Author Archives: ZerotoBillion

So I won’t be humble about it- BSE has been a huge multi-bagger for me. From the time I first bought it to its recent highs, I have seen it drop 60% and then go up almost 25 times from the COVID lows. Now the thing people generally ask is, how much is enough and when should one sell.

The question is most relevant because only yesterday Buffet sold his Paytm position at a 40% loss after having held it for 7 years. This is when he’s on record stating that his favourite holding period is forever. So even the Oracle of Omaha can’t suffer losses long enough.

So one thing which I have learnt is to cut loses, book it once and for all and get out after waiting for about three years. I generally wait two- three years in first buying a position and then building it sufficiently sizeable. If the story doesn’t work out, I generally let it be. Like for example, ISEC has been a huge under-performer in the past two years but I have had my faith intact. Similarly, earlier, I sold Sun Pharma, Care ratings, IOC etc at either loss or nominal gains after keeping them for well over three years. So in my case, three years is an absolute reasonable timeframe before getting myself to change my original opinion.

This is the cost of holding an extremely concentrated portfolio. My top 2 stocks would easily be over 70% of the total value while top 5 would be over 85%. That’s how I have kept them and I have no fuss about it, at all.

You become a serious investor, and make serious money( life changing) when you finally realise and rise above the following myths:

1. Portfolio sizing – it is important so that your winners keep growing while losses drop in value. It is however misunderstood as selling winners to maintain an arbitrary weightage of stocks. A rising stock which goes up from 5% of the portfolio to 50% of the portfolio doesn’t mean higher risk! The risk is to sell it because it has risen to 10% and then miss the next 4bagger!

2. Diversification- I currently hold ten stocks and would be happy to cut them down to 5 in 5 years. Further, in all practical terms, HUL, Colgate and ITC are one type of stocks. So the real holding would be 8! That’s too many stocks to own actually. You can’t even track that much on a daily basis. You should not own a stock which if doubles, doesn’t take your portfolio up significantly! a lot of people claim to own a lot of multibaggers among their 30-50-100 stock portfolios! Even if then you have a 25 baggers BSE, a 15 bagger DMart, your overall returns are just around market!

3. Experts are dumb, institutions dumber- the earlier you realise this, the better investor you become.

So what I am trying to tell you is that in a lifetime, the most successful investors have made their Billions in one or two really huge multibaggers. RJ made at least 2 of his 5 billions in Titan, Damani first made in HDFC Bank and then in DMart itself, Nick Sleep held Amazon and Costco for decades. So if you’re lucky to have found one ten bagger, don’t be foolish enough to sell it to book gains and appear smart. I’ll illustrate it-

Assume that you invested 2l in BSE during covid at ₹200( adjusted price). It hits ₹1000/- and you sell it for 10 lakh. You made 8lakhs. Now the stock went up to 2400/- share. So actually you lost 14lakhs! Your 2 lakhs would have become 24lakh! And not everyday you can lose so much money by being on the table. So the real money is made in holding.

And most importantly, average and size up! Always! The biggest positions must become bigger when they’re moving beyond imagination. RJ couldn’t buy 5% of Titan in 2001. He waited till 2009 to build that up, at prices almost 30x his original prices.

Thus, don’t be in a hurry to sell your dream stocks. They might be on their way to make your dreams a reality!

Okay so let’s not be humble here. Anyone who did hold any amount of BSE before March 30,2023 and still holds the same quantity has made a ton of money. For the stock has gone up almost 5x from around ₹410 to ₹1900 in just around 7 months! That’s massive with a capital M!

And, to those of you who know who I am and have bought BSE because I kept telling you to over the past three years, it’s Diwali time and I’ll appreciate a couple of bottles of Gold Label! Thankyou for saying thankyou

So here are some facts to the run! BSE has gone up over 20x since covid lows of now adjusted price of around 95₹. It’s up almost 8x since IPO price of around 280₹( adjusted, again) an most importantly, this is just the beginning! I’ve written maybe over ten blogs in the past two years highlighting the same thing but since the story is now playing out before our eyes, it’s a great time to revisit it.

The power of low float with low fund interest is magical. BSE has a total of 13.5 crore shares, held completely by public. Nobody, except a Zerodha and a few others hold even close to 5% of the shares each. As on April 1,2023, BSE was a micro cap with about ₹5500 crores market cap. Thus, it wasn’t even worth enough to be a small cap and thus had no fund or index which mandatorily bought it. Even as on June 30,2023, domestic funds had only 0.18% of the total shares. Thus, it was completely neglected even when the price had crossed ₹650-700.

Once the equity derivatives began to generate significant interest, genuine rerating led the stock to move up the market cap to around 10-12k crores and alongside came fund interests. The funds- MF and Insurance and other PMS houses do nothing but to chase momentum. So they’ll not buy when the stock is cheap but only when it has moved enough to outperform the market so that they can then buy it, do a backtesting which proved that if they had bought it ten years ago, their fund was the biggest outperformer. Plain nonsense but that’s what they will say on TV. Just like that idiot Mukherjee claims to have done with Eicher and Nestle in his early days.

So in a market where the so called alpha generation is rare, not having a stock which has beaten every other index or stock black and blue is blasphemy. Thus, more and more funds began to buy during the September quarter and held over 8% at the end of it. Now, the key to remember is that when a fund buys, in order to even have the stock to have a weight of 0.5% of their portfolio, they will have to buy shares worth in crores. So the demand of a share suddenly goes up. The daily trading volume which used to hover at less than 3lakh shares a day suddenly moves up to over 10-20-50 lakh shares a day. And this creates punters to track and trade, creating more price action.

Now remember this. The stock is moving up with increased sustained demand. As when one fund buys a rising stock but the other doesn’t, the other can’t justify it! So the rest of the funds also have to buy it and that keeps up the demand high for a longer duration. This is the reason why HDFC twins. Bajaj Finance, Eicher kept on moving up beyond logic. Or even a Dmart or a Titan or an IRCTC.

Now did I say anything about the low float? So once the demand is high, the power of limited number of shares limit the supply. As against 13.5 crores shares of BSE, IOC would have something like 1000 crores shares or even an ITC would have close to 1242 crores shares.

Thus, the moment a fund punches an order to buy over 50k-1lakh shares, the limited supply forces the order to get filled at a much higher price. This creates additional action on the upside and the punters- day traders and the likes kick in. Thus, the price moves up. This spiral move on the upside is what we saw in IRCTC and DMart or even in Nestle in the last few years.

The funds also have to at least pretend to hold the stock for a few quarters. And additional fund buying helps shore up the NAV so they all look geniuses. This is what’s happening with BSE, folks!

On a personal note, I intend to hold BSE not for now but for the foreseeable future because it’s the business, not the price which matters. With rising derivatives volume, BSE is now beating NSE every Friday on turnover volumes. So the profits estimates are rising with every passing week. And that’s real! BSE last year made an EPS of around ₹13 per share, which is likely to be around ₹22 this year but will jump to over ₹40 next year! That’s what the market is liking. And because the company needs zero additional cash to run its operations, the entire money will come back to us in the form of dividends. So the yield will be humongous!

So, it’s party time now! Hold, hold it firmly! There might be sharp, vicious 20-30% corrections on the way but hold it tight!

One multi-bagger is enough to change your life. If you have one in hand, don’t sell it for your life depends on it!

It is during the period of volatility, the period of sharp pullbacks in the midst of a mega bull run that your heart races faster and you dwell even more on what you own and what’s going to happen to them.

Everyone enjoys stocks going up. It’s the simplest truth of stock markets. Even more so, everyone hates to see their stocks going down, especially when they had finally moved after a long period of no returns. Now the very nature of markets is that it fluctuates on both sides. On a longer time horizon, good stocks go up and bad stocks go to zero.

It is pertinent to mention that in a mega bull move, in the rallies when your portfolios double or triple in less than a year to year and a half, sharp 10-15% correction is essential. It takes the froth out of the system, allows stocks to get out of the limelight and the feeling of calmness prevail. I remember between August 2020 to March 2022, my portfolio went up over 3.5x! That obviously was punctuated by a lot of sideways months, months of negative returns to weeks of mega returns. You sometimes make more in a week than three years in a Bull Market!

A good portfolio tends to go down lower than the markets in bad times while going up faster than the average during good times. Over the next one year, between March 2022- March 2023, my portfolio was down 25% and during the last week of March 2023, I was scared that the bottom was soon to fall!

As keen an observer I am to the noise of the crowd, I also observe my emotions closely. Having been around for more than 6 years, I do not generally take the daily price fluctuations too seriously. I however also felt a sense of adrenaline till last Monday when the portfolio went up 25% in less than 2 weeks. So I also grew worried that maybe the near top has been made. The correction which we all waited for finally came and being down 5-6% from the top feels alright.

In big moves, you don’t get more than 10-15% corrections in leading stocks post which they consolidate for some time and then breakout on the way up. BSE to my mind will spend a few days around this 1200-1300 mark before taking it out onwards to at least 1600-2000. It has been the best performer but also been the best behaved performer in this rally. On no days did it go circuit up or down; on no days did you wanted to sell but couldn’t or wanted to buy at a price but couldn’t; on no days did the entire market came out and praised you not there have been reports raising price targets to the moon. Remember IEX, IRCTC, DMart or even Eicher before they stopped? Everyone owned them, everyone was pressurised into owning them and the media was obsessed over it. Every expert came on tv and said he discovered Eicher in 2010, the other fellow claimed he discovered it in 2008 and one fellow claimed he bought it in 2005. There were funds who wanted to be associated with this idea- just like everyone was buying chemical stocks in 2020-21.

I was once wondering what a decent price target for BSE will be. Now this is extremely subjective for it has already been a huge winner for me but still, it’s my blog so bear with me.

One, I deal in market capitalisation and not price of stocks. So BSE today is $2B plus, just around 16-17k crores. It earlier wasn’t a part of any indices, not even nifty small cap so no fund flow went into buying BSE. Only an occasional MF scheme owned it and most institutions ignored it. BSE until six months back was valued at around 5k crores so it wasn’t even a small cap stock. Now at $2B, it is suddenly an error if the MF house doesn’t own it because it has outperformed the market by a distance, further, since nobody owns it substantially, an active manager can buy it and claim to have beaten the market. This fund flow alone will be good enough to support the price substantially.

Once the price hovers around and over this mark, it gets included in small/mid cap indices so the passive flows kicks in. Now the funds will have to buy irrespective of the price because it’s the mandate. This creates a rush between funds and institutions and the final factor- the scarcity premium comes in. BSE has 13.5 crores shares in total. So the moment someone comes in and wants to put in an order for 1lakh shares, the price moves up because there is not much shares in the markets. People like me who didn’t sell it at 800 will not sell it at 1600 because we know how this game is played. This is how the scarcity premium gets factored in and big institutions have to buy. This is how Bajaj Finance went 300x in last decade. The first 5-10x was genuine, the next 2-5x was initial fund buying and the last 10-20x was big institutional buying.

So I am sure by the end of this decade, BSE would be a five digit stock. It has been a ten bagger since Covid. Another ten? Who knows!

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.