Bitter Lessons from Uniply Investments

The Golden Goose
Uniply industries was a great investment bet. A small player in the plywood industry space with great brand, great products and ambitious management. Great market scope with "Housing for all" initiative of the government and lot of commercial and office space developments along with huge FDI investments again thanks to the aggressive push of the central government in this direction.

And suddenly out of nowhere came a shocker news

The Ugly Swan
The company announced a diversification into Civil Construction work ??? While Civil and Mechanical work also has good scope with lot of infrastructure push in the country and  on a standalone basis is not a bad business, but when you compare it with the plywood business it sounds like a horrible decision. Plywood is a consumer business with high margins whereas Civil and Mechanical work is long gestation, capex intensive and low margin business. Uniply was trading at high P/E's that are suitable for consumer business and suddenly it announces a plan to diversify into Civil and Mechanical business, which commands much lower P/E's, makes the business way more complex to understand. There is doubt on the management ability to make a successful foray into a business segment that is already overcrowded with large, small and medium sized players of all types. It is a non-transparent and corruption ridden business segment.

The smart market and the foolish me
A great business was ruined in a single day. Market realized it, however I didn't. I realized it only after all my gains (over 30%) was washed away over the days following the announcement. However what doesn't give you profits, makes you wiser. I had read the announcement, somehow didn't register or analyze it properly, kind of ignored it thinking it was not a big deal. However it was. Once such lessons are absorbed, small losses of today can be converted into huge benefits in future as an aspiring value investor.

*Note/disclaimer: As always I try to share my most important lessons for free and with all the good intentions and do not intend to manipulate or profit from it in any way. Many of you have started investing in stock markets by following me and I feel responsible to share anything good I learn. However it is advisable for you to do your research & verification independently and not follow anything blindly. 

schemes of money making

Tube Investments, Zee Media, IIFL (Coming Up)

AB Nuvo (50% in 12 months)

scheme
AB Nuvo was merged into Grasim , giving 15 shares of Grasim (adjusted for 5:1 split, original was 3 Grasim shares for 10 Nuvo shares) for every 10 Shares of ABNuvo and further demerger of AB Capital from Grasim giving 21 shares of AB Capital for every 15 shares of Grasim

Timeline (12 Months)
Announcement: Aug'16
Nuvo merger with Grasim Scheme Record Date: Jul'17
ABCL demerger from Grasim  Record Date: Jul'17
ABCL Listing: Aug'17

Profit (90%)
Nuvo market price on Announcement in Aug'16: Rs 1400 per share (stock fell from 1500 to 1300 on announcement, taking avg of two)
Nuvo market price on Record Date in Jul'17: Rs 1887 per share
Grasim market price post ABNuvo merger: Rs 1300 per share (normalized for merger ratio =1300*15/10=1950)
Grasim price after ABCL demerger in Jul'17: Rs 1070 per share
ABCL listing price in Aug'17: Rs 237 per share

Investment 10 shares of Nuvo in Aug'16 = 10*1400=14000
Value of Grasim post merger with Nuvo in Jul'17 = 15*1300=19500
Value of Grasim after ABCL de-merger in Jul'17 = 15*1070=16050
Value of ABCL after listing in Aug'17 = 21*237=4977

Slightly complex due to multi step demerger and splits, etc but you got Rs 16050+4977=21027 for investment of Rs 14000 = 50% profit in 12 Months.

Sintex Industries (113% in 11 months)

scheme
Demerger of the custom moulding business and prefab business to Sintex-BAPL and Sintex Infra Projects, wholly owned subsidiaries of Sintex Plastics Technology (SPTL). The scheme involves issuance of equity shares of SPTL to the shareholders of SIL in the 1:1 ratio

Timeline (11 Months)
Announcement: Sep'16
Scheme Record Date: May'17
Sintex Plastics Listing: Jul'17

Profit (113%)
Sintex Ind market price on Announcement in Sep'16: Rs 78 per share
Sintex Ind market price adjusted for demerger of Sintex Plastics in Jul'17: Rs 32 per share
Sintex Ind market price on Record Date in Aug'16: Rs 108 per share
Sintex Plastics listing price in Jul'17: Rs 130 per share

Investment 100 shares of Sintex Ind in Sep'16 = 100*78 = Rs 7800
Value of Sintex Ind post demerger in May'17 = 100*32 = Rs 3200
Value of Sintex Plastics on listing in Jul'17 = 100*130 = Rs 13000

So you got Rs 16200 for investment of Rs 7800 = 113% profit in 11 Months.

Bhagyanagar India (90% in 22 Months)

scheme
Demerger of Solar Division of Bhagyanagar India Ltd., into STPL. STPL shall issue 4 equity shares of STPL for every 6 equity shares held by the equity shareholder of BIL.
Demerger of Real Estate Division of Bhagyanagar India Ltd., into Bhagyanagar Properties Ltd., BPL shall issue 1 equity share for every 2 equity share held by the equity shareholder of BIL.
Reduction of share capital: Equity capital of Bhagyanagar India Ltd (BIL) shall be reduced to half

Timeline (22 Months)
Announcement: Sept'15
Scheme Record Date: Mar'17
STPL: May'17
BPTL: Jul'17

Profit (90%)
BIL market price on Announcement in Sept'15: Rs 18 per share
BIL market price on Record Date in Mar'17: Rs 24 per share
BIL market price adjusted for demerger in Mar'17: Rs 34 per share (half number of shares post cap reduction)
STPL listing price in May'17: Rs 4.9 per share
BPTL listing price in Jul'17: Rs 28 per share

Investment 100 shares of BIL in Sept'15 = 100*18=1800
Value of BIL post demerger in Jan'16 = 50*34=1700
Value of STPL after listing in May'17 = 66*4.9=326
Value of BPTL after listing in Jul'17 = 50*28=1400

So you got Rs 3426 for investment of Rs 1800 = 90% profit in 22 Months.

Star Ferro and Cement (54% in 10 months)

scheme
Star Ferro (listed) was a holding company for Star cement (unlisted) and decided to consolidate the two entities, since the holding company had no other businesses. Consolidation would lead to tax & administration efficiencies. Earlier Star Cement was paying dividend to Holding company Star Ferro & Cement (listed entity) which would distribute it to the shareholders. Post consolidation Star cement would be able to pay dividend directly to the shareholder. As per the scheme shareholders of Star ferro & cement would receive 1.33 shares of Star cement for every 1 share of star ferro & cement.

Timeline (10 months)
Announcement: Aug'15
Scheme Record Date: Mar'17
Star Cement Listing: Jun'17

Profit (54%)
Star ferro market price on Announcement in Aug'15: Rs 110 per share
Star ferro price on Record Date in Mar'17: Rs 140 per share
Star ferro price after consolidation: N/A
Star cement listing price in Jun'17: Rs 130 per share

Investment 100 shares of Star ferro in Aug'15 = 100*110 = Rs 11000
Value of Star ferro post consolidation in Mar'17 = N/A
Number of shares of Star cement post consolidation in Jun'17 = 100*1.33 = 133
Value of Star cement on listing in Jun'17 = 133*130 = Rs 17290

So you got Rs 17290 for investment of Rs 11000 = 54% profit in 10 Months

Star Ferro and Cement (Scheme announced in Aug'16, Star cement listed in Jun'17)

Max Financial Services (76% in 30 Months)

scheme
Max India’s board approved the corporate restructuring plan of demerging the company into three companies, each of which will get listed once the demerger is complete.With this, Max Life, the company’s life insurance business in which Max India holds 72 per cent stake, will be the first life insurance company in the country to get listed as Max Financial Services (MFS).The second company, Max India, will have Max Healthcare, Max Bupa Health Insurance and Antara Senior Living. The third entity will be Max Ventures which will be the investment arm of Max Speciality Films. Demerger ratio is 1:1 for Max India and 1:5 for max Ventures

Timeline (18 Months)
Announcement: Jan'15
Scheme Record Date: Jan'16
Max Ventures Listing: Jun'16
Max India Listing: Jul'16

Profit (26%)
Max Fin market price on Announcement in Jan'15: Rs 450 per share
Max Fin  market price on Record Date in Jan'16: Rs 524 per share
Max Fin  market price adjusted for demerger in Jan'16: Rs 366 per share
Max India listing price in Jul'16: Rs 200 per share
Max Ventures listing price in Jun'16: Rs 45 per share

Investment 100 shares of Max Fin in Jan'15 = 100*450=45000
Value of Max Fin post demerger in Jan'16 = 100*366=36000
Value of Max India after listing in Jul'16 = 100*200=20000
Value of Max Ventures after listing in Jun'16 = 20*45=900

So you got Rs 56900 for investment of Rs 45000 = 26% profit in 18 Months. Most of the shares ran up substantially post the scheme. At the time of writing (Jun'17) Max Fin reached Rs 600 and Max India Rs 150 and Max Ventures at Rs 100 per share giving a return of 76% in 30 months

Transport Corporation Of India (46% in 14 months)

scheme
Transport Corporation of India Ltd has informed BSE that the Board of Directors of the Company at its meeting held on October 08, 2015, has approved the Scheme of Arrangement between Transport Corporation of India Limited (TCI) and its wholly owned subsidiary, TCI Express Ltd. for Demerger and Transfer of Express Distribution (XPS) . The Equity Shareholders of TCI shall receive 1 (one) Equity Shares of Rs. 2/- each of TCI Express Ltd. for every 2 (Two) Equity Shares of Rs. 2/- each held on the Record Date in the Company.
TCI was a holding company for several businesses and attracted a holding company discount into it's valuation trading at a P/E of close to 20's. However TCI Xpress that accounted for 30% of the total revenue and 37% of profit of whole TCI business deserved a much higher P/E when compared to peers like Blue Dart, Gati trading at a P/E of 40-80

Timeline (14 Months)
Announcement: Oct'15
Scheme Record Date: Aug'16
TCI Xpress Listing: Dec'16

Profit (46%)
TCI market price on Announcement in Oct'15: Rs 250 per share
TCI market price on Record Date in Aug'16: Rs 350 per share
TCI market price adjusted for demerger of TCI Xpress in Aug'16: Rs 190 per share
TCI Xpress listing price in Dec'16: Rs 350 per share

Investment 100 shares of TCI in Oct'15 = 100*250 = Rs 25000
Value of TCI post demerger in Aug'16 = 100*190 = Rs 19000
Value of TCI xpress on listing in Dec'16 = 50*350 = Rs 17500

So you got Rs 36500 for investment of Rs 25000 = 46% profit in 14 Months

TCI (Scheme Announced in Oct'15, TCI Xpress listed in Dec16)

At the time of writing (Jun'17) TCI reached Rs 300 and TCI Xpress at Rs 481 at return of 100% in 20 months

Sterlite Technologies (68% in 13 months)

scheme
Sterlite technologies announced demerger of the Power Products and Transmission Grid Business into  Sterlite Power Transmission Limited. Demerging the power business would give Sterlite Tech a pure play telecomm business with focus on OFSS segment. The scheme had two options for the shareholders
“01 (ONE) fully paid equity share of Rs. 2/- of Sterlite Power Transmission shall be issued and allotted for every 05 (FIVE) equity shares of Rs.2/- each held in Sterlite Technologies Ltd”
OR
“01 (ONE) fully paid redeemable preference share of Rs. 2/-  at a premium of Rs. 110.30/- per redeemable preference share of Sterlite Power Transmission Limited shall be issued and allotted for every 05 (FIVE) equity shares of Rs.2/-  each held in Sterlite Technologies Ltd”
The scheme was fairly complex to understand as there was no plan for listing of Sterlite Power Transmission in the immediate future.

Timeline (13 months)
Announcement: May'15
Scheme Record Date: Jun'16

Profit (68%)
Sterlite Tech market price on Announcement in May'15: Rs 70
Sterlite Tech market price on Record Date in Jun'16: Rs 96
Value of pref share in Jun'16: Rs 110

Investment 100 shares of Sterlite Tech in May'15: 100*70 = Rs 7000
Value of Sterlite Tech in Jun'16 = 100*96 = Rs 9600
Value of Pref shares in Jun'16 = 20*110 = Rs 2200

So you got Rs 11800 for investment of Rs 7000 = 68% profit in 13 Months

At the time of this writing (Jun'17) Sterlite tech is trading at Rs 153 per share giving a return of 107% in 24 Months

Crompton Greaves (100% in 30 months)

scheme
Crompton Greaves announced a scheme to demerge it's power & industrial business and the consumer product business into separate entities. The parent group had run into trouble with excessive debt and wanted to hive off CG consumer product business which some PE players were interested in. The demerger ratio was initially 3:4 but after investor objection it was revised to 1:1. This also lead to substantial delays in the implementation of the scheme

Timeline (19 Months)
Initial Scheme Announcement: Oct'14
Revised Scheme Announcement: Feb'15
Scheme Record Date: Mar'16
CG Electricals Listing: May'16

Profit (2%)
CG market price on Announcement in Feb'15: Rs 180 per share
CG market price on Record Date in Mar'16: Rs 146 per share
CG market price adjusted for demerger of CG Electricals in Mar'16: Rs 46 per share
CG Electricals  listing price in May'16: Rs 126 per share

Investment 100 shares of CG in Feb'15 = 100*146 = Rs 14600
Value of CG post demerger in Mar'16 = 100*46 = Rs 4600
Value of CG Electricals on listing in May'16 = 100*130 = Rs 13000

So you got Rs 17600 for investment of Rs 14600 = 2% profit in 19 Months. However after listing CG ran upto Rs 80 per share and CG electricals upto Rs 220 per share giving Rs 30000 for 14600 invested. Almost 100% return. In another 1 year from the demerger.

Greenply Industries (178% in 11 months)

scheme 
Greenply decided to demerge it's laminates business from the plywood business in the ratio of 1:1 with the following rationale, "the nature of technology, risk, competition in each of the undertaking of Greenply is distinct from each other hence it is considered desirable to demerge its laminating business to Greenlam Industries"

Timeline (11 Months)
Announcement: ~May'14
Scheme Record Date: Nov'14
Greenlam Listing: Mar'15

Profit (178%)
Greenply market price on Announcement in May'14: Rs 500 per share
Greenply market price on Record Date in Nov'14 : Rs 1110 per share
Greenply market price adjusted for demerger of Greenlam in Nov'14: Rs 940 per share
Greenlam listing price in Mar'15: Rs 450 per share

Investment 100 shares of Greenply in May'14 = 100*500 = Rs 50000
Value of Greenply post demerger in Nov'14 = 100*940 = Rs 94000
Value of Greenlam on listing in Mar'15 = 100*450 = Rs 45000

So you got Rs 139000 for investment of Rs 50000 = 178% profit in 11 Months

At the time of this writing (Jun'17)  Greenply is trading at Rs 283*5 (split 1:5) per share and Greenlam at Rs 800 per share = 343% return in 3 years

commonly misunderstood

Do I make posts that are intended to manipulate people/friends for personal gains?
No, I don't. I share concepts & ideas and not stock tips

Do I manipulate my friends and groups for personal gains?
No, I have offered time & advice free to several friends to help them plan their financial future better and free them from unnecessary financial stress which most people grow with especially in a struggling country like India. I have a particular hatred towards such unwanted stress in life. Financial future planning is something you have to start early and you can save lot of pitfalls from the experience of someone like me who has probably fallen and risen from almost every pit. I consider it a disease that dwarfs our growth potential as a country, because people are busy with basics and risk averse and are usually brought up in financially conservative family background. Until now no-one has come back saying that I ruined their life. Mostly I have received good feedback which is satisfying.

I don't see anyone thanking you
These things mostly happen on personal messages and not on public walls

What do I gain from this?
Nothing, I believe stock market is a place of abundance and there is enough for everyone so there is no need to compete. I learned investing the hard way through lot of painful mistakes but had the opportunity to correct myself by following legends like Buffet, Damani, Kedia, Ramdeo and many others. So in a way I am contributing back.

Do I support political parties and personalities that would benefit me in the stock market?
No, I support political parties and personalities that I believe are pro growth & welfare oriented and that would lead to growth in stock market as a side effect.

Why do I regularly post against few politicians?
Because I believe they have harmed the world beyond repair by funding, supporting & breeding terrorist groups that have spread like plague around the world which I consider will be a major threat in the future and especially for the future generations.  I think I have the right to vent my anger at these assholes. I don't care if they are male or female or straight or gay or transgender or religious or atheist or alien or whatever. I give more weightage to results and outcomes instead of people behind it.

What do you feel about public opinion about you?
Being misunderstood is not always bad, on the contrary.. :P

What is the basis of my belief?
I read. I read several hours everyday. Over the years I have tens of thousands of reading hours. I usually make sure that I follow credible sources of information that are fact based, on the ground reports, direct interviews, research documentaries, real time information, whistle blowers, regulatory filings, legal proceedings, etc I collect information from several sources and am capable of tracking and correlating large amounts of information over long periods of time, decades. From Ramalinga Raju to alleged chemical weapons use in Syria, I follow everything all the time and endlessly. My beliefs are based on these and it keeps evolving with time.

You could still go wrong?
Yes, I verify my theories from the market.

Am I profit driven?
What the heck? Again ! No, I practice minimalism. I use and need very small amount of money to survive & be happy. I am a truth seeker and passionate about it. Markets as a whole also tends to converge towards truth inspite of all the rumors and manipulative elements who are very active in the market. Being a truth seeker helps me align with the market on the right side. 

Can I trust you?
No, I don't want anyone to trust me. I don't like dependencies & dependents. I can teach you how to fish. I cannot guarantee you a fish everyday. So you don't need to trust me. At best, if at all interested you can take pointers from me (available free) and do your own research be it politics or economics, whatever is your area of interest.

Do I have any kind of biases?
yes, I am allergic to bullshit & hypocrisy

I don't like your posts, why can't I criticize?
You are most welcome to criticize my posts and me. Only request is that you must make it constructive and factual and not arbitrary and damaging, which is also fine. It's just that if you do such a thing, I will write one more blog and post it :)

India Value Migration Story

Tremendous wealth is created when you can spot a value migration story and bet big on it. Few examples from the past that you will easily recognize

• Scooter to bike migration (Bajaj to Hero Motocorp) 
• Single screen to multiplex (Shanti cinemas to PVR)
• Photographic film based camera to digital camera (Kodak to Canon/Smart phones) 
• Landline to mobile migration (BSNL/MTNL to Airtel)
• Doordarshan to DishTV
• Manual work to Software automation & services (account books to Infosys/Wipro)

One would assume that such opportunities are rare and difficult to spot, but right now in India, several of these are evolving right in front of your eyes and moving fast. India is like a haystack of multiple value migration stories, then why are you looking for the needle instead?

Value migration happens over a long period of time as masses of people slowly migrate from some product, service, or habit to a new product service or habit in phases. There is also a compounding effect in the migration as more adoption drives even greater adoption and it starts slowly but once it catches pace, it happens very fast. So you need to spot it and position on it while it is still in nascent stage.

Current value migration stories in India

• non-tax compliant society to tax compliant society (91 Lakh new taxpayers registered, double digit growth in annual tax revenue)
• cash to cashless/less cash society (paytm, UPI, digital banking)
• Power deficient to power surplus & rural electrification  (coal block allocations, Uday/Ujala schemes, 24 hours power even in summers)
• Migration from savings based society to investment based economy (from gold, land, cash to increasing interest in equity markets)
• Migration from uninsured to insured society (healthcare, savings, old age, high value possessions, travel, etc)
• Migration from a cash in locker society to a fully banked society (increase in money velocity & leverage, Kotak 811)
• Migration from unorganized to organized sector to create huge global mammoths and consolidation through mega M&A deals (Cairn-Vedanta, Vodafone-Idea, HDFC-Max, SBI Associates merger)
• Migration from basic spending (roti, kapda, makan) to discretionary/luxury spending society (BMW, Harley Davidson)
• Migration to brand conscious society (Tailored clothing to Levis/Van Heusen/Jockey)
• Migration from poverty ridden to poverty free society(several govt schemes skill India, employment generation schemes, one nation one market, DBT)
• Migration from fossil fuels to renewable energy sources (solar/wind energy available cheaper than fossil fuel based energy sources)
• Tubelight/Filament bulbs to LED based lighting
• Migration from BS-III to BS-VI, electrical vehicles (Climate change, Paris agreement)
• Privatization & FDI in large sectors like defense, railways (Pipavav/Reliance defense, L&T)
• Low oil price commodity cycle (subsidy based pricing to market pricing)
• Developing commodity market (dabba trading to the most advanced commodity exchange MCX, GIFT city)
• One nation one tax - GST (inefficient tax based planning vs business efficiency based planning)
• One nation one identity -  Aadhaar (Easy tracking, efficient authorization)
• Corruption friendly to corruption free society (demonetization, e-governance, etc)
• Traditional bank loan based funding to Private Equity, REIT, InvIt for infrastructure and real estate, startup financing
• small kaccha projects to huge infrastructure, housing, smart city push (Huge development in some states like Andhra Pradesh)
• Paper companies, non-transparent, low corporate governance companies to credit rated & internationally certified businesses especially in the SME segment (CARE, ICRA, CRISIL)
• Chor real estate companies to highly regulated professionally managed, consumer friendly companies (RERA)
• Import into India to Make in India (good progress in manufacturing sectors like textile, chemical, auto, electronics)
• Conservative, Risk averse business to strong visionary businesses like Reliance Jio, Patanjali
• Leadership position in low cost space research & exploration (ISRO)
• Job seeker, labor & hard work oriented professionals to startup inclined professionals & innovative smart younger generation
• Alcohol drinking is sin to drinking is a sign of luxury & class society
• Coalition govt to single party, consensus majority and power mandate central govt (Congress to BJP)
• Improved rating & ranking on several parameters like ease of doing business, investment destination, tourism destination (pending credit rating upgrade)
• Developing/Emerging economy to developed economy

Negative Value migration:

• High salary & employee cost in less efficient PSU companies make them more uncompetitive and less attractive for investment. However increasing middle class income will be drivers for consumption

book your fucking losses

It is that time of the year when you need to book your fucking losses to make some money! YES you read that right. It's March, end of financial year. Once we cross March 31st we need to pay tax on a the short term capital gains made last year. We tend to do a lot of profit booking but we hold on to stocks that are loss making. So we end up paying tax on all the profits generated and we make more losses on our loss making investments by holding on to them. That is double loss!
So book your losses adjust it against the profits and then pay tax only on net profit. Save lot of money and thank me someday :)

Note that you can offset your short term capital gains only with short term capital loss and not with a loss in  a long term investment. But still this is a good time to review those long term loss making investments also and dump them down the drain where they belong ... unless you are in love with the psychopath who has kidnapped your portfolio and is one day going to shoot it down. And unless you are harley quinn "daddy's little monster" I suggest you you look for these little monsters in your portfolio and weed them out .. and reduce your tax outgo by doing the same before 31st March in the next 5 days

Pay your taxes

If you don't declare your capital gains, I strongly suggest start doing it else the taxman is surely coming to your door sometime soon (Aadhar, KYC, digitization and single view dashboard of all records, they can catch you easily if they want to). Modi and Jaitley are one of the smartest politicians and they know people are making money in the stock market and they would want you to contribute some of that back for Nation building (not unfair at all). So unless you are harley quinn and don't give a shit ..start declaring your short term capital gains religiously. Once you start declaring it, you would want to save on it. To save you need to book your fucking losses. And trust me you will gain much more by getting rid of these loss making investments using tax planning as an excuse to convince your heart into taking this difficult decision, than you would lose by paying your capital gains tax. 

So let's do some accounting jugaad because in real life harley quinn is just a dream ! 

practical optimist

The temperament of a investor plays a very important role in his success or failure. Whether he is optimistic or pessimistic influences what he does which in effect decides the result he gets from the market. Let's take the BJP or Modi victory in UP state elections and look at how different investors would react to it.

The Optimists's View
The optimist would see this as a great tailwind for the market which will take it to new highs. He would further say that this actually seals the BJP victory in 2019 and is a long term positive event for several years to come. It would make passage or implementation of major reforms like GST, attack on black money, bad loan cleanup, digitization very easy for the ruling party and keep good news flowing into the market and hence he would suggest that people should invest blindly in this market.

The Pessimist's View 
The pessimist would see this as an expected event that the market has already factored in. Any run up in the market according to him would be a good opportunity to book profits in the market. He would argue that elections and other political events have only short term impact on the market and going forward market would focus on results, monsoon, FED rate hike, EU elections, geopolitics, and the continuing trend of outflow from EM's to DM's

The Practical Optimists's View
A practical optimist would say that look market can do whatever it wants to do. It may go up or it may have factored in the UP victory and will face resistance and profit booking at higher levels or it may be range bound reacting to various global triggers... but it's going to be definitely better than what could have happened had BJP lost the UP elections. No doubt about that! Now that's a Practical Optimists's View that cannot go wrong can it ? better days ahead for sure !

Who am I ? I try to be the practical optimist .. always .. who are you ?

WorthRead

MIPA

Make India Prosperous Again

The adjective prosperous often describes a person or a person’s future, but it can apply to anything that’s experiencing growth and success. Prosperous derives from the Latin word prosperus, meaning “doing well.” Great pronouns of this happy word include golden, well-heeled, flourishing, and thriving.

Routine vs Potential days
Most days are normal routine days and some days have potential. Potential to change normal and routine into exciting possibilities. Union budget 2017 on Feb 1st could be one of those days. Not saying it will be for sure, but it could be. Opportunity is not lottery, it is a possibility. An opportunity turns into success only for those who bet on the possibility it opens up.
What if the opportunity doesn't work and becomes a threat? Accidents happen, we recover from them and look for new opportunities. That's simple.

Budget'17 the opportunity
I have high hopes from this budget. The banking system is flush with cash, thanks to demonetization. Rural sector is on a recovery path, thanks to monsoon. The groundwork behind most of the major reforms like GST, land acquisition bill, bankruptcy code are in place, thanks to Modi & his team. The government has ambitious plans digitization, FDI reforms, defense, housing for all, infrastructure, smart cities, 24*7 power and electrification. Modi government has completed 2.5 years in office , enjoys massive public support and goodwill .. it's now or never for the Modi government. I would be very disappointed if the Budget on 1st Feb is anything short of revolutionary. As a high stakes investor I am always prepared that things may not work out the way I want it to but at the same time I am always hopeful that the next opportunity will be a life changing opportunity.

Make India Prosperous Again (MIPA)
If it works out the rocket is ready to launch, get onboard. If it doesn't, remember the day had the potential. There will be another day and we will bet on it again. Now I will keep quiet and leave it for Jaitley to decide to make India prosperous again or wait for another time.
Why a Trumpistic angle to this blog? .. because public don't like Trump but I think there are two sides to everything and I am not afraid to appreciate the good side .. Make America Great Again was an absolute master stroke .. this blog is dedicated to a similar idea of making India prosperous again !

accept facts to win

How can you deny what has happened? What is the point in wishing that it should have not happened? Once something has happened, it has happened. What happens is not random, it is a function of everything else that happens. Unless you believe in parallel universes, this is what it is. Off-course in future you can try to change things but first you need to accept what has happened. Denial of facts is for losers.

The world is constantly moving in a direction. Your best chances of winning lies in aligning yourself to this direction. On the opposite side lies nothing. Note I am not saying that you cannot change things, but even to change things you still have to align yourself to this larger direction. If you try to change things by going in the opposite direction, you will be left behind and forgotten.

The winning formula
Keep an open mind. Accept. Move forward. Move in the strongest direction. If you want change, lead the change from the strongest direction. Over time movement in all other directions will perish, only the one's in the strongest direction will persist.

Trust me, you will need it this year
In stock markets, I believe being able to align yourself to the strongest direction will be the winning attribute that will get you through this year.  2017 is going to be a tough year. Trump policies, aggressive rate hikes by US Fed, instability in EU, volatility in currency, commodity, bond markets. These things will happen. You have to accept it, find the strongest direction and move in that direction. If you try to go in the denial mode, run away from these events, you will perish in any other direction.

For me a lot is at stake always in the stock markets at any time. After 2016, it is painful to think that we have another year ahead of us full of uncertainties and volatility, but it is what it is. Will not try to run or hide from it. 2017 will be the year I will bet on the market most aggressively and will wait for the strongest direction to emerge and when it happens, hopefully will be among the front runners in that direction. And that's the way to go for me !

threats and opportunities

Threats

US FED Rate hike
US Fed has guided for 3 rate hikes during the year 2017 which is one of the dangers for the markets addicted to free money. The FED meeting dates are given below and is important to watch out for

Oil price
India is a developing economy and heavily dependent on oil imports. Rising oil price can throw all the govt plan of lower deficit and higher developmental spending out of order completely screwing the macro picture. It will also lead to higher inflation hitting the household budget. If oil spikes above $60, we will have to re-think everything. This will be a difficult problem even for Modi-Jaitley-Patel together. Similar argument applies to other commodities also where India is a net importer.

EU
Elections and referendums are expected to happen throughout the year in EU. Be it a follow up on Brexit, fiver star movement from Italy, German elections, Scottish referendum, Greek debt problem. They are all going to haunt the markets throughout the year.

Geopolitics & Terrorism
While situation in Syria is slightly better, the problem is far from over. EU refugee crisis, terrorist attacks around the world, the south china sea problem, the north korea problem, the African & M.E crisis, I wonder how long can the market ignore all this...

Trump effect
If market finds investing in America more attractive then very little is left to invest into emerging markets. These are tectonic shift events that can lead to few earthquakes here and there. However things will settle down eventually. Not all that worried about this.

US bond market
Something about rising yields and crashing bond markets that could lead to chaos in the world markets. US bond market is supposedly in a big bubble that can burst anytime, however we have been saying so for nearly everything realty, stocks, bonds, .. so let's see.

Opportunities

Economic recovery from demonetisation
As the cash availability improves there will be a burst in the commercial activity due to pent up demand. All I can say is that the worst is behind us and golden days are ahead. This was a historic event and I am just happy that we are done with it

Gloal India Rankings & Ratings
Expect India to improve in several areas in global rankings like ease of doing business, corruption, etc which will make it an attractive investment destination

Politics
Hopefully recent measures has only strengthened Modi's position in Indian politics as a leader who genuinely wants to fight corruption and uplift the huge poor population of the country. It is only in India that people will accept so much suffering and still support the leader. It is called being invested. The suffering was not optional so people want to give Modi some more time hoping that the rewards will follow. UP election will be a litmus test for the same, but an adverse outcome will not be disastrous either.

GST
GST along with demonetization and digitization brings huge opportunities for the organized sector in India to grow into global behemoths.Expect huge wave of consolidation in the market. We will soon enter the phase when the big will keep getting bigger and better. This will present one of the largest wealth creation opportunities once the snowball starts rolling.

Infrastructure/Housing for all/Defense/Digitization push
It is a super ambitious project and could trigger a China like growth in India. I am not sure how much we will achieve on the ground but surely this can lead to some spectacular gains in stock markets

monsoon
Another year of good monsoon is extremely important. The rural sector could not leverage the good monsoon to the fullest due to demonetization and is still very fragile. A bad monsoon this year will be disastrous, but let's just hope that la nina was not just a one year wonder. A good monsoon on the other hand will bring in all round prosperity for everyone.