Why I’m Looking Beyond the Nifty

The SOIC Podcast

The episode examines the current choppy phase of the Indian stock market, drawing direct parallels to the prolonged stagnation period of 201

Key takeaways

• Nifty 50 is trading at ~19x P/E after falling nearly 14% from its September 2024 peak, mirroring the time-correction phase of 2011-14.
• FlexiCap mutual funds show extreme dispersion over the last three years, with top performers yielding ~9% CAGR while others lag at 1.5-3% CAGR.

Main topics

• Indian market stagnation and historical cycle comparison
• Passive investing strategies and mutual fund selection

Notable quotes

India is a stock picker's paradise if you do it well.

Conclusion

Investors should recalibrate expectations toward normal long-term returns (10-12%) while adapting to

Transcript preview

Speaker 2 (0:00) Hi investors, welcome back to SOIC. So today we are going to make this podcast due to this current market situation. Where a lot of people are scared, a lot of people are confused. So today we have with us Ishmaru bhaiya, we want to learn from his perspective how the market is looking. And what are the past experiences that we can apply now. Speaker 1 (0:19) So basically Amit, what is happening in the market at this time? That last, I think. from June, I would Speaker 2 (0:29) say, Speaker 1 (0:29) from the Speaker 2 (0:29) time Speaker 1 (0:29) the election results came, since then the market has been choppy. I think today we are almost into the 27th or 28th month of choppiness on an index level. Speaker 2 (0:39) We Speaker 1 (0:40) haven't Speaker 2 (0:40) done Speaker 1 (0:40) index anywhere. Speaker 2 (0:42) And Speaker 1 (0:42) broadly, when I talk Speaker 2 (0:43) to Speaker 1 (0:43) an average investor, although I don't Speaker 2 (0:45) do Speaker 1 (0:45) active investing, a lot of people have not done that well because market stagnation. I have Speaker 2 (0:51) a Speaker 1 (0:51) short summary to show you. Here I have the returns Speaker 2 (0:56) of Speaker 1 (0:56) FlexiCap funds. These are the returns Speaker 2 (0:59) of the last Speaker 1 (0:59) 3 years of FlexiCap funds. These are basically sorted out by the SID levels. If we look here, some of the FlexiCap's, if we put the top 3, like 9 % of the per annum return. We are looking at the SID level returns. But if we look at Speaker 2 (1:19) the Speaker 1 (1:19) bottom, like Motilal's is around 7%, Attyabhillal's is around 7%. Then some of the well-known ones have actually given barely 2-3 % CAGR. If we look at the example here, then 2-3 % CAGR is going on. TGM Flexicap's 2-3 % CAGR is going on. Kotak Flexicap's 1.5 % CAGR is going on. Speaker 2 (1:40) So, Speaker 1 (1:41) in the last 3 years, if someone is doing SIP, I think I understand also that some people have pain in the market. Or it's been 3 years, and they don't Speaker 2 (1:51) have Speaker 1 (1:51) money, they are doing SIP. But we will also see in the end that when we do SIP, in which year we give epic returns. But here I am showing monthly SIP. Then I will show one time of lump sum also. What is going on in lump sum? First we will see in last one year. So in last one year, I think in Flexicab best category, 8.9 % is return will be there. But if we see top, 8-9 flexi cap and show this out of 43 and the remaining ones have been a negative over last one year from today's day. But if we look Speaker 2 (2:23) at Speaker 1 (2:23) 3 years, we Speaker 2 (2:23) will see the numbers Speaker 1 (2:23) again in mid-term. So I think we will see in 3 years. Some other ones have done decently well. 14-15 % CAGR has also been there. Because from early part of Speaker 2 (2:35) 2024, Speaker 1 (2:35) from September or from June to September, the market was still epic. After that, the market spiked out. Speaker 2 (2:42) Right. Speaker 1 (2:42) To show what I want to tell you, let's look at the indices after coming to the stock scans. I came to the stock scans and on September 2024, Nifty was at 26,178. This is the price return index, not the total return index. This is divided by the Speaker 2 (2:59) dividend. Speaker 1 (2:59) So, I see Speaker 2 (3:00) the Speaker 1 (3:00) price return index. So, it's been 738 days since when the Nifty has been down by nearly 14.35%. Right? So, Nifty briefly broke Speaker 2 (3:11) its Speaker 1 (3:11) high in September 24th, in December 25th. But since then, the Nifty has again broken down. Similarly, if I look at Nifty 500, what I Speaker 2 (3:21) am hearing from Speaker 1 (3:21) Nifty 500, I can see that the high was on September 24th, 24,490. And today, it has been 738 days. It's down by nearly 11 % since then. Right? So, for many people, such market environments become frustrating. Like, if you don't do active investing, because if you do active investing, it will be halted. It will be different. So, here, the first thing that we have to do is that we have to learn from history. Okay. What bear markets are needed in Speaker 2 (3:54) Indian markets? Speaker 1 (3:54) What bull markets are needed? And how long these market phases have lasted for? Okay. I think, If we look at Indian markets and different phases of Indian markets, let me put it this way, there are six massive bull runs in Indian markets. And whatever bull run has come, the returns have been different. For example, if we start with bull runs, the first bull run, which is called the Karshad Maida, Speaker 2 (4:23) lasted Speaker 1 (4:24) from 1990 to this year. Speaker 1 (4:30) In the 21 month period, Sensex went up by 50%. Speaker 1 (4:43) That was one crazy bull run. After that we did time correction. Actually people didn't know that index was in time correction for multiple years spam. Index was in time correction for many years. But after that what happened is that if we Speaker 2 (4:57) remove Speaker 1 (4:57) index then a TMT bubble was created. Telecom Media and Technology TMT TMT bubble. So if you see from 1995 to 1999, you will Speaker 2 (5:09) see Speaker 1 (5:09) the entire Gama chart in the long run. From 1995 to 1999 Epic market then peaked out for 2 years. You can Speaker 2 (5:16) see the Speaker 1 (5:16) chart Speaker 2 (5:16) of Speaker 1 (5:16) HSCL, I think it went to some 2300 rupees almost from a price of 10 rupees to that level in a span of 4 years. And a lot of IT stocks Infosys, Wipro, HCN Infosys had a postural boy of IT. Speaker 2 (5:31) It Speaker 1 (5:31) went Speaker 2 (5:31) to Speaker 1 (5:31) Easting and again it went up massively. Because there was a TMT boom. Speaker 2 (5:37) But Speaker 1 (5:37) Amit, the interesting thing is that again, nothing happened with index. Speaker 1 (5:42) So, there Speaker 2 (5:43) is a Speaker 1 (5:43) lesson in this Speaker 2 (5:44) that always Speaker 1 (5:45) the character changes in the stock market. If you are doing active investing, then sometimes your underlying themes will be very strong but it is not the part of Speaker 2 (5:55) the index. Speaker 1 (5:56) Until it becomes Speaker 2 (5:57) the Speaker 1 (5:57) part of the index, the bubble is over. Or sometimes the index goes through the churn. Like in 1990s, there were not so many banks in the index. But post 1990s, banks started becoming the majority part of the index because banks had more free float. India's economy was not financialized so financialization started to grow. If we take R.K. Damani's example, he had bought HDFC banks in Speaker 2 (6:22) 1996. Speaker 1 (6:23) Literally at a price to book, I would Speaker 2 (6:25) say Speaker 1 (6:25) in Speaker 2 (6:26) the Speaker 1 (6:26) price to earnings ratio, he was in the masterclass in super investors. In 1990s, I think he would have bought it at almost 100 times earnings. and still he made a killing. Because the growth rates Speaker 2 (6:36) were so Speaker 1 (6:36) fast, they Speaker 2 (6:37) lasted for so many years. Because early stage. Speaker 1 (6:41) So, what Speaker 2 (6:42) does Speaker 1 (6:42) it mean to say that in cycles, some themes make money, but money is made in cycles in the stock market. And that theme keeps changing. Themes keep changing and even bull and gray market cycles keep changing. Like, let's take the bull market as an example. So, we talked about 1990 to 1992, then a bull market came. The super cycle from 2003 to 2008, in 57 months, Sensex was up by almost 590%. That was the level of bull run that we saw. Sensex literally went up hugely. It was almost 6x Sensex. Under Sensex and Nifty. Underlying stocks. Speaker 2 (7:25) Realty sector, infrastructure sector, Speaker 1 (7:27) power Speaker 2 (7:28) sector. Speaker 1 (7:29) So again, this was a bullrack which was led by Capex Investment Group. Speaker 1 (7:35) 2003 to 2008 was a decade of investment. Whatever NPS we had in 2016, those problems were there from 2003 to 2008. And again, this is not something that is out of the ordinary. These are ordinary economic cycles. Sometimes, what happens is, I will tell Speaker 2 (7:57) this Speaker 1 (7:57) for my viewers, sometimes investment led stocks do well. Sometimes consumer led stocks are better. Both together in parallel, both together in parallel, Speaker 2 (8:12) both Speaker 1 (8:13) together work less. Like if you take the example of 2010 when all this boom and boom ended. In 2010-11 when the bull market, the big bull market comes, then the correction also comes big. The connection is either price or time. Speaker 2 (8:28) So if Speaker 1 (8:28) you see the market Speaker 2 (8:29) from Speaker 1 (8:29) 2011 to 2014, today the Indian market will be like that. Speaker 1 (8:35) In 2011-14, there was a taper tantrum. Bond yields fluctuated. There was a debt crisis in Europe. There were austerity measures in Greece. There were problems in Italy. Because these companies did a lot of spending and then debt went out of sparrows. Whenever this cycle ends, there is always Speaker 2 (8:56) a Speaker 1 (8:56) debt. Speaker 2 (8:57) Yields keep increasing. So Speaker 1 (9:00) 2011-14 was a market which was in an aftermath of 2003-2008 market. Because in 2003-2008, the stock crash in 2008, the index was 40-50 % down. Then it recovered in 2009, so in 2010, it was on the same level. But 2011-2014 was the market which was a frustrating market. How frustrating the market was? Here I'll just show you one data point. I think we'll see this in the longer term view. Where was the market in 2011 and where was it in 2014? Speaker 2 (9:31) Right, Speaker 1 (9:32) so this is something that you can see. So if Speaker 2 (9:34) we Speaker 1 (9:34) look at the market in Speaker 2 (9:35) 2011, Speaker 1 (9:35) the market was in October 2010. The market was Nifty of 5826. Right. And it took nearly a period of three and a half to four years for us to comprehensively break those ice. Speaker 2 (9:53) I Speaker 1 (9:54) mean, at least a time connection went on. And this time correction lasted for nearly 158 weeks. Speaker 2 (10:09) That Speaker 1 (10:09) was the level of time correction. Almost for 1 year or 3 years. Speaker 1 (10:16) Just imagine. Speaker 2 (10:17) And this period is also the same. Speaker 1 (10:20) Today's period is similar. Today, there is a good part and a bad part. I will give a good view first. Okay. If our market was in 2011-14, when did the market bottom out in 2011-14? When the rupee made an all. That was the time we bottomed out. And the FCNR scheme that has come now, FCNR scheme came in 2013 too. Okay. Speaker 1 (10:43) So Speaker 2 (10:43) that Speaker 1 (10:43) the dollar stock in Speaker 2 (10:45) India is Speaker 1 (10:45) low. Similar scheme came in 2013 also. It was taken out by Raghuram Rajan ji. And then the Modi wave came, then we went into a bull market etc. etc. happened. So this is the power of cycles. The more we study history, the less we will learn that we will know that much or what is in the market. So today if I see Amit market, we peaked somewhere around, I think that was 23rd September. And today we are like almost 25 months into it, below that. And the most important support we have at this time is around 21,800. But at the index level, if we look at the valuation multiples at this time, our Nifty 50 is trading at 19x P.E. ratio. Speaker 2 (11:34) But Speaker 1 (11:35) before someone jumps all in with a lump sum investment, that I'll buy Nifty 50. I would like to show what will happen Speaker 2 (11:42) in 2011 Speaker 1 (11:42) -14. Speaker 2 (11:43) Okay, so we are learning from that phase also. Speaker 1 (11:45) Because that phase is an exact replica of Matros which are repeating today. But one important nuance is that we were AI-Kapex. At that time, AI-Kapex was not something like that. Now just before going forward, as a part of the SOIC membership, we have divided the SOIC membership into some parts. The first part is for beginners, where we teach you in level 0 and level 1, what are the basics of finance and how can you become a fundamentally strong investor. Which we teach in level 2 as well. In level 3, we teach you all about valuation. and valuation along with how you can create a portfolio allocation framework. In level 4, we teach you all about how to buy or sell stocks, how to create Speaker 2 (12:26) a Speaker 1 (12:26) framework for buying and selling along with stage analysis. In level 5, we teach you all about screening stocks, Speaker 2 (12:32) how to screen domestic and international stocks. Speaker 1 (12:35) Level 6 and Market Signals is only meant for advanced investors. What we do here is, we look at the weekly updates of Speaker 2 (12:42) the market, Speaker 1 (12:42) like what Speaker 2 (12:43) happened in the Speaker 1 (12:43) top-down market, what is going Speaker 2 (12:45) on in which Speaker 1 (12:45) theme, which industry is buzzing. So these are the things that we teach in Market Signals plus the L6 course. So all these things are part of one SYC membership, which has some added bonuses. The first added bonus is SOIC Market Signals. Market Signals is a part of the SOIC membership if you sign up for it today. Along with that, StockScanz has a limited time membership which is a part of the SOIC membership. And there are two more things. One is the AI Investing Masterclass. And along with that, the SOIC TVGV Investing Masterclass which is a framework of us, Theme, Valuation, Growth and Promoter, is a part Speaker 2 (13:19) of the Speaker 1 (13:19) crash course which is included in the SOIC membership. With this, if you want to sign up for the SOIC membership, you can use the coupon code SOICBONUS10 or SOICSCANZ. I'll see you inside the membership. Now let's go back to the video. Speaker 1 (13:59) So, let's take the passive example. In passive investing, I would say that the market will give you odds. That today you have to do something to the passive investor. But if I am a passive investor, then I am very clear today. I will slowly increase the amount of SIPs. Speaker 1 (14:18) Like if the market index is below, then I will trust the fund managers that I have selected. I will keep increasing my SIP amounts and it can happen that, I have put all the SIPs in the mathematical data in the description box. If someone has started SIP from 2024, they have not even beaten the fixed deposit it hurts. And some people say, what will happen to the market? I am telling you, it didn't happen for the first time. It will happen again and again in the market. Oh, Speaker 2 (14:45) it will happen in cycles. So, this is a market template of 20 level Speaker 1 (14:47) to 14 level. So, the returns after 2020 came because of the destroyed base of COVID. Supernormal or abnormal results in returns. Because of liquidity, the market got pumped in. So, here in this market, this is the very first thing that I am saying. In passive investing, if we do Nifty 50 ETS, I see that Nifty is at 19 times PE. De-rating in terms of 16-17 times PE, it can't Speaker 2 (15:17) be Speaker 1 (15:17) ruled out that Nifty will go. But it can Speaker 2 (15:19) become an Speaker 1 (15:19) absolute floor for you. That maybe it won't go below that. And then if India slowly improves, then Nifty will keep going upwards over a period of time. But do I want this to happen in a year? No. You will have to look at the horizon of 2-3-4-5 years. Speaker 2 (15:36) And even if you are doing SIP, if you have a 2 year view, then that is not SIP. Correct. Speaker 1 (15:40) Let us know about ETF buying. If you are doing ETF as a passive investor, you need to have a 3-4-5 year view. Speaker 2 (15:45) Because, Speaker 1 (15:46) they are in D-rating zone, so they can come to 16-17 times P-ratio. Which won't be a surprise. Because see, Amit, I was talking about this in this video. Yes, world alumni, AI trade is a big thing. So, the US government bond yield is going up. Government bond yield has crossed the 2003-2002 highs. Mortgage rate in the US has increased by more than India. 7.3-7.4 % Still, there will be a NASDAQ. Speaker 2 (16:12) Yes. Speaker 1 (16:13) There is something in the DECOT somewhere. Speaker 2 (16:15) True. True. Speaker 1 (16:16) NASDAQ is going Speaker 2 (16:17) up Speaker 1 (16:17) because of two or three things. First, they Speaker 2 (16:20) want to increase the growth of the Speaker 1 (16:20) normal GDP. If the normal GDP increases more than inflation, then the deleveraging will play out. They will inflate away the debt. Speaker 2 (16:27) What Speaker 1 (16:28) is the Speaker 2 (16:28) second Speaker 1 (16:28) thing? that in the US, the KTEX has gone so high that Amazon, Google, Meta, all these companies are issuing long-term debt. Speaker 2 (16:38) So Speaker 1 (16:39) there's a crowding out which is happening. What is crowding out? Either the Treasuries can raise money, or these companies can raise money for KTEX. Speaker 1 (16:47) So that is why the bond yields partly because of this because US economy is very hot right now that the bond yields are poor. So, how long will AI and CAPEX boom last? That will also play the sentiment towards Ikea. First, let's do passive investing. Speaker 2 (17:03) Again, Speaker 1 (17:04) coming back to the topic. I went into macros. Let's do passive investing. Remember that Nifty, Fifty, ETFs are all fine. They are favorable at this time. But I would like to say one more thing. The structure of our country's indices is changing. Just thinking. Like if you see the journeys of the Indian economy, how each trillion dollar was added to the economy, right? So