Novices bolt from Dalal Street ….
Dalal Street has a deserted look nowadays.
Barring a few die-hard punters like me, there is no one around.
Even MMB is deserted.
“This kind of market is best described as maarkaat. Better remain inside your house and lock the gate” a distinguished silver member said.
“Breather .. at last market is closed today ..” another punter added with a sigh of relief.
We cannot blame the novices for bolting because the Bears have butchered the Nifty and the Sensex.
In fact, the market capitalisation of the entire mid and small-cap has been slashed by a whopping 50%.
BSE “B “group that consists of Mid and small caps market cap has reduced by half. It was Rs 24 lac crore in Dec 2017 and now at 11.55 crore. Similar market cap level was seen in March 2016 when Sensex was at 25K. For B group this is bear market.
— sunil damania (@sunildamania) October 1, 2018
Even the Nifty and Sensex are significantly down.
NIFTY 50 INDEX 1 Month Return
1 stock down ~50%
3 stocks down 20-35%
10 stocks down 10-15% pic.twitter.com/0oBHtOr3FH
— Jayesh Khilnani (@jayeshkhilnani) September 28, 2018
Some experts tried to soothe nerves of the novices by pointing out that despite the carnage the markets have outperformed other investment classes and given a net CAGR return (after inflation) of 12% since 2011.
Few data points to calm you in market melt down
Annualized return: 7% p.a
average inflation: 6%
Net returns: 1%
Annualized return: 18%
average inflation: 6%
Net returns: 12%
— #RenukaJain, FCA ?? (@RenukaJain6) October 1, 2018
However, it has had no impact on the novices.
… while Billionaires storm in
In sharp contrast to the attitude of the novices, Billionaires are rushing to Dalal Street to scoop up high-quality stocks at bargain basement prices.
Billionaire Harsh Mariwala, the visionary businessman, always leads from the front.
He stormed into L&T Finance a few days ago and bought a massive chunk of 1.3 lakh shares.
Harsh Mariwala of Marico bought 1.3 lacs of L&T Finance on 21st Sept as per exchange filings. He is also an independent director at L&T Finance
— Darshan Mehta (@darshanvmehta1) September 26, 2018
His total holding in L&T Finance has now swelled to 5.3 lakh shares.
Post this acquisition, Harsh Mariwala owns 5.3 lakh shares (0.02%) in the company.
— BloombergQuint (@BloombergQuint) September 26, 2018
It is worth recalling that L&T Finance is one of the all-time favourite stocks of the Billionaire.
He bought his first lot in December 2016 at the throwaway price of Rs. 80 when the markets were undergoing a similar crisis. He explained that L&T Fin is going through a “Major Shift Towards Value Creation” and that he has confidence in the abilities of the management.
— CNBC-TV18 (@CNBCTV18Live) December 30, 2016
— CNBC-TV18 (@CNBCTV18Live) December 30, 2016
In fact, it is clear that the modus operandi of the wily Billionaire is that he waits patiently for stock market crashes before venturing out to buy his favourite stocks.
NBFC sector fears are exaggerated: Nirmal Jain
Nirmal Jain of IIFL is also a visionary.
He is a recently crowned Billionaire and knows the entire NBFC sector like the back of his hand.
— Shekhar Gupta (@ShekharGupta) March 17, 2018
Nirmal Jain has sent the clearest message to us that the fears relating to the NBFC sector are exaggerated and that we have to dive in without hesitation and grab the beaten down NBFC stocks.
I think NBFC sector fears are exaggerated. Sector has robust regulatory framework, is growing well helping financial inclusion-nation’s growth by delivering credit to underserved!Excessive panic can cause heart attack in a healthy body. Equity sentiment alwys moves in a pendulum
— Nirmal Jain (@JainNirmal) September 26, 2018
Mein Saalo Se Bol Raha Hoon Ke Ya Toh News Accha Hoga Ya Bhaav Accha Hoga: Madhu Kela
Nobody can dispute that Madhu Kela is also a visionary.
He single-handed transformed Reliance Mutual Fund into a behemoth with his brilliant stock picking skills.
In fact, when Pharma stocks were in the doldrums, Madhu Kela had sent the clarion call that we should not miss the opportunity to tuck into high-quality stocks.
“The valuations surged from Rs. 1 lalk crore in 2008 to 10 lakh crore and now it has slumped to Rs. 5 lakh crore …. However, none of these companies have ever suffered a loss … Some of these companies are now available at 1.5x book value. I have never seen such valuations in the past 25 years,” he advised (see I Have Never Seen Such Low Valuations In Past 25 Years: Madhu Kela Gives Buy Call).
Needless to say, Pharma stocks are now surging like rockets and investors are grinning from ear to ear.
Sonia Shenoy charmingly described the surge as the “return of the laggards”.
August 2018 has been about return of the laggards
Is this a tactical rally or a structural change ?
Axis bank up 18%
ICICI bank up 13%
Sun pharma up 13%
DRL up 12%
Lupin up 9%
Underperforming power, coal stocks rallied in august
NTPC up 10%
Coal india up 10%
— Sonia Shenoy (@_soniashenoy) August 31, 2018
PHARMA STOCKS IN FOCUS#SunPharma Gets US FDA Nod For Flu Injection, Infugem Injectable #TorrentPharma Gets US FDA Nod For Anti-inflammatory Drug, Mometasone Furoate Ointment#Cipla Gets Tentative US FDA Nod For Renal Drug, Solifenacin Succinate
— SONAM MEHTA (@sonamcnbcawaaz) July 18, 2018
Best Pharma Stocks To Buy | Karvy Research Report Karvy has issued a Research Report on the Best Pharma Stocks To Buy after Q1 FY19E https://t.co/7XzGbXPtKw
— Multibagger Stocks (@multibaggersorg) September 23, 2018
Anyway, now there is a sense of déjà vu with regard to NBFC stocks.
In his latest interview, Madhu Kela reminded investors about his buy call on Pharma stocks.
“I was the first one who came to your channel and recommended buying pharma stocks but at these valuations — I will stick my neck out — you very rarely get these kind of companies down 30-35% and if it is for some fundamental reason, then one can understand that something has gone wrong. But if it for technical reason, then these are the times you have to stick your neck and put your money,” he said.
“Main saalon se bolte aa raha hoon ki ya to news acchha hoga ya bhav acchha hoga, jab news kharab hai to bhav acchhe hote hain or jab news acchha hota hai to bhav kharab hote hain (I have always said either news is good or the price is good. If news is bad, price is good and if news is good, price is bad)”, he added.
“If you really understand the company and if you have faith in the management, these are brilliant opportunities to buy these companies. Wherever the management is solid, they will be able to weather this storm and come out stronger,” he said with a big smile on his face.
Basant Maheshwari has echoed this advice:
Basant Maheshwari #OnCNBCTV18 says don't think Govt can let NBFC sector fail. Think earnings will support market going forward, should go & buy high quality names right now, think it’s a good time to invest in quality names pic.twitter.com/fanh6Hp7Mh
— CNBC-TV18 (@CNBCTV18Live) September 24, 2018
In addition, Kotak Institutional Equities, which normally has a pessimistic view of the market, has confirmed that there are no liquidity fears in the NBFC sector. They have cheery-picked 7 NBFC stocks of the highest quality and fail-safe status and recommended a buy.
Prima facie, it is better if we obediently follow the directives issued by the Billionaires and visionaries and tuck into high-quality banking and NBFC stocks whenever there are dips. Otherwise, we will cut a sorry face when the stocks surge and revert to their glorious days!