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Last 5 years would have humbled a lot of investors There was a time when the playbook looked simple: - Buy a blue chip - Hold it forever - Forget about quarterly numbers - Expect 20% CAGR The era of lazy investing is being seriously challenged Businesses, competitive advantages & industry structures are changing faster than ever Some of the strongest businesses, established market leaders & supposedly recession proof sectors have delivered negligible or even negative returns Look at how many supposedly strong narratives have been shaken: 1. FMCG : Cash rich businesses, recession resistant demand, predictable earnings & whatnot! When REV growth remains in single digits for years, even exceptional ROCE & strong cash generation cannot justify premium valuations indefinitely A company cannot keep trading at 50-60x P/E forever without meaningful earnings growth Eventually, valuations have to catch up with the underlying growth reality! For years, the biggest moat for the sector was distribution Thousands of distributors + lakhs of retail outlets made it extremely difficult for a new brand to compete with established FMCG giants Quick Commerce gives a new brand access to consumers almost instantly D2C brands can build awareness online, launch nationally & reach customers without spending decades building physical distribution The incumbents are still extremely strong businesses, but distribution alone is no longer the moat it once was 2. IT Services : The Traditional Growth Model Is Under Pressure For decades, Indian IT companies benefited from global outsourcing & labour cost arbitrage More global outsourcing → More employees → More REV → More profits But AI is potentially changing the economics of the entire industry The traditional headcount led growth model is being challenged, while discretionary spending remains weak The old narrative cannot simply be extrapolated 3. Paints : Even Strong Entry Barriers Can Be Challenged The paints industry was once considered one of the strongest consumer franchises Distribution + dealer relationships + brand + tinting machines created enormous entry barriers Then a large new player entered with massive capacity, aggressive dealer expansion & pricing Suddenly an industry believed to have almost impenetrable barriers had to deal with a completely new competitive environment Again, the businesses didn't suddenly become bad The competitive structure changed And these are just a few examples! A company that was a market leader 5 years ago may still be a market leader today, but its growth prospects, competitive advantages & valuations could be completely different You have to do the hard work! Track quarterly results, management commentary, competitive intensity, market share & changing industry dynamics Most importantly, keep questioning your original investment thesis.

Reality Check in Stock Markets 👀 Looked at companies with: - Market Cap >10,000 Cr - 5 Year Stock CAGR <5% 78 out of these 130 companies have actually delivered a negative 5 year CAGR And many are some of the biggest, most well known names in the market 5 Yr CAGR - Reliance Industries: -0.5% - HDFC Bank: -3.5% - Infosys: -7.5% - TCS: -6.2% - Wipro: -10.7% - Hindustan Unilever: -4.9% - Asian Paints: -4.9% - Bajaj Finserv: -2.1% - Kotak Mahindra Bank: -0.5% - Avenue Supermarts: -7.1% - SBI Cards: -13.5% - IRCTC: -12.0% - Dabur: -9.0% - Tata Elxsi: -8.8% - Godrej Properties: -8.6% - PI Industries: -7.5% - HDFC Life: -5.4% - Berger Paints: -5.3% - Shree Cement: -3.9% - Ambuja Cements: -1.2% - Godrej Consumer: -2.3% - Page Industries: -2.0% - Biocon: -0.6% - Colgate: +0.7% - ICICI Lombard: +1.1% - SRF: +1.8% - Tech Mahindra: +2.8% - ITC: +3.1% - Bajaj Finance: +3.4% - Tata Consumer: +3.8% - JSW Energy: +3.9% - HCL Technologies: +4.0% - Nestle India: +4.1% - Britannia: +4.2% - Tata Steel: +4.5% And the full list includes: Whirlpool India, Adani Total Gas, Gujarat Energy, Crompton Greaves Consumer, Aarti Industries, P&G Hygiene, Kansai Nerolac, SBI Cards, Bandhan Bank, Trident, ACC, IRCTC, Vinati Organics, Jubilant FoodWorks, Sammaan Capital, Wipro, Tata Chemicals, Atul, Deepak Nitrite, Indraprastha Gas, Dabur India, Tata Elxsi, Nuvoco Vistas, LTM, Godrej Properties, Adani Energy Solutions, Syngene International, PI Industries, Blue Dart Express, Bayer CropScience, Infosys, ICICI Prudential Life, United Breweries, Avenue Supermarts, Metropolis Healthcare, Emami, IndusInd Bank, Pfizer, Honeywell Automation, TCS, Ramco Cements, UPL, Container Corporation, HDFC Life, Berger Paints, UTI AMC, Mphasis, Hatsun Agro, Asian Paints, Hindustan Unilever, PVR INOX, Gland Pharma, Voltas, Havells India, Shree Cement, Dalmia Bharat, HDFC Bank, Balkrishna Industries, Astral, L&T Technology Services, Tata Motors Passenger Vehicles, Cohance Lifesciences, Godrej Consumer Products, Kajaria Ceramics, Bajaj Finserv, Page Industries, BASF India, Sumitomo Chemical, Ambuja Cements, Natco Pharma, Devyani International, Biocon, Kotak Mahindra Bank, Reliance Industries, Info Edge, DCM Shriram, Amara Raja Energy, Punjab & Sind Bank, Alembic Pharma, Adani Green, New India Assurance, Mahanagar Gas, Sun TV Network, Godrej Agrovet, Dr Lal PathLabs, Colgate-Palmolive, Zydus Wellness, ICICI Lombard, Brookfield India REIT, Patanjali Foods, CAMS, Chambal Fertilisers, V-Guard Industries, Vodafone Idea, SRF, Zensar Technologies, 3M India, IRB Infrastructure, Cyient, Tech Mahindra, Century Plyboards, Grindwell Norton, ITC, JM Financial, Yes Bank, Sona BLW Precision, Bajaj Finance, Carborundum Universal, IndiGrid, KIOCL, Nazara Technologies, Tata Consumer, LIC Housing Finance, Embassy Office Parks REIT, JSW Energy, Tata Communications, HCL Technologies, Central Bank of India, Nestle India, Sundram Fasteners, Britannia Industries, Petronet LNG, CIE Automotive, Graphite India, Affle, Abbott India, Max Financial, Tata Steel, Endurance Technologies & Gillette India.

One Important Concept to Understand in Lending! Closing AUM = Opening AUM + Disbursements - Principal Repayments How can an NBFC report 75% AUM growth despite disbursements growing just 5%? 🤔 (Explained with a detailed illustration below ⏬) Similarly, an NBFC can report strong disbursement growth, but AUM growth can remain significantly lower! How? The answer lies in higher repayments, prepayments & shorter loan tenures.

Rajeev Jain shared some interesting insights on Gold Loans during Bajaj Finance's Q2FY27 concall! Bajaj Finance has already built a 24,000 Cr Gold Loan book (+105% YoY) It is now among the top 5 Gold Loan lenders in the NBFC sector - Gold Loans should be a “profit builder”, not an “AUM builder” - Bajaj experimented with short tenure Gold Loans, but these created unnecessary technical delinquencies when customers missed maturity dates - 1,047 Cr of Gold Loans moved into Stage 2 during the quarter largely because of this structure - Management stopped these short tenure schemes from August itself - 550 Cr had already moved back to Stage 1 by the time of the concall - Company now prefers longer 9-12 month tenures while still allowing customers to repay earlier - 99% of Gold Loan customers currently use bullet repayment - Management does not want to build an auction driven Gold Loan franchise - It is willing to accept slower AUM growth rather than push higher LTVs or products that could unnecessarily stress customers - Average ticket size remains ~2.4-2.5 lakh with LTV around 75%, including interest Some excellent insights into the nuances of the Gold Loan business!

Strong set of numbers from Lumax Auto in #Q2FY27 - REV growth: 35% YoY - PAT growth before minority interest: 50% YoY But H2FY27 is where growth rates are likely to cool off Management has already highlighted that Q1 & Q2 benefited from a low base, while Q3 & Q4 will face a much tougher comparison as H2FY26 had already seen hyper growth post GST rationalisation

Optical fibre companies is going through a very strong upcycle Sterlite Technologies - Q2FY27 REV 🔼145% - 2,529 Cr Operational EBITDA: 685 Cr PAT: 517 Cr vs 4 Cr YoY Reported EBITDA includes a one time ~161 Cr gain from a US tariff refund Order book reached a record 35,274 Cr Data Centres contributed ~33% of H1FY27 REV Management is targeting ~50% contribution in FY27 STL continues to target: - FY29 REV: ~20,000 Cr - EBITDA margin: >30% Margin ambition was increased from >27% earlier Management is also planning ~1,000 Cr annual capex through FY27-29 & ~50% expansion in fibre, preform & cable capacities HFCL - Q2FY27 REV 🔼144% - 2,542 Cr EBITDA 🔼224% - 658 Cr PAT 🔼448% - 394 Cr Robust Order Book: 28,900 Cr Capacity Expansion plans - Optical Fibre capacity: 28 Mn fibre km → 34 Mn → 43 Mn - Cable capacity: 34 Mn fibre km → 63 Mn The company is also investing in its own preform capacity, which should increase backward integration & potentially improve margins further FY27 guidance upgraded massively : 20% → 40% → 80% 🔥 Initial FY27 REV growth guidance: ~20% After Q1: ~40% After Q2: at least 80% HFCL had earlier targeted 10,000 Cr REV by FY29 Management now believes this milestone can be achieved significantly earlier Defence becoming the next growth engine HFCL is targeting 500 Cr of Defence & Aerospace REV in FY27 Both companies are clearly in one of the strongest earnings cycles they have seen in years

Defence Stocks have witnessed massive correction Shipbuilders have seen one of the biggest cracks: - Cochin Shipyard is down 62% from ATH - Mazagon Dock is down 51% from ATH - Garden Reach is down 47% from ATH Several other names are also down 20-50%

Was looking at NBFCs - median correction is 25% Many lenders are now trading close to some of their lowest valuation zones Bajaj Fin, Chola Fin, Muthoot Fin all trading at the lowest band of valuations

KEI & Polycab both stocks have gone through a massive valuation reset: KEI Industries: P/E peaked at 75x, now around 34x TTM Polycab: P/E peaked at 63x, now 35x TTM Both are now trading around ~30x on fwd est

FD Investors Right Now 🕺😂

Crazy Amount of Liquidity Trapped in the Jio IPO! The issue is already subscribed 8x & has crossed 1 Cr applications milestone It will be interesting to see how much of this liquidity flows back into secondary markets!

A Very Interesting Time to Study the Financial Sector! 👀 Several financial stocks are now trading near their historically low valuations, across Gold Finance, MFIs, SFBs, Housing Finance & MSME This is a good time to go through quarterly concalls & understand what is actually happening on the ground - ICICI Bank - SBI - Bajaj Finance - CreditAccess Grameen - SBFC Finance - Arman Financial If you are tracking the financial sector, these concalls are certainly worth listening to, as management teams share a lot of valuable insights! A few have already reported their results, while others are yet to report

🚨 CreditAccess Grameen is now trading at its lowest ever valuation Stock is currently trading at around 1.8x P/B Interestingly, every time the stock has slipped below 2x P/B, it has eventually marked a bottom

CreditAccess Grameen Q2FY27 - Key Management Insights Management has upgraded its FY27 profitability guidance Q2FY27 Performance - AUM 🔼20% - 30,946 Cr - Disbursements 🔼19% - 6,355 Cr - Total Income 🔼26% - 1,905 Cr - NII 🔼31% - 1,277 Cr - PPOP 🔼40% - 970 Cr - PAT 🔼299% - 502 Cr PAT growth was driven by operating leverage & normalisation of credit costs Management has upgraded its FY27 guidance - ROA - 5.2-5.8% vs earlier 4-4.8% - ROE - 21-24% vs earlier 16-20% - AUM Growth - 20-25%, unchanged - Credit Cost - 3-4%, unchanged Retail Finance is emerging as an important growth engine - Retail Finance AUM - 7,200 Cr - Retail AUM Share - 23% - Secured Retail AUM 🔼61% - 695 Cr Management expects Retail Finance to grow faster than traditional group lending over the coming years The company is increasingly graduating existing microfinance borrowers into individual business loans & secured lending products Asset quality has improved significantly - GNPA - 1.79% - NNPA - 0.59% - PAR 90+ - 1.11% - X-Bucket Collection Efficiency - 99.71% Management indicated that asset quality is at its strongest level in 10 quarters However, an important risk is emerging in central Maharashtra Management highlighted drought related repayment stress across approx 6 districts The company is restricting new customer sourcing in affected regions & expects some increase in credit costs during Q3 NIMs have likely peaked following the sharp improvement during H1 A 50 bps lending rate reduction became effective in October, with its impact expected to flow through gradually over 4-6 quarters Management indicated that further lending rate reductions would depend on borrowing costs & credit-cost trends. Customer acquisition is also expected to accelerate in coming quarters Another monitorable is the proposed insurance commission regulation, which could potentially impact ROA by 25-30 bps Management still expects FY27 credit costs within 3-4%, potentially towards the higher end

What a Massive Divergence Between Eternal & Swiggy! Eternal: Up ~10% YTD Swiggy: Down over 50% YTD! Swiggy has now corrected over 70% from its ATH Eternal is now almost 6x the size of Swiggy in terms of Market Cap - Eternal Mcap: ~3,00,000 Cr - Swiggy Mcap: ~50,000 Cr The biggest difference between Eternal & Swiggy is due to Quick Commerce business Blinkit NOV 🔼79% - 20,940 Cr Instamart NOV 🔼35% - 6,594 Cr But the bigger gap is profitability Blinkit Adj EBITDA: +184 Cr Instamart Adj EBITDA: -895 Cr That difference in growth quality & unit economics largely explains why the market has rewarded Eternal

Broader Market Damage Is Getting Deeper Data for Mcap >2,000 Cr: From 52W High: - Median stock is now 27% below its 52W high - 95% of stocks are down 10%+ - More than 1 in 2 stocks are down 25%+ From All time High: - Median stock is now 36% below its ATH - 83% of stocks are down 20%+ - More than 1 in 4 stocks are down 50%+ Another interesting breadth indicator: - 86.5% of stocks have delivered negative returns over the last 1 month - 66% are negative over the last 3 months - 59% are negative over the last 1 year

No matter which way the global AI trade moves, Indian markets seem determined to fall! Absolutely no support in sight, just relentless selling pressure across the board Smallcaps & Microcaps are getting hammered, with indices down over 3%! At this point, Markets are in complete FREE FALL mode!👿