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Tatas are blessed by God

The Tata Group, founded in 1868 by 29-year-old Jamsetji Nusserwanji Tata, began as a modest trading venture with an initial capital of just ₹21,000. Today, the conglomerate spans a vast array of industries, from salt to steel, with a market capitalization exceeding ₹33 lakh crore.

 

The late Rakesh Jhunjhunwala, one of India’s most respected investors, famously said, “The Tatas are blessed by God.”

 

Jhunjhunwala, who made a significant portion of his fortune through his investment in Titan (bought 6 crore shares of the company at just ₹3 in 2001 and held onto them for more than two decades). This investment delivered an extraordinary 83,250% return.

 

Investing in Tata Group entities, especially during times of turbulence, presents a compelling case. Let’s deep dive (not a recommendation to invest):

Tata Motors:

What went wrong?

 

-> Jaguar Range Rover sales dropped massively

-> The ambitious low-cost Nano car failed to capture the market

-> COVID-19 Impact

-> Demonetization & GST Fallout

-> Shrinking Domestic Market Share

 

Stock declined 89% from Rs. 600 to Rs. 63

Action taken

 

-> Tata turnaround plan

-> New models introduced and focus on hatchbacks, SUVs & EV

 

Revenue touched all time high of Rs. 4.4 lac crore in FY 2024 – growing by 25% CAGR in last 2 years

 

Stock appreciated from Rs. 63 to Rs. 1150

Titan:

What went wrong?

 

-> Lockout in Hosur factory

-> Low net profit margin

-> Low return on capital employed

 

Titan share was available around Rs. 3 in 2003

Action taken

 

-> Leveraged ‘Tata’ brand

-> Aggressive marketing of Tanishq, Skinn and Titan (watches)

Revenue touched all time high of Rs. Rs. 50,000 crore in FY 2024

Stock appreciated to Rs. 3,800 in 2024

Voltas:

What went wrong?

 

-> Intense competition from foreign brands

-> No advance technology

-> No customer loyalty

 

Stock price fell from Rs. 12 to Rs. 2.8 in 2001

Action taken

 

-> Invested 1% of revenue in training

-> Foreign collaborations

-> New product introductions

 

Revenue touched all time high of Rs. Rs. 12,000 crore in FY 2024

 

Stock touched all time high of Rs. 1946 in 2024

Trent:

What went wrong?

 

-> Intense competition from Pantaloon (2005-2006)

-> Low footfall

-> No Brand loyalty

 

The stock was available around Rs. 40 in 2008

 

Action taken

 

-> Launch of fast fashion brand Zudio

-> Restructuring of Westside

-> Close of loss making stores

 

Revenue touched all time high of Rs. Rs. 12,000 crore in FY 2024

 

Stock appreciated to Rs. 7,500 in 2024

Tata Elxsi:

What went wrong?

 

-> No growth in business

-> Recession in Japan (auto sector)

-> Wrong investments in movie VFX

 

The stock fell to Rs. 20 post doc com crises (2001)

 

 

Action taken

 

-> Focus on technology & AI

-> Focus on operating cash flows, EPS, and dividend

 

Revenue touched all time high of Rs. Rs. 3,500 crore in FY 2024

 

Stock appreciated crossed Rs. 9,000 in 2022

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India in the Era of Trump 2.0: What to Expect

With Donald Trump set to return to the presidency, there is considerable uncertainty surrounding his policies, especially as foreign investors are withdrawing capital from global markets at record levels. According to Nomura, Japan’s leading investment bank, emerging markets are likely to be affected—primarily China—but India stands to benefit the most from this shift.

 

Moody’s ratings suggest that New Delhi could gain significantly as global power dynamics shift under Trump 2.0. The US accounts for about 18% of India’s merchandise exports, with key exports including electronics, pearls and precious stones, pharmaceuticals, nuclear reactors, petroleum products, and to a lesser extent, iron and steel, autos, and textiles. In addition, India is one of the world’s leading exporters of services, particularly IT and professional services (including global capability centers involved in outsourcing value-added services). The US remains a key customer for these sectors.

 

Trump’s Top Priorities: Reducing US Debt, Boosting Domestic Manufacturing, and Tackling Illegal Immigration

 

So, how exactly will Trump’s second term impact India? Let’s break it down.

1. Geopolitical Stability with Reduced Tensions in Ukraine

  • Trump is likely to reduce US funding to Ukraine and prioritize domestic issues. This could lead to a reduction in global geopolitical tensions, creating a more stable international environment. A reduction in military spending and focus on domestic policies may be more favorable for India, especially in terms of global stability and security, allowing India to focus more on economic growth and regional security issues.

     

2. Higher Tariffs on China Could Benefit India

  • Trump has hinted at imposing significant tariffs (60%) on Chinese imports, which would help reduce US debt and incentivize local manufacturing. As a result, businesses looking to avoid high tariffs on Chinese goods could shift their supply chains to India, giving a boost to Indian exports. India could become a key beneficiary of this trade reorientation, particularly in sectors such as electronics, textiles, and automotive components.

     

3. US Inflation Could Lead to a Stronger Dollar

  • With higher tariffs and a push for increased domestic manufacturing in the US, inflation in the US is likely to rise. This, in turn, could push the US dollar to strengthen. While a strong dollar may lead to capital outflows from emerging markets, including India, it could also attract more foreign direct investment (FDI) into India as companies seek alternative, cost-effective manufacturing hubs outside of China.

     

4. Fossil Fuel Focus May Impact India’s Renewable Exports

  • Trump’s push for more fossil fuel exploration in the US could hurt Indian firms exporting renewable energy equipment like solar panels and wind turbines. With a less favorable regulatory environment for renewable energy in the US, Indian companies in this sector may face reduced demand. However, India’s broader energy transition strategy, focused on solar and wind, could still find opportunities in other global markets.

     

5. US Crypto Policies Could Offer New Opportunities for Indian Tech

  • Trump’s pro-crypto stance may create new opportunities for blockchain and decentralized finance technologies. India, which has been cautious about cryptocurrency regulation, could find itself at a crossroads: either embrace crypto innovation or continue to regulate it. Indian tech firms with blockchain capabilities might benefit from the global rise in crypto adoption, though India’s stance will be key in determining how much of this growth they can capture.

     

6. Stronger US Border Policies and Immigration Crackdown

  • Trump’s likely focus on curbing illegal immigration in the US could affect Indian IT professionals and students, especially those on H1-B visas. Although this might lead to a reduction in the influx of Indian talent to the US, it could simultaneously open up opportunities for Indian firms to offer outsourced services and tech talent solutions to the US market, as American companies look to diversify their workforce sourcing.

     

7. Tariff Concessions for Tesla Could Stimulate India’s EV Industry

  • Trump’s close relationship with Elon Musk could lead to favorable tariff concessions for Tesla’s electric vehicle (EV) project in India. If India opens up its market to Tesla and provides incentives for manufacturing EVs locally, this could accelerate India’s transition to cleaner transportation and make India an EV hub for both domestic consumption and exports.

     

8. Muted Comments on India-Canada Issues Could Strengthen US-India Ties

  • Trump’s likely more muted approach to the Indo-Canadian tensions (e.g., the Pannun-Nijjar issue) could reduce friction in India-Canada relations, ensuring that these issues don’t become a major stumbling block in broader India-US ties. This could create a more stable diplomatic and trade relationship between India and the US, fostering stronger bilateral cooperation.

     

9. Supply Chain Relocation Could Accelerate India’s Rise as a Manufacturing Hub

  • As companies around the world look to de-risk their supply chains and move out of China, India is well-positioned to benefit from this trend. Trump’s “America First” policies, combined with a push for supply chain diversification, could lead to an accelerated relocation of global manufacturing to India. India’s large consumer market, competitive labor costs, and improving infrastructure make it an attractive alternative to China for multinational companies.

     

10. Greater Economic Collaboration in Technology and Services

  • India’s export of IT services, particularly business process outsourcing (BPO), software development, and consulting services, is a critical pillar of the US-India trade relationship. Trump’s “America First” rhetoric may push for more collaborative ventures between US and Indian firms, especially in tech, where India already holds a significant competitive advantage. However, trade policies that favor US manufacturing over outsourcing could lead to adjustments in the way Indian companies operate with their American counterparts, but long-term, India’s digital prowess may continue to drive growth in the services sector.

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Seizing opportunities amid market corrections

In light of recent market corrections, we want to provide insights into the factors at play, why volatility is a natural aspect of equity markets, and strategies to navigate the current environment while remaining focused on India’s strong growth potential.

Factors Behind Recent Corrections

 

Local Influences

  • Weak Q2 Earnings Across Key Sectors: The second quarter of FY2025 saw weaker performance in sectors like FMCG and automotive, impacting market sentiment. The banking sector is experiencing normalization of non-performing assets, leading to higher provisions, slower deposit growth, and increased costs—factors contributing to slower profit growth. Additionally, prolonged monsoon and lower government spending in the industrial and utilities sectors have affected earnings. However, we expect these to be temporary dips, with a recovery anticipated in the coming months.

     

  • High Valuations in Mid and Small-Cap Segments: Elevated valuations, particularly in mid and small-cap companies, suggest that a focus on large-cap allocations and diversified investments across asset classes may be more beneficial in the current landscape.

     

External Supply Factors

  • Foreign Institutional Outflows Due to Attractive Valuations in Other Markets: China’s recent economic stimulus, alongside Japan and other emerging markets’ appeal, has drawn foreign institutional investors (FIIs) away from India. FII holdings are now near historical lows, after offloading nearly Rs. 1,00,000 crores in October and Rs. 2,27,000 crores this year. We view this as a short-term trend, with India’s growth narrative remaining compelling in the long term.

     

Global Factors

  • US Election-Driven Global Volatility: While upcoming US elections may heighten global volatility, we expect minimal long-term impact on Indian markets.

  • Geopolitical Tensions in the Middle East: Recent instability in the Middle East may cause short-term fluctuations in oil prices, with limited and temporary effects on the Indian economy.

     

Technical Factors

  • Market Indicators Suggesting Correction: The Nifty 50 index’s Relative Strength Index (RSI) recently reached high levels, paired with technical patterns that suggest a correction.

Corrections and volatility are an integral part of equity markets:

Only 4 out of the last 44 CY, had intra-year declines less than 10%

Despite the markets having intra-year declines every year, 35 out of 44 years ended with positive return.

The two graphs highlight that markets typically undergo 10–15% corrections annually, yet often closing the year with positive returns. This highlights the value of staying invested despite short-term fluctuations, as markets tend to recover and reward patience over time.

Path Forward: India’s Resilient Growth Story

Though markets are currently volatile, India’s long-term growth trajectory remains strong:

  • Economic Resilience: India’s GDP growth continues to surpass historical averages, with recent inflation control measures positioning the economy for sustained expansion.

  • Robust Liquidity: With mutual fund inflows reaching historic highs of Rs. 25,000 crores per month, liquidity remains strong, underscoring investors’ faith in India’s growth story.

  • Positive Outlook from Global Institutions: The IMF projects a 7% growth rate for India, signaling that the country’s long-term growth story remains robust.

Strategies for Navigating Market Volatility

 

  • Large-Cap and Diversified Allocations: With mid- and small-cap segments appearing overvalued, focusing on large-cap stocks, including flexicaps with a large-cap tilt and multi-asset mutual funds, may offer more stability and resilience.

  • Systematic Investment Options: Consider using Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) to manage volatility effectively, allowing for cost averaging over time.

  • Staying Invested for Long-Term Gains: By remaining invested, you position yourself to benefit from India’s promising growth trajectory, as markets tend to reward patience over the long term.

     

We appreciate the trust you place in us to help guide your investments, and we’re here to answer any questions or discuss tailored strategies that best fit your goals.

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Your next crore

For many middle-class investors, a portfolio worth a crore still feels like a distant dream. Many of our investors have touched this milestone recently. As India’s equity culture continues to grow and the Sensex rises, more investors are eager to capitalize on this momentum.

However, we always remind our investors that reaching a crore is just one milestone on your financial journey, not the final destination. While it’s natural to feel excited, remember that the best is yet to come. In fact, each successive crore could take less time than you might imagine in your wealth creation journey.

The sooner you reach that first crore, the quicker you’ll move on to your second, third, and beyond. As illustrated in the chart above, if you invest Rs 50,000 per month at an annual return rate of 15%, it may take nine years to reach your first Rs 1 crore. But don’t be discouraged—if you continue investing, your second crore could come in just three years, and your third in only 2.5 years. This is the extraordinary power of compounding. By the 18th year, you could be adding nearly Rs 1 crore every year to your wealth.

 

And if you think that’s impressive, consider this: in your 28th year, an additional Rs 4 crore could be added from the ongoing Rs 50,000 monthly investment, while the 30th year could see Rs 5 crore added.

This isn’t just limited to SIPs. For example, it might take ten years for Rs 25 lakhs to grow into Rs 1 crore at a 15% return rate, but the next crore could come in just five years, and the one after that in three years only.

Compounding is like a snowball rolling downhill

 

It starts small, but as it gathers more snow, it grows larger with each turn. Similarly, reaching your first crore may feel like a long and challenging process because you’re starting with a smaller base. But once you hit that milestone, your portfolio’s growth accelerates, making it quicker to reach the additional crore. You’ll find that the time taken to achieve each additional crore becomes shorter and shorter.

 

Magic of compounding turns your money into a powerful wealth-generating tool. The key is to stay invested and allow your money to work harder for you as it grows.

 

Disclaimer: Equity returns are not a straight line, as depicted in the chart. They fluctuate over time, with ups and downs. The above examples are for illustrative and educational purposes only.

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Castles are not built in the air

Last week, the Nifty 50 Index touched a significant milestone, crossing 25,000 points. This is noteworthy not just for the number itself but for the pace at which it was achieved—just 221 trading sessions, or roughly eleven months. While this milestone is cause for celebration for many investors, whose portfolios are also reaching all-time highs, we believe it’s a prudent time to reassess the risks in equities.

Valuation Concerns:

  1. Price to Earnings Ratio: The trailing P/E ratio of the BSE500 currently stands at 31x, a level comparable to the pre-COVID era and about 10% higher than the 2007 peak. While these elevated valuations have persisted for some time, the current macroeconomic and earnings backdrop differs significantly from previous periods. In 2017 and post-COVID, low interest rates were a crucial support for these valuations. Today, however, the primary driver is earnings.

  1. Price to Book Ratio: On a P/B basis, the BSE500 is trading at 4.5x, which is 20% higher than pre-COVID levels but below the 2007 Global Financial Crisis peak of 6.5x. The difference lies in the Return on Equity (RoE) profile—while the BSE500 RoE was 25% at the 2007 peak, it was just 10% in 2018 and is around 15% today.

  1. Market Cap to GDP Ratio: The market cap to GDP ratio has once again reached the previous peak of 150% from 2007. This metric effectively captures both primary and secondary market sentiments. However, the economic backdrop has changed—while nominal GDP was growing in the mid-to-high teens in 2007, it is now struggling to reach double digits. This disparity suggests that current market valuations may be out of sync with the real economy.

Why Do Valuations Matter?

 

When it comes to investing, the initial valuation at which you enter a position is crucial in determining your medium-term returns. While the impact of valuations on short-term performance can be less predictable, their influence over the medium term is undeniable and often decisive.

 

In light of these rich valuations across multiple metrics, we advise exercising caution in the current market environment. While there may still be opportunities, the potential risks should not be overlooked.

Other indicators which may prove that the market is in overvalued zone:

 

1.       Record number of IPOs

2.       NFOs raising record money in sectoral funds

3.       Promotor selling in secondary market

4.       Increase in speculative ideas

However, these parameters overlook the concerns surrounding valuations:

  1. Liquidity: With record monthly inflows from SIPs, EPF, NPS, and insurance funds, the market is currently flush with liquidity. The fundamental driver of these flows is income growth, which, if sustained, will likely have positive spillovers across various asset classes.

     

  2. Strong Balance Sheets: Historically, Indian and emerging market earnings have moved in tandem. However, since the post-COVID recovery, India Inc.’s earnings have significantly outperformed those of other emerging markets. Additionally, from a corporate balance sheet perspective, Indian companies are now much more deleveraged.

     

  3. CAPEX Cycle Sustainability: The government has been focused on building infrastructure and has invested record amounts over the medium term. For continued economic growth, it’s essential that this CAPEX cycle remains robust.

Predicting the exact inflection points in a market with strong momentum is very challenging. However, we believe that at this stage, the margin of safety is limited.

What Should You Do as an Investor?

 

The fundamental drivers of India’s multi-decade consumption and infrastructure growth, are still firmly in place. While predicting market direction is impossible, careful planning is essential. If your financial goal is approaching in 2024, it might be wise to consider moving funds out of equities and into safer investment options.

 

For fresh lump-sum investments, a flexible approach that allows you to diversify across sectors/asset classes could be prudent—consider options like Multi-Asset or Flexicap funds.

For other existing investors, we recommend to stay invested as India’s long-term growth story remains intact.

 

For SIPs, it’s advisable to continue them, keeping in mind your financial goals and risk tolerance.

 

We remain vigilant and committed to providing insights that help you navigate these complex market conditions. Please do not hesitate to reach out if you have any questions or would like to discuss this further.

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Budget Highlights: What It Means for You

India’s Economic Landscape:

 

  1. Fastest Growing Economy: India continues to lead as the world’s fastest-growing major economy with a 7.8% GDP growth in Q4FY24,surpassing many of its global peers.

  2. Resilient Economy: Despite global supply chain disruptions, India’s core inflation is declining, showcasing its strong economic resilience.

  3. Robust Foreign Exchange Reserves: A moderated current account deficit and substantial forex reserves provide India with a comfortable import cover for up to 11 months.

  4. Revenue Growth: Increased tax revenues, higher-than-expected non-tax revenues (including RBI dividends), and growing GST collections enable continued government investment in capital expenditure.

  5. Fiscal Discipline: In contrast to global trends, India remains committed to fiscal consolidation, maintaining a stable fiscal stance.

  6. Healthy Corporate Sector: Impaired loans have further decreased, and corporate balance sheets are robust, fostering a favorable environment for private capital expenditure.

  7. Structural Reforms: Government reforms are propelling the economy forward, with expected further boosts from strong execution.

  8. Capital Expenditure: Consistent growth in government capex is setting a solid foundation for economic recovery post-geopolitical shocks.

Budget Priorities:

 

The budget outlines nine key areas for development aligned with the ‘Viksit Bharat 2047’ vision:

 

  1. Agriculture Productivity & Resilience

  2. Employment & Skills Development

  3. Social Justice

  4. Manufacturing

  5. Urban Development

  6. Infrastructure

  7. Energy Independence

  8. Innovation

  9. Next-Gen Reforms

Tax Changes:

 

Custom duty:

  • Reduction of basic custom duty to 15% on Mobile phones and chargers

  • Reduction of basic custom duty from 10% to 6 % on Gold & Silver (6.4 on platinum)

 

Income-tax:

 

The Good:

  • Standard Deduction for salaried employees increased from Rs. 50,000 to Rs 75,000 (under new tax regime)

  • Deduction on family pension for pensioners increased from Rs. 15,000 to Rs 25,000

  • Angel Tax abolished for all class of investors

  • LTCG on certain Financial and Non-Financial assets to attract 12.5%: Fund of Funds (FoFs), Multi Asset Funds (with less than specified equity), International MFs, Gold/Silver ETFs, REITs/Invites and Unlisted Stocks to benefit

  • Exemption limit for LTCG (Equity) increased to Rs 1.25 Lakhs from 1 Lakhs

  • For listed securities, period of holding for LTCG is 12 months and for all other assets, rationalized to 24 months

  • TDS on repurchase of Mutual Fund units to be removed

 

The Bad:

  • STCG on listed equities & equity oriented MF increased to 20% (from 15%)

  • STT increased on Futures & Options to 0.02% and 0.1%

  • Income received on buyback of shares to be taxed in the hands of the recipients at marginal tax rate

  • Indexation on all asset classes would be removed

  • LTCG on certain Non-Financial assets to attract 12.5%

Urban Development Highlights:

  • PM Awas Yojana Urban 2.0: Investment of ₹10 lakh crore to address housing needs for 1 crore urban poor and middle-class families.

  • Stamp Duty: Moderation by states with lower rates for properties purchased by women.

  • Water and Sanitation: Projects for 100 large cities focusing on water supply, sewage treatment, and solid waste management.

  • Transit Oriented Development: Plans for 14 large cities with populations over 30 lakh.

Focus on MSMEs and Manufacturing:

  • Credit Guarantee Scheme: Up to ₹100 crore cover for MSMEs in the manufacturing sector.

  • Industrial Parks: Establishment of 12 industrial parks under the National Industrial Corridor Development Programme.

  • Mudra Loans: Enhanced loan limits to ₹20 lakh under the ‘Tarun’ category.

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The #1 lesson every investor needs to learn

WHEN TO SELL A STOCK

Although Warren Buffett famously says that his favorite holding period is “forever,” there are occasions when you may need to sell off your investments. Buying a stock is only half the job done; knowing when to sell is equally crucial. Many investors excel at purchasing stocks but struggle with identifying the appropriate time to sell. This struggle often leads to missed opportunities for maximizing gains or minimizing losses.

1. You Made a Mistake in Your Investment:

Sometimes, despite thorough research, an investment may not turn out as expected. If you realize that your initial analysis was flawed or new information comes to light that contradicts your original thesis, it may be wise to sell the stock.

Example: Suppose you invested in Jet Airways (India) Ltd. based on its market position and growth potential. Later, you find that the company’s financial health is much worse than anticipated, leading to potential bankruptcy. In such a scenario, selling the stock would be prudent to avoid further losses.

2. A Better Opportunity Arises:

If a new investment opportunity presents itself that promises better returns or aligns more closely with your investment goals, it might be beneficial to reallocate your funds.

Example: Suppose you hold shares of WIPRO Ltd., but you notice that Tata Consultancy Services (TCS), a company with superior fundamentals, is getting listed. TCS shows strong growth prospects and potential for higher returns. Considering this, switching your investment to TCS could be a more strategic move. TCS was listed on 25/08/2004 and has since delivered significantly higher returns compared to WIPRO, as illustrated in the graph below.

3. The Company No Longer Has a Competitive Advantage (No More Moat):

A company’s competitive edge, or ‘moat,’ can erode over time due to various factors like increased competition, technological advancements, or regulatory changes. 

Example- Nokia was the first to create a cellular network in the world. In the late 1990s and early 2000s, Nokia was the global leader in mobile phones. However, the company overestimated the strength of its brand and believed it could arrive late to the smartphone race and still win. In 2008, one year after the first iPhone release, Nokia finally decided to compete with Android, but it was too late. Their products weren’t competitive enough.

4. The Stock Becomes Overvalued:

When a stock’s price exceeds its intrinsic value significantly, it may be overvalued. Selling overvalued stocks can help lock in gains and reduce the risk of a price correction.

Example: Suppose you invested in Indian Railway Catering & Tourism Corporation Ltd. (IRCTC) during its IPO. The stock experienced a significant price increase of 700% from2019 to 2021, resulting in a price-to-earnings (P/E) ratio exceeding 300 in October 2021, which was much higher than the industry average. This overvaluation could have been a signal to sell and realize your profits. Indeed, the stock subsequently corrected by 48% and only returned to its 2021 levels in May 2024, after 31 months.

P/E ratio of IRCTC post listing (2019-2024):

Shares of IRCTC post listing (2019-2024):

5. Change of Management

Leadership plays a crucial role in a company’s success. A significant change in management can affect the company’s direction and performance. If you lack confidence in the new management’s ability to steer the company, it might be a signal to sell.

6. Slow Growth

If a company’s growth slows down significantly, it might no longer align with your investment strategy, especially if you are focusing on high-growth opportunities.

Example: Suppose you invested in Bombay Dyeing & Manufacturing Company Ltd. because of its diverse business portfolio and growth potential. However, if the company begins to show prolonged periods of slow growth, it might be wise to consider selling your shares in favor of a company with better growth prospects. For instance, Bombay Dyeing’s revenue increased from ₹2325 crore in FY 2012-13 to ₹2674 crore in FY 2022-23—a mere15% increase over ten years. Additionally, the company has incurred losses in six out of those ten years, indicating a weak growth trajectory.

Shares of Bombay Dyeing (2014-2024):

Additionally, portfolio rebalancing is another reason to sell a stock. Over time, certain stocks in your portfolio may grow disproportionately, leading to an unbalanced investment strategy. Selling stocks that have performed well and reallocating the proceeds into other investments can help maintain your desired asset allocation and risk level.

Personal financial needs can also prompt the sale of stocks. Life events such as buying a house, funding education, or covering unexpected expenses may require liquidating some of your investments. In such cases, selling stocks can provide the necessary funds while still aligning with your long-term financial goals.

In conclusion, while holding onto stocks for the long term can be beneficial, it is equally important to recognize when to sell. Regularly reviewing your investments and staying informed about market conditions and company performance can help you make well-informed decisions.

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Achieve Your F.I.R.E: A Guide to Financial Independence and Retiring Early

What is F.I.R.E?

 

F.I.R.E stands for Financial Independence and Retire Early. This philosophy focuses on aggressively saving and investing to enable individuals to retire significantly earlier than the traditional retirement age (usually 60), achieving financial independence in the process.

How Can You Achieve F.I.R.E?

Here are some essential steps to help you on your path to F.I.R.E:

  1. Aggressive Saving: Aim to save around 70% of your monthly income. This aggressive savings rate allows you to accumulate wealth rapidly, paving the way for an early retirement.

  2. Frugal Spending: During your earning years, adopt a frugal lifestyle. Even if you can afford to spend more, the goal is to save and invest as much as possible, avoiding unnecessary expenses.

  3. Disciplined Investing and Planning: Invest your savings as early and for as long as possible to maximize growth. Careful planning and evaluation are crucial to ensure your investments align with your financial goals.

  4. Lower Risk Appetite: With a shorter time horizon for wealth creation, it’s important to manage risk wisely. Consider balanced investment strategies, such as hybrid funds, to protect your savings from high volatility.

  5. The Rule of 25: This rule suggests that you need to save 25 times your annual expenses to maintain your lifestyle after retirement. For example, if your annual expenses are ₹10 lakh, you should aim to save ₹2.5 crore (₹10 lakh x 25) to retire early.

  6. Post-Retirement Strategy: Achieving F.I.R.E is not just about accumulating savings; managing your finances post-retirement is equally crucial. Plan to withdraw no more than 3-4% of your savings annually to ensure your funds last throughout your extended retirement.

 

Although the FIRE method is a good way to achieve post-retirement financial freedom, it requires immense self-control and discipline. Despite the advantages offered by this unique financial strategy, it is essential to understand that the FIRE method may not be suitable for everyone.

 

For instance, if living frugally does not suit your lifestyle, adopting the FIRE approach may not be ideal. On the other hand, if you’re capable of saving and investing aggressively, you may consider adopting this strategy.

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Modi 3.0: Three Sectors Set for Growth

The political landscape in India now exhibits a sense of continuity, which augurs well for policy stability and the nation’s development trajectory. The reaffirmation of the ruling party’s mandate signals a resolute path forward, ensuring that key economic policies and initiatives stay on course.

The BJP’s manifesto, branded under the vision ‘Viksit Bharat,’ outlines an ambitious plan to transform India into a developed nation by 2047, coinciding with the country’s centenary of independence.

Third term:

In its third term, the BJP aims to continue its reform agenda and complete unfinished initiatives. Prime Minister Modi has hinted at making significant decisions to accelerate India’s growth. He highlighted the current period as unprecedented, marked by increasing growth rates, decreasing fiscal deficits, rising exports, a reducing current account deficit, controlled inflation, and growing opportunities and incomes. These factors collectively contribute to poverty reduction.

Future reforms:

Future reforms are expected to focus on further digitalization and strengthening India’s role in global value chains. The BJP’s policy push towards manufacturing and exports is anticipated to continue, with an emphasis on supply-side reforms. These reforms include a transition to clean energy, increased spending on both digital and physical infrastructure, and targeted policy initiatives aimed at youth, the poor, women, and farmers.

  • Infrastructure

A notable aspect of the NDA’s governance has been its focus on infrastructure development, resulting in the doubling of highway lengths and an increase in the number of airports from 74 to 146.

BJP Manifesto: ‘We will focus on the modern road network, enhance rail and metro connectivity with new age trains and expanded networks, develop comprehensive EV charging stations, construct new airports and advance our telecom infrastructure with affordable 5G and innovative 6G technology, promoting ease of living for middle class families’

We will expand the railway network to increase capacity for passenger as well as cargo transportation. We have constructed 31,000 km railway tracks in the last ten years. We are now adding 5000+ km of new tracks every year and will continue to add new tracks at this pace for the next five years’

Key players: Ambuja, Ultratech, L&T, Jupiter Wagons, RVNL, NCC, BHEL

– This theme will continue to gain prominence. Prime Minister Modi has recently announced that the speed of implementing infrastructure projects will be accelerated manifold in the next five years to make India the third-largest economy in the world.

– Railways and highways are expected to remain top priorities on the government agenda, with related sectors like minerals and metals also projected to grow.

– In the third term, the government may export locally designed and manufactured Vande Bharat trains.

– Over the next five years, the railway network is set to expand rapidly with the addition of 5,000 kilometers of new track each year.

– The government has set ambitious targets for the transport sector, including developing a 200,000-kilometer national highway network by 2025 and expanding the number of airports to 220.

– Further, Vision 2047 plans to complete the construction of national highways by 2037, as robust road infrastructure can have a multiplier effect in the following decade.

  • Defence Sector

BJP Manifesto: ‘We will vastly expand domestic defence manufacturing and exports of Made in Bharat defence equipment. This effort will be facilitated by accelerating indigenisation in major air and land equipment’

Key players: Hindustan Aeronautics, Bharat Electronics, BEML, Mazagon Dock Shipbuilders, Bharat Dynamics and Garden Reach Shipbuilders and Engineers

– India’s defense sector is witnessing a significant export boom. In FY 24, the country recorded a stellar performance, with defense exports reaching a record high of Rs. 211 billion, marking a substantial increase over the past few years.

– With rising demand for defense equipment, technologies, and services, there are promising prospects for companies involved in defense production and technology development.

  • Energy:

Key players: GAIL, IGL, Mahanagar Gas, Gujarat Gas, NTPC. APL Apollo Tubes, Finolex and pipe manufacturers may benefit from government’s vision to convert households to PNG.

By 2032, the government aims to add only 80 GW of coal-based power capacity compared to 500 GW of renewable energy capacity.

The focus is on reducing petroleum imports and achieving energy independence by 2047.

The government should prioritize the development of energy storage infrastructures, such as battery energy storage and pumped hydro projects, to facilitate a smoother integration of renewable energies with the national grid.

The views expressed herein constitute only the opinions/ facts and do not constitute any guidelines or recommendations on any course of action to be followed by the reader. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers

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What we learned from Warren Buffett at the Berkshire Hathaway Meeting

Before diving into the highlights from the event, it’s worth noting some key facts about Berkshire Hathaway:

  1. Share Price: A single share of Berkshire Hathaway, valued at $620,000 (approximately Rs. 5.2 crore), is the most expensive share in the world.

  2. Cash Reserves: The company holds $190 billion in cash and cash equivalents, an amount greater than the combined cash reserves of all Indian listed companies.

  3. Daily Earnings: Berkshire generates almost $100 million daily.

  4. Global Ranking: Berkshire Hathaway is the sixth largest publicly traded company in the world.

 
And the credit goes to none other than Warren Buffett, who acquired a struggling textile company in the 1960s and transformed it into the giant it is today.

Earlier this month, we travelled to Omaha, Nebraska, to attend the Annual General Meeting of Berkshire Hathaway and listen to the investing legend, Warren Buffett, share his insights on investing and life.

 

The event was a profoundly insightful and motivational experience, attracting 30,000 attendees from around the globe, including notable figures like Bill Gates (Founder of Microsoft) and Tim Cook (CEO of Apple), as well as fund managers from some of the world’s largest hedge funds.

We met many investors who have made the pilgrimage to Omaha annually for the past 30-40 years. A lot of investors were keen to know more about India and its growth story.

From taxi drivers to business owners, everyone had praise for Warren Buffett in Omaha. Many were early investors in his company and have significantly benefited from his remarkable track record, which saw a single share of Berkshire Hathaway grow from $19 (in 1965) to $620,000 (approximately Rs. 5.2 crore) today. A police officer we spoke to mentioned that he was able to retire 15 years early thanks to Buffett’s guidance.

The meeting was scheduled for 8 AM, but eager investors began queuing outside the CHI Health Center as early as 4 AM to secure the best seats and catch a glimpse of Buffett. Each year, a 30-minute film is shown before the event starts. This year, the film paid tribute to Warren’s longtime friend and business partner, Charlie Munger, who passed away at 99 in Nov 2023.

Following the film, Buffett discussed Berkshire Hathaway’s financials and answered questions from investors, imparting his vast wisdom. Here are some of the key insights he shared:

Buffet on investing

 

  • Successful investing is all about having a few very big winners

  • If you understand businesses, you understand stocks

  • The power of compounding is the most underrated power in the world

  • Don’t try to time the market

  • The best time to sell a wonderful company is (almost) never

  • Apple is Berkshire’s largest holding and Berkshire is Apple’s largest institutional investor: Apple is a very high-quality business to Buffett and Berkshire plans to own it for a long time

  • The impact of AI on human society – both good and bad – is yet to be seen

  • The transition from fossil fuels to renewable energy will take time and currently, it’s not possible to transition completely away from fossil fuels

  • On the importance of asset allocation – maintaining $189 billion cash pile: “It wasn’t that people didn’t have money in 2008. It’s that they were paralyzed. And we did have the advantage of having some capital and eagerness even to act, and a government that, in effect, looked at as us as an asset instead of a liability.”

  • Getting extraordinary results in the long-term is not easy, but getting decent results is, if your behaviour is right

  • Distribution businesses are not wonderful businesses, but they can perform really well if there’s a great manager at the helm

  • Positive on India: There are unexplored and unattended opportunities in India

Buffet on life

 

  • Kindness is free

  • Buffett has signed the “The Giving Pledge, ”committing 99% of his wealth to philanthropy.

  • Biographies are a wonderful way to have conversations with great people from the past

  • Figure out who you want to spend the last day of your life with, and meet them often

  • Having the resources and the will to act when everyone else does not is a great advantage

  • If you’ve been lucky in life, help pull up others too

  • Always surround yourself with people you look upto and trust

  • He has read ‘The Intelligent Investor’ by Benjamin Graham at least five times.

Onesta Capital Ventures is a Multi Family Office based out of Gurugram (India). We aim to provide tailored independent wealth management and other family governance solutions to individuals and corporates.

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