Monthly Archives: October 2018

Happy Diwali -the first thoughts

dear friends,

what a year 2018 has been for investing. Starting with an upsurge where investing was just about buying anything and seeing it go up to the current state in October when:

a) you have more predictions on nifty levels on the downside than upside

b) your broker is stunned that you have a buy order and his first sentence is we will need the payment today as our terminals have huge pressure (this situation is better now than it was in September)

c) investors celebrate both the closure of the market at 3.30 and all holidays

d) you love stocks in your portfolio that fell the least not those that had highest potential

e) you find solace in the fact that hardly anything has been spared beyond large IT, pharma and consumer and thus as a rare first investor returns are more or less aligned to a substantial melt down

f) whatsapp groups (I am on none) only talk of negatives and social media investors turn philosophical with endless quotes of Buffett, Graham, Howard Marks.

g) there is endless fascination with nbfc fall and business models overlooking that beyond a dewan housing almost all others have fallen in line with mid and small caps where they belong

h) the same sectors that looked bad in January look like the most delightful ice cream sundaes. I remember how I was trolled in dec 2017 and January for recommending pharma and mid IT

i) there is greater belief in selling before the next seller and least conviction in buying particularly in mid and small caps

j) a leading tv channel finds more viewership in getting only technical analyst and day predictions than making any case for value investing

k) your broker instead of telling you what looks good through research of his broking house wants you to tell him how the market looks and himself has lost all sense

l) there is least interest in magazines and broking house coverage of Diwali dhamakas Patakas or picks

m) the fortune of investing is now only taken to be dollar, crude and fii activity

n) it is already assumed that elections could be rough and would impact markets

o) the most credible business leaders are not in focus while investing contrary to several notions that quality of management is one of the critical guiding factors in investing. Any promoter speaking well of his company is equally being doubted

p) At a recent investor carnival, there was more interest in trading momentum and short term than what I thought was the very purpose of the carnival with some long term investor speakers even opting out


if I notionally step out of this gloom debate above and try and think what positives could there be to attract investing I think I get my answers in simplicity. Most gloom is usually in prices and the same scrips that looked like revered jewels 💎 in July or earlier now look like touch me not.

i think 💭 another leading fact is all is being tainted (not painted) alike.

Yet history goes against being overtly negative. Distress times make assets cheap and smarter money pops in to make better gains. Historically currency 💴 depreciations of the magnitude of 15 percent odd have been followed with huge rallies in succeeding year as scrips become cheap not only in price terms but also currency terms.

there are many positives that are bound to play out sooner than later. Many banks have seen stability or reduction in npa, defaulters are selectively coming back to back and the recent example of Essar would in by assessment be just one example of many to follow. I personally think it is impossible that the nbfc shakeout doesn’t create very strong nbfc leaders who gain from the weaker players- the sector is critical to SME, MSME and post demonetization is a liquid for the economy. Bank head said themselves say there are no npa’ with nbfc and the function in an efficient model to break a large chunk of capital into smaller parts to cater to funding utilities that banks cannot micro manage. Even otherwise nbfc are themselves the largest customers of banks. I find it impossible to believe that aspirations of people to own 🏡 houses, 🚗 cars, motorcycles 🏍 or to buy clothes will be reduced as if the entire earning power of 🇮🇳 india will come to a stand still. Recent commentaries from many leaders indicates that the current impasse in the economy is better than demonitization and things should get back soon.

i recall in December I think it was 26th post demonization on 9th November I had visited malls instead of my annual winter break and tweeted things were looking up. I personally took the call to invest more and go against the fears. Needless to say the rewards were much to my satisfaction. What followed thereafter was a huge rally and all of demonization worries were buried. The search went from choking economy to digital economy and several companies that catered to it. PayTM was one unlisted example that excelled in this. Slowly the momentum spread like butter on a hot toast to other sectors and india was looked upon as a huge growth story. Senses and nifty targets flew in and every person in town had a success story to say in his portfolio. It was believed across social media and investor conferences that multi baggers are routine things and anything less is not worthy. No wonder excesses cropped in till they were against reset with GST. 

Again post GST and a reset in market, the debate started and I too was a believer- buy organized sector and sell others. The play caught momentum and soon was a to be taken for granted story.

Suddenly nothing is being believed. Even giants in paint 🎨 sector that have record of giving you more than market gains even if you bought them at highs every year are disbelieved. As if we won’t paint our homes, cars will come paint less or when dented will remain so, white goods will no longer be painted- I think ppl think even white is not a color 🙃

There will be no home improvement, RERA is a fantastic progression and should see the noticeable credible builders excel. I think the confidence of end users in apartments or homes will rise if defaults come down and much of this will inure to benefit companies that cater to this. I personally feel real estate prices may not rise like the past given speculation was largely led by accumulation with low initial payments and a cash led grey market.

such is the mood or sentiment that even when say a Christian Lagarde says currency wars “could” slowdown global growth and india stands apart, the same “could” is taken as “should”. Corporate America is going through one of its highest growths and I do not believe the US will end up as an isolated country with no trading partners. While the USA market may cool off given yields money is something that always flows in pursuit of opportunities. Some will go to emerging markets which have been under weight for a while, some in private equity- I see more of flipkart, paytm kind of deals happening, some in acquisitions- don’t forget in GDP india is a high growth country and much of india’s assets have become cheap just by currency and liquidity pangs. News of acquisitions has a reset mechanism for the companies in the sector concerned. One should not lose sight that Indians have lost the opportunity to own fantastic businesses like paytm, ola, flipkart and have allowed the opportunity to go to foreign ownership. Fair enough. Every asset will find some buyers.

at a personal level ask yourself do you really think you can’t make 💰 money owning stocks and see your own history. Where was the return the best? In times of investing in drawdowns. Almost everything is on sale and there’s is hardly any reported promoter selling. In fact many companies are doing capex even now and open t acquiring assets.

I will not be concluding this write up on such a sober thought process given we are entering festivities. Pl treat this as part 1 of my write up.

part 2 will follow close to Diwali.



(no spell check done. Not an investor advisor. Views are personal)


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