Snapshots That Wow!

Index investing is becoming expensive!

Since 2018, new-age stocks related to areas such as insurance, fintech, organised retail along with consumer and healthcare companies have enteredNIFTY50 at the cost of old economy stocks from sectors such as oil & gas, industrials and traditional lenders. The trend is peculiar given that the divergence of P/E of incoming (median P/E of ~60x) and outgoing stocks (median P/E of ~10x) at the time of index changes was very high and above normal levels. Hence, on like-to-like basis, NIFTY50 index would have appeared 8-10% cheaper with a trailing P/E of 20x and FY26 P/E of 17.9x, assuming 2018 index constituents had not changed.

Source: ICICI Securities

RBI had valid reasons

RBI’s clamp down on low ticket personal loans had a very valid basis given that almost two-fifths of personal loans are going to borrowers with more than 5+ loans!

Source: Indus Valley Report 2024

Everything is cyclical!

These quality names were market favourites in FY14-17 market up move. Investors bid them up to speculative valuations assuming earnings growth of 18%-20% is guaranteed for a long period of time. However these lofty valuations, invited more competition from new players, which eventually led to lower profitability.

• Without the benefit of rounding off, only Blue Dart managed a double digit operating profits CAGR, let alone living up to the glory years before they became fancied
• Bluedart despite its 13% CAGR did a meager 5% stock price CAGR given the 113 starting PE ratio
• Had Ind-AS accounting not been implemented, BlueDart too would have a low single digit EBITDA CAGR
• Symphony, Asian Paints, Eicher, Kajaria, La Opala were all market leaders in their respective categories despite which stock price could not beat FD returns let alone the nominal growth rate of the country

A brand that grows by reducing number of stores!

Hermes CEO: "When I started out managing the group in 2013...there were 313 stores at the time & now we have 293. So we have fewer stores than back then. So it's not by opening more stores that we became more successful & increased fourfold our revenue. So we don't grow our scope by opening new stores"

Source: The Transcript

Is cash really king?

If cash is king, and the SPX500 rally over the past decade has come at diminishing FCF yield, are we in the lawless era?

Source: Goldman Sachs

Time to look at venture investing again?

Both the total number of deals and the absolute value of deals has fallen by 60%; back to pre-2017 levels. Perhaps it is time to get back to venture investing?

Source: Indus Valley Report, Tracxn