Finding Alpha | How To Navigate The Indian Equity Market Amid Global Tensions? | Samvat 2082

[Music] Well, hello and welcome to finding

Alpha. I'm Naj Luza in the Mumbai news

Alpha. I'm Naj Luza in the Mumbai news center. It's been a challenging year for

center. It's been a challenging year for Indian equities. We have seen sustained

Indian equities. We have seen sustained FI selling, renewed tariff tensions under President Trump, geopolitical concerns and muted earnings. All of this has put pressure on the Indian markets.

But there's a growing sense of optimism that things could actually be turning around. Well, on this special edition of

around. Well, on this special edition of Finding Alpha, we're joined by Amit Jaswani, founder and chief investment officer at Stalin Asset Company. Well,

Amit, thanks a lot for joining in. And

before I start off the show, it's going to be a very very special Diwali for you because in the last 45 days or so, you have welcomed a baby girl. So all the best to you, your family and

congratulations on the little angel.

>> Thank you so much, Nigel. It really

means a lot.

>> Okay. All right, Amit, let's get uh to discussing some uh themes then. Walk us

through the key playbook as well as uh strategies investors should keep in mind when they navigate the Indian markets from here on. you know if you could help us out with a few of them. So my first question to you basically is since we're

going to be talking about playbooks strategies as well earlier if I recall a couple of years or so ago you all were you know more towards mid towards small cap companies but if I look at your

portfolio right now it appears you're tilting more in terms of the large cap tell us how you're constructing it so we've been 50% large cap for the last 7 years broadly 48 49% large cap for last

7 years since the inception of Stallion we've been about 22 midcap and 18 small cap 10% cap cash. If you take seven years of average of Stalin asset as a fund, >> we've always had near 50% exposure to large

>> large cap.

>> It's just that uh when there is risk on, we go towards high growth small caps as well. And when we go to small caps, our

well. And when we go to small caps, our expectations is so we don't go for small caps which typically grow at 20%.

>> Okay?

>> We want small caps which can grow at 40 50 60%. See the idea is to make in a

50 60%. See the idea is to make in a bull market >> the idea is to make as much money as possible. In the bare market you want to

possible. In the bare market you want to retain whatever you you made in the bull market. So in bare markets typically

market. So in bare markets typically >> uh so in 2018 2019 the markets were all about quality. We were with quality

about quality. We were with quality >> in 2021 when we keep moving where the markets are moving but over time we've understood that there are those super

cycles that that came come about where you can create outlier returns. See our

goal of a portfolio management company like ours >> Yeah.

>> is to create alphas for our clients. uh

and alphas need superior returns than benchmarks. So you want to be in

benchmarks. So you want to be in companies which are growing way faster.

>> Yeah.

>> But you also need tailwinds. You cannot

have companies that can grow super fast >> without tailwinds.

>> Got it.

>> Yeah. I mean so I I mean I think we get that point then on that front, you know, because I think in cricketing pollins what you're telling me is that when the the wicket is a little tricky, you want to hang in there, >> you know, and face a large number of

deliveries while when you're seeing the ball big, you want to smash it out of the park. So we'll get to a couple of

the park. So we'll get to a couple of playbooks on that front but let's talk about a couple of themes first of all you know with the various fiscal monetary policy as well changes that we have seen discretionary consumption is

something that you're a little bit bullish on so explain that to us so we are actually bullish on consumerf facing companies broadly for last 7 years for us has been 74 75% of our portfolio

>> we do not invest so much in government stocks we've never been able to create alphas it's just that our playbook's not strong enough uh we we invest in processes is and our process is very

simple right now about 70% of nifty companies will grow at less than single digit uh your GST growth is around 8 9% for the first few months of this

financial year if your GST growth itself is 7 8 9%.

companies which can grow at 25, 30, 40, some food delivery companies would grow way faster than that. Some some So wherever there is growth and that has always been our style, we chase growth

and uh wherever there is sustainable predictable growth and there is the largest player is gaining market share.

That is where you'll find us and uh yeah so and that's the whole playbook that there is a super trend right now in internet stocks. Yeah. uh internet is

internet stocks. Yeah. uh internet is the leader of this bull market, right?

>> Uh and just find good players out there and if you get a few themes right.

>> Yeah.

>> This in bare cycles also you can make money. 1996 to 2000 the markets went

money. 1996 to 2000 the markets went nowhere but your tech stocks went up 100x 200 300x even post that between 2000 to 2003 your hero Hondas etc. the

companies who keep growing consistently bull market bare market is for the entire market there will always be set of 25 30 40 companies right which will lead the bull market right you know Amit

let's let's take that super cycle first that first playbook that you're putting out there and you're telling us that the internet stocks could potentially be in that super cycle which means you know you have the sector tailwind and you

have growth as well which could be sustainable in the near term now I want to ask you about a couple of examples in the past because the EMS theme you know out there we saw those stocks I mean the profitability went up by 5x 6x in a

matter of a few years or even when we look at the cash market you know the volumes FNO volumes cash market volumes when they went through the roof that time you saw this entire you know some of the exchanges did well some of the

wealth companies did well so explain a couple of those super cycles in the past so typically what happens is like right now the global super cycle is internet and where you have Nvidia AI etc now

$4.5 trillion market cap that is as much as India's market cap. uh typically what happens like EMS such an good example you give uh the largest EMS company in India this is stocks are not

recommendations me my family have vested interest and we keep adjusting our portfolio buying selling stocks >> we'll get the disclaimer up on the screen but stocks like Dixon Dixon used to make 120 crores in 2020 yeah

>> India was a net importer of electronics today we're a net exporter of electronics the profits of Dixon scaled from 120 crores to probably around 1,300 crores this year and analysts are

expecting around 2,000 crores next year.

Option trading it was happening in front of us. Big brokers like Zeroda went from

of us. Big brokers like Zeroda went from probably 100 200 crores pat to now 5,000 crores pat. Your BSE used to make 100

crores pat. Your BSE used to make 100 crores a quarter. Started making 500 100 crores a year in 2020. That's 25 crores a quarter. Now makes 530 and it was

a quarter. Now makes 530 and it was happening in front of us. You could see cotly numbers. You could keep riding the

cotly numbers. You could keep riding the trend. MCX as well as an example that

trend. MCX as well as an example that you gave. uh option trading market. MCX

you gave. uh option trading market. MCX

started option trading in 2022. They got

permission from Sebi and from there it's been a one-way journey. So you keep looking at changes. What is that large theme and in that large theme you keep finding names if you want super

performance it will not it may come by value stocks. There are hundreds of ways

value stocks. There are hundreds of ways to make money but we find our super performance comes from buying these super cycles and just holding and capital market is a super cycle. It can

keep changing names. We can change from right now the game may be AMC's as well.

>> You have new two AMCs which are getting listed this. So if you have to identify

listed this. So if you have to identify a couple of super cycles, internet could be one theme, right?

>> Absolutely.

>> Internet could be one theme. Since we're

talking about internet as you said Nvidia's market capitalization is a few trillion dollars, right?

>> And you know if I look at a company like say Zumat over here, you know, with all your disclosures etc. Some people say it's already three lakh cr market cap.

But if it's got a tailwind then do you think themes like these have a lot more to go because you add all of them together. Zumato that's eternal swiggy

together. Zumato that's eternal swiggy the other internet plays as well still the market capitalization is not that much is 8 lakh cr. So if example swiggy is at 1.808 lakh crores zamato is at

three lakh crores 3.2 lakh crores uh you have ptm at 70 80,000 crores you have delivery at 30 40,000 crores you have first cry at 20,000 crores. So basically

when you look up US market cap $60 trillion is the total US spx market cap out of that semicon plus technology is

about 60%. You're looking at 35 36 lakh

about 60%. You're looking at 35 36 lakh crores. If you take Tesla also being

crores. If you take Tesla also being tech and all then it keeps going higher tech is and very hyperscaling because in most companies what will happen Nigel is

your cost in tech do not grow with your revenues. Yeah. So be it a exchange your

revenues. Yeah. So be it a exchange your cost doesn't is not directly correlated to your revenue. So every incremental revenues is profits. So when your revenue goes up 100%. Your pat actually goes up two 300%.

>> Correct?

>> And that kind of J curve will keep happening in India. Our total tech market cap right now in India 8 lakh crores. Out of 500 lakh crores total

crores. Out of 500 lakh crores total market cap. We are at 1.6% tech market

market cap. We are at 1.6% tech market cap. When we end 2030, there'll be of

cap. When we end 2030, there'll be of course new IPOs that will come. But when

we add N 2030 and these private equity there is nothing why did tech not become so big in India because these private equity guys would come and keep burning money and make sure the incumbent player doesn't make money.

>> If incumbent's valuation go higher what do these private equity guys go? They

fund the second best guy and just keep putting money in and trying to see if they can make money and but that game is over. The loss making game burning game

over. The loss making game burning game beyond a point it doesn't work. Everyone

capital is a shortage >> both competition to what the big name that you said let's say competition to the big the leader of food delivery >> Swiggy and Zeppto >> both have said that they will not open

new stores they will go towards profitability and Zamato was the guy who didn't lose money no recommendations of course we keep buying selling stocks so but uh >> so from 1.6% 6% internet companies as a percentage of

>> it can become 20 30 40%. Every company

will have to become an internet stock.

There's no question that internet as a theme as next everyone will have to every company has to move towards AI. So

>> it it's not possible that you'll not so a lot of value will get created.

>> So internet that could be one theme that's in a super cycle >> but you still need great entrepreneurs.

A theme doesn't mean that you'll make money. Correct. you need to back the

money. Correct. you need to back the right entrepreneurs even after you've got the right thing.

>> Correct. And if I also look at you know household money uh equity is in comparison to any asset it's still very very small right and the flows domestically are quite good. So do you

think even some of these market related players like an AMC like maybe exchanges they could still have a longer runway maybe they pause in a little bit but in a on the whole they're in a super cycle.

>> See if weekly options don't stop >> I think capital market have already bottomed out. Okay,

bottomed out. Okay, >> that I don't know. CNBC keeps playing that it will stop, it'll not stop. I

don't know.

>> But if this weekly option doesn't stop, >> I think capital markets have already bought. This is my view on all your

bought. This is my view on all your exchanges stocks uh >> AMC's, AMC's will do well regardless uh because they are not affected by the capital man, but other brokers etc. The

value chain has bottom. The worst was priced in uh the day you know where rumors were extreme high that uh I think the worst probably may be behind but it all depends on weekly options being

there or not. If weekly options are there then there is way more downside left in uh these stocks.

>> So two themes internet themes and some of these market related plays >> capital market >> capital market plays. Let's go to your next playbook then. one playbook out of the way super cycle is what you've told us about your next playbook is focusing

on identifying the market leaders and also the emerging challenggers uh how should an investor approach this sort of distinction you know in in an industry

>> so we divide India in 71 industries in every industry every quarter we track who's the guy who's gaining market share who's the guy who's losing market share from cigarettes I'm just giving you

example cigarettes this is happening very clearly uh that that the incumbent player is taking market share from the market leader. It happens in uh your

market leader. It happens in uh your two-heer uh vehicles. Two-wheeler

vehicle is a two two cr market and right now a 2 cr two wheelers get sold in India and about 16 17 lakhs is your EV two wheelers. You need to see who will

two wheelers. You need to see who will make it large in this uh EV market. Uh

so there are market shares that keep changing and market values consistent gain in market share. If you see what TVS has done, TVS market share used to

be single digit. It's moved to 32 33% of the entire two-wheer market. The stock

has gone up 100x >> whereas Hero Honda which used to be at 45%. Has has gone to probably 31 32% and

45%. Has has gone to probably 31 32% and the stock has not done anything in 10 years. Basically, you keep focusing on

years. Basically, you keep focusing on in every market in this like a playbook, right? You want a GDP growth is 10%. uh

right? You want a GDP growth is 10%. uh

nominal GDP growth right now is 10%. And

now you need to find players who can grow at 25 30%. Either they keep finding newer geographies, do acquisitions etc. or they they gain market shares and

market share gains is very persistent.

So the stocks which keep gaining market share is very persistent. every quarter

they'll gain this happened with let's we don't own it so I can say it like Safari for 40 quarters Safari was gaining market share against VIP >> against VIP where the world market world

number one was Samsung was losing market share uh India's number one VIP was losing market share and you had surya that was gaining market share very consistently you keep track of every

industry shoes uh right right beauty platforms what is happening in which industry which guy is doing well and that is what we keep doing and it is the best trend to have is to have companies

who are gaining market share. There is

no risk in those typically like there is a lot of outperformance you can find in those kind of names. See the whole goal Nigel that we are doing this is to find out performance.

>> What is the playbook for outperformance?

First is super cycles.

>> Second is market leaders or competition to market leaders. Correct.

>> Competition to market leaders. Market

leaders which can keep growing like let's say uh in the >> give us an example with regard to the cigarette theme that you spoke about.

You know there is a smaller player who we all know is eating into some market share. So we might have vested interest

share. So we might have vested interest here also we've got and we can keep buying selling based on quarterly numbers and a lot of things >> but ITC is 20,000 crores pat >> and you have the second player who's at

1100 crores pat >> correct >> 45% of incremental market share is being taken by >> country yeah yeah >> by the second player 45% and so there's

a long way to go so those are kind of themes I'm not saying by this this talk it's already rallied but those are the kind of themes that you need to focus on >> that uh that market share like BSE was

taking on market share of NSE >> right >> in the option trading market and 60 70% of BSC nse revenues were option trading so you keep you need to keep a eye on uh

a total industry size industry should grow at 10 15% and your player in that industry should grow at 25 30% and that is where you get super performance cuz nifty will do right now if your nominal

GST growth is 10 11%. M

>> Nifty is not going to give us outlier returns. If you're 70% of Nifty stocks

returns. If you're 70% of Nifty stocks are growing single digit, how will you get outperformance? You will get

get outperformance? You will get outperformance only if you get super companies but at right prices also.

>> Correct.

>> Got it. All right. So we have identified that then super cycles either the leaders or the guys who are taking share from the leader you know making inroads.

So we've got those examples as well out of the way. Let's talk about another uh you know playbook that you look at special situation plays. Could you tell us about identifying such opportunities?

What are the key signals you're looking at out there? What is the trigger? What

is that trigger point that tells you this is a special situation need to get in. So we look at everything every news

in. So we look at everything every news that comes be de mergers promoter buying stick uh right issues first learn corporate actions very well.

>> Biggest alpha creation uh is change in margin. That is the biggest alpha

margin. That is the biggest alpha creation source but second biggest alpha creation source is change in management.

So we divide we are fundamentally just using frameworks and processes to make decisions. We are only making four

decisions. We are only making four decisions in market what to buy, when to buy, how much to buy and when to sell.

>> Coming to special situations be it de mergers from Adani uh no vested interest of course but Adani also was a a great uh uh so story of de mergers look at

every de merger which is happening.

Noama that we had we still have might have like know this thing but Noama also we bought because of the de merger and uh this thing we had in history we've

had stocks like red tape where we've done very well so many de mergers are happening and they all list tips uh so many de mergers and you have to also

look at acquisitions we got in uh like the top electronics player again uh electronics EMS space again only because it acquired uh vivos India's business.

Uh so basically keep looking at acquisition especially if a company's acquiring companies 1x it size 2x it size that is where a large change can happen. See we are potentially we want a

happen. See we are potentially we want a symmetry we want that if we lose we lose 20 30%. But if things go right you end

20 30%. But if things go right you end up making 200 300 400%. And your entire portfolio >> cannot be a symmetry but half of your portfolio can be a symmetry. Then you

have market leaders then you have super cycles. to divide your portfolio in two

cycles. to divide your portfolio in two three five seven themes. Uh and that is how you build a great portfolio. Got it.

All right. Just a quick question since you're talking about this inorganic growth as well. Of late we have seen rate gain. They went and they bit large.

rate gain. They went and they bit large.

We had tega they went ahead and they did a larger size acquisition as well or even a tilakagar industries. Those as

well could qualify as a special situation. We might have vested interest

situation. We might have vested interest in some of them but you have to look in them. Tilaknagar has bought one of the

them. Tilaknagar has bought one of the largest uh imperial as is this thing.

I'm no we don't have any positions no recommendations but you keep tracker of them like this is a point where the Jacob can start at any point of time from a brandy only player the valuations are cheap and typically if you look at

what valuations your ado is trading at trades at 100x >> so you know alcohol as a space even United spirits which doesn't grow at all >> get 60 70p so you know in your mind a

national player >> whiskey player gets what kind of valuation and then if they get the execution right which is not so Easy. Uh

if they get the execution right, you can just hit sixers. You now it becomes your tracking position.

>> Correct.

>> Of course you track, right? You don't

just uh the day announcement happens, you may buy if it's a full toss or you may wait. But in Tuxagar case, we are

may wait. But in Tuxagar case, we are not >> you're not invested.

>> Not yet. But we are looking into it. The

other names we might be invested.

>> Okay.

>> But we we also have tracking quantity.

So it's not like when we go we buy only straight 3% of our port. Short point is identify that special situation and see whether or not it fits into your scheme.

>> Change in management is the biggest alpha creation driver. Be it CG power.

>> Yeah.

>> Bigger than D merger the criteria that work. So I'm just telling you back

work. So I'm just telling you back tested numbers of everything.

>> Change in management if a large company if a is a small company is being bought by a large corporate.

>> Got it.

>> That theme is the best theme ever. Even

your >> Got it. Got it. Got it. uh you know summit I'm just going to you know I'll tell you what you have told us about super cycles identifying uh the the leader also playing those special situations but we'll take a short break

come back we'll focus more on risk management and how do you know when is the right time to get off uh the bus break come back we've got lots more

lined

[Music] Welcome back. You're tuned in to finding

Welcome back. You're tuned in to finding Alpha. It's a Diwali special and we have

Alpha. It's a Diwali special and we have Amit Jasmani who's with us uh in the studio. Amit, you know, before we talk

studio. Amit, you know, before we talk about stocks and equities, I want to ask you your view on gold. How do you see the current rally shaping up? Do you

think we're at the later end of the rally? I mean, your quick view on gold.

rally? I mean, your quick view on gold.

>> My wife is very happy. My mother's even happier with this.

>> I've got a little girl, so you buy some more gold.

>> But this is a trend. This is a super trend right now. It's a dollization trend. I don't know where this will end.

trend. I don't know where this will end.

>> But right now, the trend is there. Any

dip looks like a buying opportunity for now. And silver's just broken out the

now. And silver's just broken out the 40-year level. Now, how can you stop a

40-year level. Now, how can you stop a breakout after 40 years? We've not seen this kind of breakout in many, many, many years. So, I don't know. This will

many years. So, I don't know. This will

this will eventually become a bubble.

And people say that, you know what, I told you not to buy at this level. But

it may happen at $6,000, $8,000, silver can go to $100 and then the bubble can blast. So the whole part is that I have

blast. So the whole part is that I have a saying, be greedy when others are greedy. Be fearful when others are

greedy. Be fearful when others are fearful. There is no you make the most

fearful. There is no you make the most money by riding a bubble, not by being out of it. Uh as long as you can sell it at uh right points. But uh in the stock market portfolio, we are playing gold

via a gold finance company and the exchange the commodity exchange uh which should do decent hopefully. So

>> a larger gold finance company, >> the largest gold. See, we don't buy the 10th best company. Yeah.

>> In any sector, we want the best company because that's how you can manage your risk. They fall the least and and they

risk. They fall the least and and they need to grow also the fastest. The my my the gold finance the fastest the largest gold finance company is growing at 40%.

>> And the smaller ones are growing at 15%.

Why should I buy the small ones? No, I

was asking you because you talk spoke on management change as well. So I want to know whether you're going for the one that is >> we had the management change which one you're referring to.

>> Right. Manapurum. So it's not manapurum.

>> We don't have it in my portfolio. We

sold out because we thought that is the leader. So we we get that on board. We're going with the leader out

board. We're going with the leader out there. And in terms of commodity

there. And in terms of commodity exchange it'll be MCX. But you know before we wind down you often talk about you know everyone talks about riding the winners but don't marry the stocks. That

is important as well. When do you decide it's time to jump off?

>> So, I had this old saying. I'll say it again. Stocks are girlfriends. Stock

again. Stocks are girlfriends. Stock

market is wife. You don't get out of the stock market ever. But and you have to stay invested whatever it happens. But

every cycle is different. Every 2 three years. And people who buy and hold is

years. And people who buy and hold is not working. See our goal is to make

not working. See our goal is to make money. That's our only goal. Buy and

money. That's our only goal. Buy and

hold you, every two, three years there'll be new winners. And you have to see where the new incremental growth is coming. If a company is growing at 30

coming. If a company is growing at 30 30%. And market thinks that the company

30%. And market thinks that the company will keep growing for five years for 30%. Markets in first one year or one

30%. Markets in first one year or one and a half year will discount the entire five year growth and after that if you have that stock you're not going to make any money. It will just only the results

any money. It will just only the results will make you happy.

>> The stock prices will not go up. Markets

are hyper discounting.

>> Yeah.

>> You have to keep finding newer cycles.

Every cycle is different. Don't have 10 year horizons. I have two three year

year horizons. I have two three year horizons max 2 three year and you have think about it if I have 25 companies in my portfolio you always have 25 companies which are looking good to you

right >> and you have to keep adjusting your portfolio where is the next incremental growth where is the next discovery see if you want outperformance if you want beta returns that's different but if you

want to be the best then you have to keep finding newer cycles and there will be new cycles tell me one threeear period and the next threeear period the same stocks go up it doesn't work that way Yeah, >> now markets are very different. 18 to 24

months are the size of one cycle.

>> You keep finding those cycles and keep playing in cycles >> very quickly. GLP1 is a big opportunity.

>> GLP1 is a large opportunity and you need to buy uh like we we can it's a super cycle. It's again a super cycle. I'm I'm

cycle. It's again a super cycle. I'm I'm

not fit but hopefully I will get fit the next time I come to CNBC.

>> So but uh without GLP1s but uh but it's a large trend you know there are already one lakh users in GLP1. It's a large opportunity and you need to find a pick and shovel method. When gold rush was

there, it was the jeans guys that made the money. So you need to find according

the money. So you need to find according to you who are the pen guys, who are the other guys and hope to make money. I

don't know you can lose money also. No

and GLP1 I mean one of the one of the disclosed investments that all made a small investment is Shelly engineering of very small part of our portfolitally it would do my team is beyond me. So

whatever happens have that discipline.

If you are finding super performance be ready to make mistakes in markets you will keep making mistakes and mistakes are part of the game. Do not marry your stocks.

>> Well said, Amit. Well, we thank you for coming down to the studio for this Diwali special. Thank you for taking us

Diwali special. Thank you for taking us through your investment playbook as well and warning us with regard to the risk.

It's a pleasure having you in the show.

Well, hope you guys had an as much uh fun as me on the show. That's for you telling you about identifying cycles, riding the themes and also booking your losses when the time comes. Well, we'll

wrap up on this edition of Finding Alpha, our Diwali special.

[Music]