714 Days and Counting – The Stock Market Isn’t Cooperating With the Bachcha Party My column @91basispoints. (Free to read. Needs one time registration.) Sensex has spent 714 days below its September 2024 peak – down ~13% from 85,836. Ninth-longest such drawdown since 1979. The much broader NSE 500 Total Returns Index has fallen much less than the Sensex. It has fallen 4.5%. It's fourth longest drawdown since 1995. The NSE 500 has fallen much less than the Sensex. One reason for that has been the lackadaisical performance of largecap stocks in comparison to midcaps and smallcaps. Meanwhile, investors are selling out of large caps and investing in small caps, because that's the story that those in the business of managing other people's money, the OPM wallahs, are currently busy selling. The trouble is that most smallcap stocks do not have much liquidity. Hence, when money floods in, prices go up very fast, as do their valuations. The BSE SmallCap Select P/E has jumped from 29 in April to ~42 now – the priciest since 2015-16. (If we look at annual averages.) ICICI Pru's S Naren calls this anti-asset-allocation. In 2008, the SmallCap index fell 80% peak to trough. All this reminds me of something a hedge fund manager told me many years ago, after his fund hadn’t really delivered the kind of returns that he had promised investors while raising money: “The market isn’t cooperating,” he had said. The trouble is, the markets aren’t meant to cooperate. They do what they do. And for a generation that has grown up watching the stock market go up almost every year, two years of going nowhere can feel like a very long time. But that is how markets work. They go up, they go down and sometimes they simply sit around doing nothing. The bachcha party is perhaps slowly learning that bit. basispointinsight.com/Story/…

Move Over Vijay Mallya: Why Subhash Chandra Has Become the New Poster Boy for Bank Loan Defaults My column in @91basispoints (Free to read. One time registration required.) Why do some bank loan defaulters become poster boys, and others don't. Like almost no one seems to have heard of Brij Bhushan Singal, the chairman of the erstwhile Bhushan Steel, the big daddy of corporate defaulters, a company which defaulted on bank loans of Rs 56,000 crore. Or the Ruia brothers of Essar Steel which defaulted on Rs 49,000 crore. But everyone has heard of Vijay Mallya, Nirav Modi and Naresh Goyal of Jet Airways -- who were largely small fry in comparison to the big defaulters. Or consider other companies like Monnet Ispat and Energy, Bhushan Power and Steel, Era Infra Engineering, ABG Shipyard, Jaypee Infratech, Amtek Auto, Alok Industries, Jyoti Structures, Lanco Infratech and Electrosteel Steels, all big defaulters. Who are their promoters? Why have we never heard of them? basispointinsight.com/Story/…

Khelo India Khelo: What Gen Z Protests Tell Us About the Lure of Easy Money My column @91basispoints (Free to read. Requires one time registration.) What do futures and options, crypto, online money games, illegal betting apps and now even weather derivatives have in common, with Gen Z protests? They have all been marketed as easy ways to make money, often with the help of finfluencers, stand-up comics, cricketers, celebrities and now even FM radio jockeys. With good jobs scarce, wages stagnant and aspirations rising, millions of young Indians are hustling for a side income beyond their day job. That's what makes the promise of easy money so seductive. The product changes. The pitch doesn't. Until the economy creates enough quality jobs, someone will always be ready to sell the next shortcut to prosperity. So, the Gen Z protests weren't just about politics. They are also about economics. Young Indians are angry because the economy isn't creating enough good jobs to match their education and aspirations. That's also why the promise of making money easily on the side has become so appealing. basispointinsight.com/Story/…

The Government Earned ₹1.29 Lakh Crore Taxing Equities. Why Will It Let It Go? My column in @91basispoints (Not behind a paywall. Requires one time registration.) More than 10% of personal income tax now comes from long-term capital gains tax on stocks and equity mutual funds. It was around 5% earlier. The tax has grown at the rate of 28% per year from 2018-19 to 2024-25. If one were to put this in a language that the those in the business of managing other people's money, the OPM wallahs that is, understand, in 2024-25, the revenue from long-term capital gains on stocks and equity MFs was 4.4X of what it was in 2018-19 – a very impressive CAGR of 28% on average. Every rupee not collected from equity investors has to be collected from someone else – through higher taxes, lower public spending or more government borrowing. Those demanding zero tax on stock market gains rarely acknowledge this trade-off because doing so weakens their case. The OPM wallahs are free to argue for abolishing the tax or lowering it. But then they should also tell us whose taxes they want raised instead. Until then, they aren't arguing for lower taxes, they are simply arguing that someone else should pay for them. Indeed, the trouble with an OPM addiction – like a continuing opium addiction – is that it blurs your thinking and makes you keep repeating the same thing while expecting a different reaction from your audience. basispointinsight.com/Story/…