Bimtek Capital’s India Growth Fund: Investor Update Newsletter #26, Feb-2025
The Usual Suspects: Par for the Course!
Dear Investors, Readers,
Sometimes in a lot of hubble-bubble around, we miss asking ourselves the important questions. The only few that matter. Most of the other questions popping up around us are, simply put, derivatives (or second / third order implications) of these few ‘important’ ones.
Is there a structural shift in India’s growth and domestic consumption story?
If the answer to this question (i.e., Long-term India Growth Story) is NO for any of us- then we should be sleeping a little less comfortably. Otherwise-
Haven’t the seasoned investors seen or been through this before? Isn’t this how markets work?
Across pendulum arcs of extreme greed (and over-exuberance reflected in prices of securities) and extreme fear (with healthy and or deep corrections). And at times- in excesses across both ends!
Yes, the markets may have run up in the recent past, above their long period averages. Yes, Mr. Trump’s policies of tariffs for various trade relations across geographies may cause hiccups in the markets till the time there is clarity on each of these being negotiation tactic hardballs or actual plays. Yes, onshoring and even larger geopolitical turmoil might play out (like it has every 70–80–90 years)- the mega cycles so to speak- be it the Dutch, or the French, or British and now US- as the primary power (force) across regions
Bimtek wouldn’t preach Buddhist lessons but: This Pain is part of the process. Has always been!
What we signed up for whilst choosing to invest in the capital markets. So for those readers and investors with excess capital to deploy- you are, by extension of ‘cash is king!’ analogy- the kingmaker now with amazing opportunities to invest into. For those who are near fully deployed- rest assured that Bimtek vouches for its fiduciary duties in having invested in the right securities at a healthy price (v/s underlying value) so we’d rather trust the process and see the long term results speak for themselves. And for those looking to exit the market and enter again at lower levels (basis divine guidance in knowing when to?)- unless someone can prophesize the exact market lows- I’d say the time tested thing is to NOT do something that we might regret later.
Because looking back, regret is what most of us do: at the lost opportunities of deploying more instead of exiting during covid lows, or during the other past crisis times (be it the nbfc play out around 2016 or even earlier one’s). So without any further on the Indian capital market valuations (and prices)- Bimtek will stick to what we believe we do a fairly reasonable job at- ascertaining VALUE of securities and buying with reasonable margin of safety to deliver healthy risk-adjusted returns across our investment portfolios.
Macro Backdrop: Times are changing!
Value investing is finally taking priority as relatively saner growth outlook (or supposed ‘slowdown’) kicks in!
Queries have come in from some of our ‘recent’ investors regarding potentially exiting markets and re-entering later once things stabilise. Bimtek isn’t of the school of thought of jumping around much. We like to be the lazy, old-school boring investors- sitting on our eggs just right and letting the management teams do what they do best: manage (mind) their (own) business!
We aren’t in catching the falling knives business but things seem not too bad now. The froth in the markets have sub-sided. At least in the Indian markets. Despite this slight portfolio correction, Bimtek is sleeping relatively better at night.
Contrary to this, In the US, things seem all headed in the right direction: at least optically!. Some of Bimtek’s ex-colleagues at Goldman have come out and blown the trumpet how the US is in a GOLDILOCKS period. Where the inflation is gradually sub-siding, and job-growth is ‘relatively healthy’. Is it now?
Time (AND NOT TRUMP) will tell. We seem all too complacent about it.
Bimtek isn’t a proponent in arguing that trees could grow to skies but that has NOT stopped the Magnificent-7 from adding $11 Trillion (yes Trillion, NOT billion) in Market Cap over the recent past. Much more than the market cap of some of the developed economies: Germany, France, UK et al combined!
Yeah, a bit of jitter down the spine.
The bigger risk, to Bimtek’s mind, is that persistently higher interest rates, could do serious damage to US’ fiscal outlook and economic growth prospects.
As you’ve heard before from Bimtek, our bigger macro view is that the excessive government debt may EVENTUALLY cause a global financial crisis!. Most developed economies have excess debt so the epicentre of this could be anywhere and eventually reach US. It wouldn’t be the first time!
The critical point is that governments can issue currencies (causing inflation) to repay these debt but the fact that this $ might not be worth as much basis the underlying effect of inflation. Is it coincidence that long-term rates are rising and probably rising the most in the part of the yield curve where treasury concentrates its debt? Probably not.
Treasury debt are being reprised to reflect the rising concern about US fiscal stability. Bimtek thinks the business leaders, and everyone in the world understands that the tariffs will rise. Mr Trump! Everyone understands the need to rebuild domestic production and restore balance. The question is about:
How it is done? Everyone wants to see a clear orderly path process and when it will end! About what gets done and how. So everyone can plan accordingly. And NOT be surprised. For no one likes surprises in the markets!
Add the layer of Oil prices to this macro balance, a possibility of another three (or four) 25bps rate cuts by Fed, combining with some actual and substantial reductions in deficit. Although, if Trump administration follows through on regulatory relief, it could be good for the US economy, so a sanguine outlook couldn’t completely be ruled out for US per se!
Or as wise investors say:
You can’t predict the future, so you better prepare yourself for howsoever it unfolds!
As always- if you’re interested in discussing investments in general or would want to evaluate investing with us through Bimtek Capital’s India Growth Fund- we’d love to talk.
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Kind regards,
Team Bimtek Capital
