted to gain at the cost of minority shareholders but in this case, promoter is ICICI Bank, an institution with no one person or a group of persons as beneficiary. Also, the management with hefty ESOPs can only make money if they can exercise the right to sell for which a listing is essential. Otherwise, all your ESOPs are worth a lot but essentially locked and illiquid. Second, once you delist, you can’t relist for another three years at least. So the current management will be extremely foolish to give up its liquidity for a better life.

The second point is negated to the extent that this is a swap delisting and not a cash for share one. So in the swap ratio to be decided in the board meeting, we will get ICICI Bank’s shares in return.

One thing is certain- Unless the price at which ICICI securities is delisted, if it does get delisted, is at a significantly high premium to today’s price, yes even today’s 620₹ is nothing; the premium ICICI Bank gets for its corporate governance will erode tremendously. Simply because the bank shares are at a lifetime high while the securities shares are trading at the pit bottom. So if they cash out at the retailer’s cost, forget about the potential ICICI AMC listing.

The fact stands that the company is marching ahead at this point and the eyes are on the outcome of the June 29th meeting. I opine that unless they announce a 1:1 swap, valuing the company at around ₹900, there will be a disappointment and it will be seen as a steal deal. I’m not sure if I really know how it will play out but I for certain has been a big believer in the ISEC potential and feel a bit cheated for we are at the beginning of a revival and the shares would have taken care of themselves!

Coming back to what the markets are sensing- today, over 1.6 crore shares worth ₹1000crore plus traded hands and the stock still closed up 11%. On a decent day, hardly one lakh shares used to trade. I believe we’re going to witness at least a ₹100 move more going into the 28th for anybody and everybody, including the institutions who wanted to sell have sold today. 1.6crore is 20% of the available float and is more than 80% of the total shares held by public. So it just wasn’t the retail fishing today. Someone big went in to buy big. I can smell 💰 here! So exciting times ahead!

Today’s move was a classical bull market rally- markets sold quite sharply yesterday, just around at the life highs levels, fell a bit more today and then made a massive one side up move. Anybody who sold his shares has certainly missed the bus. The best thing about such moves is that they make you fearful- oh this is the top, the market is moving south, this is the pullback we were waiting for and markets drop 2-3% in a day or two and then you sell. In a day or two, markets regains the lost ground and boom, you can’t enter at a higher level than you sold at!

So the belief gets cemented that people have burnt their hands buying the dip so much that they’re extremely scared of any reversal, a minor pullback is enough to throw them off and panic sets in. This is the phase when even through you’re making money, you’re so afraid of that 10% correction CNBC or Zee Business was telling you or that report from Goldman wrote about is that you’re extremely nervous at the slightest of the bad move. And, people have now been waiting for that correction for two months while markets have gained strength over strength. Portfolios have recovered a lot more than we anticipated but nervousness pervades the market. This makes me so happy because the more people doubt, the higher the market rallies and ultimately this doubt will lead to FOMO and acceptance which eventually will lead us to much higher levels and a booming bull market.

So coming back to a more recent events. The SEBI order barring IIFL securities from client acquisition is the answer to all the questions people have asked me about my belief in ISEC instead of an Angel or potentially a Zerodha. The problem with all Lala type companies, and that includes the new age tech entrepreneurs as well is that once they are on a high, they’re after a fancier lifestyle- Malabar Hills Apartment, Porsche and the business takes a beating. Also, since the gains are so concentrated that the owner is more likely to either let the competition mount an attack or do some hanky Panky to further increase his net worth by all means, not all of them fair. We have had numerous examples of large broiling houses vanishing overnight for that extra ounce of greed.

Now I’m not saying that it can’t happen with an ISEC. Only that the rewards are not disproportionate for its CEO to fudge his accounts because like we have seen with leading ex Bank CMDs, all their earnings are clawed back. And most of the employees are system driven because at the end of the day, reputation of the $100B bank is at stake. So the incentive to fudge is minuscule compared to the punishments which could be meted out. And this safety net of having a bank behind the broker is what makes me so bullish on this stock. The Indian capital markets are going to explode over the next decade or so and anybody who manages to just do his boring job with a 7-8% market share and doesn’t blow up is a guaranteed ten bagger. It’s almost like buying an HDFC Bank in 2002-03. And best part is they have no state owned banks to compete against. If ISEC simply manages to remain in business, it’s a $25B market cap in ten years by default. That’s more than a ten bagger!

TaMo is very close to its life highs and the move has been significant for a few reasons. It’s market cap used to be a fraction of Maruti’s and about half of M&M’s. Over the past one month, it’s lead over Mahindra has gone up to almost 35k crores and tha gap with Maruti has narrowed to less than 80k crores. There was a moment in automobile history when Tesla crossed Toyota in market cap, way back in 2020 and then went up 5x from there. Over the next one year or so, TaMo will cross Maruti and that will mark the end and a simultaneous beginning of an era unparalleled in Indian markets. That’s still a long shot but well, this elephant has only managed to deliver zero returns in past 8 years, peak to peak. Similar consolidation breakout led ITC to 450 while HUL went 5x and Reliance went up 4x after crossing the peak. Moonshot, maybe. Possible, hell yeah!

PS: if you haven’t yet noticed Oracle, please do! Thank me later