Jan 2018 - MCAP - $2.3 trn GDP $2.6trn
Jan 2022 - MCAP - (est) $4.3 trn GDP $3.3trn

Difference : in 4 Years for a total addition of $700bn in GDP, we rewarded Equity investors an additional $2,000bn in Mcap. That's almost 3x.

Corp Profit to GDP stands at about 2.5-2.7% roughly. So that's about an incremental $20bn in additional profits added into the total mix. And we are roughly valuing this at 100x

Note that This assumes ALL incremental GDP comes from listed companies

Yeah Seems about normal.

Another statistic:

Incremental GDP addition this year:

USA - $ 1,250bn (5% on base of $21trn)

China - $ 750bn (5% on base of $15trn)

India - $ 270bn (9% on base of $3trn)

We make so much noise about the greatness of India's growth

Fact is China + US still add incrementally to global GDP an amount which is equal to +60% of India's total GDP even today !

Oh did I forget to mention that California GDP = India?

But Mcap of Indian listed companies is reaching a whole new level.

The most passionate reasoning these days is that there is "very little ownership" of stocks amongst Indian households unlike countries such as US.

But if you think tht 70mn demat + MF a/c's = stock ownership & that penetration is only 5% of total population, then ur wrong

Why's that ? Well because:

35% of India's population is BPL. Forget demat, stocks, financial assets, they don't know where their next meal is coming from.

Another 35% are those who are basically running hard to stay in one place.

Another 20% don't even earn or are beyond risk taking ability (below age or above 65)

That leaves us with 10% addessible population who can basically invest in Equities.

That's roughly 14cr people. & We r already at 50% penetration !

This is where you are at.

With 7cr people buying stocks thinking 15% CAGR from whenever they enter the market till the time they retire 25-30 years out is their birth right, what you have is avg valuations of better managed Indian Cos, growing at 10-15% CAGR r now trading at +40-50x earnings!

Valuations of companies from traditionally wealth destroying sectors have now suddenly increased 50-100% in the last 3-6 months, that too with no ostensible change in operating environment. So how much of the future prospects are we in a hurry to price in today itself?

Last but not the least, if compounding is the 8th wonder of the world, mean reversion is the 9th wonder.

If u go up too fast too, far away from long term Avg, sooner or later u will come back.

Today's returns are simply being borrowed from tomorrow's returns.


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More from @abadjate

12 Oct
9.15am: First I will take a 2Lac rupee loan via a Digital lending mobile app . Time: 5 mins

9.20am: Next I will open a trading account with a discount broker. Time: 5 mins.

9.25am: Next I will watch three 2 min YouTube videos on trading options. Time: 6 mins

9.31am: Wait for 9.45 candle (because youtuber trader said not to trade for first 30 mins)

9.45am: Punch in my first BUY order (well because that is all I was taught in all 3 videos - where is the BUY button on screen"

10.15am: 30 mins is too long so I close my trade

10.15am: Log into Twitter and see who can be trolled

11.15am: fresh from my maiden victory I decide to start my own telegram channel

12.15pm: I post my first LIVE trade (yes another BUY idea)

3.29pm: I give 'timely' exit instruction to all my 3 group members

Read 5 tweets
20 Jun 20
Don't want 2 play party pooper but while small/midcap stocks can continue ringing d cash registers on d long side 4 d nxt few wks, TBH IMHO this is d time to b CASHING OUT - Not d best of times 2 b pyramiding or hunting actively for "breakouts" & "long term buy ideas"

Sure thing stocks fell vertically by 50-70% and have risen 50-300% frm the bottoms.

But most of them are STILL down for the Yr.

Narrative, flows, liquidity notwithstanding, stocks are SLAVE to earnings grwth

While we may see a near term resurgence in demand

There is no way of telling hw much is pent up demand & hw much is d new normal. It is v likely tht we may see the new normal (frm a medium term perspective) adjusted lower.

Consider this - most stks were STILL trading at valuations abve their 2009/2013 troughs in Mar'20!

Read 20 tweets
13 Jun 20
The stock market is inefficient. Period!

People buy & sell in the stock mkt daily.

These people have their own underlying biases & perhaps flawed thought processes which makes them take those buy sell decisions

When a trade is exchanged betwn an inexperienced & a smart

Investor, it transfers money frm one pocket to another

But when 2 idiots make up d entire mkt while d experienced hands sit by d sidelines, what do u call tht situation exactly ?

The madness of crowds.

In the short run it's the collective decision making of the crowd that drives prices.

And most analysts (sell side or buy side) spin their logic / story around those prevailing prices.

It takes sheer guts to take d 'contrarian' route

Read 4 tweets
2 May 20
Let me tell u a story:

I am someone betwn d age of 35-45. Married. Hve a kid. Wife doesn't work. Am a higher/mid level exec wid a large Co.

I hve 5 yrs worth of savings in financial assets - stocks, bonds. I hve bought the flat tht I live in on a 20 yr loan in 2016.

Hve 2 credit cards. No revolvers. But hve a 5 Yr car loan for a nice car bot 3 yrs back & 2 EMIs running for an iPhone and a big tv purchased last Diwali.

Usually take 1 dom trip every yr & a foreign trip perhaps once in 2 yrs. Go to movies 2x a month. Eat out 2x a week

Worked hard last 2 yrs. Boss promised a good raise + bonus this yr aftr 3 tough yrs. Was considering gifting wife some jewellery on d upcoming anniversary & d kid a laptop on birthday. Was also looking to either bump up SIPs running since last 7 yrs (Am a patient investor)

Read 7 tweets
30 Dec 19
Betwn 1985-2000 & again 2009-19 host of "quality" & "growth" stks performed extremely well in India

Betwn 2003-08 was the era of cyclicals largely based on the "investment theme"

So 25 of last 35 yrs hve gone largely towards quality / growth theme . That's a long time !

Today most 'fear" over priced consumption related stocks and during onset of any mkt correction, most are cheering a fall in "expensive" consumption stocks .

What does all of this mean ?

It means only one thing:

Nothing in the mkt is permanent in nature.
But then 10 yrs is a long time! Seeing is believing. And it's easy to extrapolate things into perpetuity (favorite time frame: "next 10 yrs")
But themes keep shifting. At first subtly. Then abruptly.

Read 7 tweets
14 Dec 19
Did u know ?

After BBTC broke out of a 20 yr consolidation phase , it generated 82% CAGR over next 3 Yrs ?

After ABB broke out of a 10 yr consolidation phase, it generated 63% CAGR over next 3 Yrs ?

More to follow ...
After Kotak Bank broke out of a 11.5 Yr consolidation phase, it generated 63% CAGR over next 3 Yrs ?

After HUL broke out of a 11 Yr consolidation phase, it generated 22% CAGR over next 3 Yrs ?

More to follow ....
Aftr Bata India broke out of a 11 Yr Consol phase, it generated 40% CAGR ovr nxt 3 Yrs ?

Aftr Kajaria broke out of a 15 Yr consol phase, it generated 75% CAGR ovr nxt 3 yrs ?

Aftr Abbott India broke out of a 11 Yr consol phase , it generated 24% CAGR ovr nxt 3 yrs ?
Read 4 tweets

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