Hitesh,
On similar lines from a 2-3 year perspective what are your thoughts on some banks like Federal bank, DCB Bank and for that matter BOB (which was showing strength before corona). They have been down and out and now also out on favor?
Think about the kind of impact Corona can have on newspapers and banks. First of all we have to accept that the effects of Corona are not going to go away soon and might last more than we expect.
I think all these financials like banks etc are going to face twin problems of NPAs and poor credit demand.
Even with jagran and db corp I think there is the problem of increasing pledging. So that explains the perils of trying to find value. 
Maybe the pleding is priced at these prices for these newspaper companies. But I am not biting.
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Hi Hitesh, would be nice to know your thoughts on management quality of lupin and Sun Pharma alsoā¦as they were earlier domestic pharma leaders in last Bull runā¦thnx
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Hi @hitesh2710
A serious question. Would be of great help if you could share your valuable inputs. The US market recovery is shocking to say the least. A lot of stocks are now above pre corona levels. ( Of course one can always say, FED action, liquidity etc. But still this is a bit too much) . I dont buy this usual theory that market is forward looking blah blah. Nobody knows how things will pan out in this situation. I wont be surprised if Indian market also behaves that way. (Since there is a large FII participation).
So where is the efficient market hypothesis?. Do you think some of the proven investment principles are no longer applicable in this age?,
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Hitesh Sir,
Could you kindly provide your views on LTTS vs Tata Elxsi pls?
Both have ensured that they arenāt too reliant on the auto sector anymore and LTTS in particular seems to be at a decent price
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Sun pharma promoter built the company from scratch and even after the drubbing it received during last 5 years from its top, its market cap remains above 1 lac crores. Most competitors swear by Sunās business strength. Problem I see are some poor capital allocation decisions in form of Ranbaxy takeover, wasting money in NCE, in a personal capacity, investing in dud like suzlon etc.
The other aspect is the prolonged problems with USFDA compliances.
Lupin I dont have much idea about promoter quality.
But if the sectoral tailwinds are to play out and pharma index were to outperform, both sun and lupin look set to outperform the markets in next few quarters, months.
Product quality wise the products of both companies are top notch.
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Its difficult to fathom the movements of markets and specifically indices in the short term. And the reasons thereof.
I am not too much of a theoretician and hence avoid going into such thoughts. Idea is to focus where tailwinds are and look at individual companies.
On the ground realities in both India and USA are indicating tough business conditions going ahead but market movements are influenced by a lot of other factors too.
@Mukundks I dont track LTTS or Tata elxsi.
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Thank you for pointing out and emphasising the lack of proven benefit of any of the drugs currently being tested against COVID19. So important
Efficient market theory is debunked by many including warren buffet
Markets donāt trade efficiently, they are either overvalued or undervalued by a massive amount
Some of the cases against efficient markets are stocks that have slightly different symbol being bought. If market were efficient there should have been sellers to take advantage of slight profit. Latest example below:
Agreed. As you mentioned, its always overvalued or undervalued. But the current situation is different. We havenāt had such an event for several decades. I was asking in that context. In fact, company CEOās themselves dont have any visibility.
I had read that zoom thing. That may not be a good example since the market cap is small.(I mean the other company)
Whenever credit is curtailed by government policies like increasing interest rates or increase in reserve ratio, the effect is that capital goods donāt have funds to develop
Existing developments funded by loans are difficult to complete
In the current scenario we have the governments of major economies doing the opposite. They are introducing extra money into the system
In Uk, government is paying employees and self employed salaries on behalf of businesses while production has taken a hit
So we have more capital chasing lesser amount of goods. This creates and will continue to create a lot of inflation however the excess capital also finds its way into equities
Further with no real loss of actual income but limited possibility of using the income via holidays, eating outs, etc only excerabates the problem of more funds than markets can absorb, further driving up share prices and inflation.
Right now inflation is not an issue so governments can afford to do it.
It will become an issue at some stage as it canāt continue
In fact USA was trying to increase interest rates and reduce quantitive easing. Itās just I think pushing the problem for the future
When it does happen it will hurt but markets are inefficient to price this uncertainty
A little bit of inflation is good as well as the government can increase wages or give an effect of increasing wages and keeping the common man happy without loosing much in real terms for itself and the industry. Labour never takes a decrease in salary so we have inflation. If there was a deflation, labour would go on strike if governments reduced their salaries.
Only when inflation is starting to get out of hand and simultaneously reducing money from the system will mean loss of employment for many and recession. Right now I donāt think itās recession yet in USA and Eu economies
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āIn the short term the market is a voting machine but in the long run it is a weighing machine.ā
Ben Grahamās quote captures the current marked mood in a single sentence. As explained by @edwardlobo with governments globally pumping in money and surplus money sloshing in everywhere, ultimately part of the money is going to find its way towards equities.
But if we consider situation over the longer term of say few quarters, ultimately earnings dictate the trajectory of stocks and markets.
My approach is to look after things which are in my control and that is to buy companies where I am confident of my identified triggers (usually earnings growth) playing out. Directions of markets, macros etc are things not in my control or in my circle of competence.
I think sometimes we tend to overanalyse stuff and get stuck therein. I think its always a good idea to keep things simple.
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Hello Hitesh Sir,
Joined the forum few days back. Spent hours reading various threads. Extremely impressed by the insights and knowledge the esteem members have. I am quite intrigued by your approach ā very clear thought process and strong conviction. Lot to learn from you all.
Very naive questions.
(1) Why some scrips fall more than other in similar category ā Market leader likes of Bata or Asian paint did not fall much when covid impact on Bata specifically is as bad.
(2) When do you know if a scrip has bottomed out and risk of further fall is low? why I am asking is as many a times I keep looking for a bottom and in process miss out ,it goes up by 20-30% in just few sessions though fundamentally not much has changed (market operators? What if it goes up and stay there, is it indication of strong investor interests?)
Thanks for your patience with newbies.
@hitesh2710 ji,
I was surprised to see that Sundaram Finance was very much resilient among the mayhem in Banks and NBFCs. It fell the least among the bigger financial companies (almost same as HDFC Bank) and also not participating in the short rallies that these companies undergo, for example today.
Theyāve huge exposure to CVs, and so this price action is quite surprising to me, especifically when Chola finance with similar exposure and good management was hit hard.
What is your take on that?
Hitesh Bhai,
Whats your view on UPL at CMP in view of good results & recent Arysta acquisition? Now worlds 5th largest agrochem co & growing at arate better then competition.
Efficient Market Hypothesis is just that hypothesis. Itās been rejected by market again and again. Behavior Finance model is good replacement for EMH and even looks more practical than EMH. Market are efficient in only long term but in long term we are all dead so there is no practical significance of it I.e. itās hard to use EMH to make money.
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According to Dr Sanjay Oak who is heading the task force for Covid in Maharashtra, they have got some encouraging results by combining HCQS and Doxycycline. Maharashtra continues with HCQS after reducing the dose. Death toll continues to be high in the state though stable considering the increase in overall number of patients testing positive.
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The fall in Bata, was from 1900 to 1000 and then it quickly recovered to 1300-1400 kind of levels and is now sideways. But Asian paints fell from high of 1900 to levels of 1400-1500. Bata in effect suffered nearly 40% while that in Asian Paints was lesser to the tune of 20-25%. This was due to the dominant market leader position of Asian Paints. In fact both these companies are acknowledged high quality companies and hence whenever there is a big fall the guys who have always wanted to buy quality companies but could not because of extreme valuations jump in to buy and arrest the fall. These guys know that the problems the companies face are only for a few months or quarters and since they plan to buy for 5-10 years they take these opportunities.
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For scrips to bottom out, it usually requires consolidation for a long time in a range and then a move above the range with bigger volumes. Other signals of reversal are faster retracement of the last major leg of the fall. Or sideways consolidation for long time and then the scrip posting 3,6,12 months high on a consistent basis. Or successful reversal patterns completed like inverted head and shoulders pattern, double bottom or triple bottom etc. There are many patterns of bottom formations and one can look out for those in charts.
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Hi Hitesh Bhai,
Any idea on Birla Tyres? The stock has zoomed over 400%
I cant see much information about this stock in screener or any platforms except for the news of JK tyre acquistion on Birla tyres dated : 2015
Likewise - Indag Rubber, TVS srichakra, Balakrishna ( we can possibly see that the shares are trying to breakout - am assuming this is just a short demand bounce due to the exhausted lock down)
Dear Hitesh Sir - thank you for your continued guidance, and Iāve been off late a silent observer of your invaluable posts. I see that you had Muthoot Capital Services back in 2012 (and may or may not still have it). I took a substantial position in my portfolio back in 2018, and the stock has been coming down since due to a multitude of factors including but not limited to NBFC crisis, Kerala Floods, Auto slowdown, etc. Requesting your views on the stock whether a revival could be in place, and in a significant way once the Auto sector picks up (am betting on it would with people preference changing to having own vehicles post Covid, and more so the 2 Wheeler space where Muthoot primarily focuses on) or any other tailwinds you see in the time to come. Many thanks, and appreciate your time and help in advance.