Samvat 2078: What to avoid in the market? Overvaluation, fashion, momentum and FOMO: Madhu Kela


“I would have liked to take enough position in my highest conviction – Divi’s Lab – and hold out over the past 20 years. It’s been a thousand bags, ”says a market veteran. Madhu Kela.

Last year has been great, Happy Diwali indeed, but will next year be this happy and brilliant?
We sincerely pray that the next year will continue to be so happy and rewarding for everyone around. Going back to my particular point of view, the past 12-18 months have seen an unprecedented amount of wealth creation, the greatest and best I have seen in my career. The Indian stock market has added more than $ 2 trillion in the past 18 months in terms of wealth and global markets have created around $ 60 trillion in wealth from the March lows.

So obviously these things are unlikely to be extrapolated over the next 12-18 months. While remaining optimistic there will also need to change expectations in the future and I think making money will be more difficult. You will need to be very agile and open to the rotation of your thoughts. We will have to be open to investing in new sectors.

Shankar Sharma says you inspired him to buy liquor companies. Is this what happens this Diwali, people are celebrating the past year and drinking more?
It is very simplistic to say. Whether we are sad or happy, we always drink alcohol and that is the heart of belief. I don’t want to discuss specific stocks. But these companies continue to be on a compound growth path for India and this will continue for a long time.

But on a more serious note, I want to point out one thing that life is like a Ramrajya and everything is good because everyone has made so much money in the last 12-18 months. But let me caution that there are some pretty clean pockets in the market where there is overvaluation and maybe we don’t have the skills to value a lot of these companies. But from my past experiences, in 2002 I was told the same thing that I don’t know how to value a dotcom business, but ultimately the earnings and cash flow has to justify what investors buy and let’s say what. quarter and the next quarter there. is a lot of disturbance; many commodity prices have gone haywire, our logistics costs have gone haywire. It is therefore necessary to be very careful in the investment.

You have to know the subject very well. Otherwise a quarter or two of bad profits like what happened in drug companies and stocks are down 30%, 40%, 50%.

While the history of India remains very strong, we are all very optimistic in the medium and long term but you have to really know the companies well. Don’t be fooled by tips, don’t be fooled by the trendy, don’t let that feeling out because so many people have made a lot of money. Don’t buy what’s available. I’m just putting a word of warning here. Look at what has happened to the market over the past two weeks. So many stocks corrected over 25% in two weeks while Nifty lost just 500 points.

You miss a little thing and the actions are penalized. So, this is a word of warning. However, let me say that there is still tremendous value in the market. We are talking about PSU banks. They have increased a bit further over the past month. In the event of a downturn, I would still be a buyer. Textiles as a sector of which I am speaking for the first time. It looks very interesting. The government showed up and said the export target of $ 35 billion is being revised to $ 100 billion over the next five years. So if $ 65 billion or more in textile exports are to happen, even if it’s 60-70% instead of 100%, there will be a lot of winners here.

In real estate it is still very early in my opinion, although stock prices have risen a lot, but any downturn in real estate or ancillary companies related to real estate still offers a lot of value.

The pharmacy has seen many corrections during this quarter and the following quarter, as these logistical issues are resolved and US FDI begins to visit companies, there will be selected opportunities even in the pharmaceutical space. I would avoid overvaluation, fashion, momentum and clearly this fear of missing out (FOMO).

Sensex a lakh when and when?
It will happen. We don’t know when. But I can bet it will happen in my lifetime for sure.

What is this stock that you wish you had bought or sold too soon?
I would have liked to take enough position in my highest conviction, which was Divi’s Lab and held for 20 years. I don’t think I would have needed to do anything more in the markets. He’s been a thousand bagger.

Diwali is a celebration, but today maybe we want to look back and understand what you would say was one of the big mistakes of investing in the career?
Just selling the winners too early and not doing enough work on them to keep pace and not allocating enough capital to the companies that you have included in the past. So I took note of it, I hope we will correct it in the future and I hope the markets give us another chance to do so.



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