Thoughts on the current market situation…

“What you think, you become. What you feel, you attract. What you imagine, you create.” —Buddha 

Hi, we are writing this to pen down our thoughts and what are some of the bad and good events that has happened in the company level and what are we going to do in the next 2-3 months.

First of all, let’s see and calculate the damage on the Indices:

Nifty is down around 16% from the peak of 26,200 (Sep 2024)

Nifty MidCap 100 Index is down around 22% from the peak of 60,800 (Sep 2024)

Nifty SmallCap 100 Index is down around 25% from the peak of 19,600 (Dec 2024)

Nifty Microcap 250 Index is down around 27% from the peak of 26,400 (Dec 2024)

As far as our portfolio is concerned, we are down about 28% from the peak and currently entered the negative zone on a portfolio level

Talking about the valuations of Nifty:

Currently P/E is 20x TTM earnings and P/B is 3.4x, As per nifty-pe-ratio.com

Talking about the broader market, the number of stocks hitting new 52-week lows is making new highs. 

Pic credit: @itsTarH

See, the thing is when most people see these kinds of events happening they are tend to sell stocks at any prices which trigger more panic selling in the market.

The sentiments are very bad. The stock price movements are now no longer respecting earnings growth direction. This is purely short term broad based down movements due to bad sentiments, over valuation and euphoric kind of situation in the small and midcap companies.

Let us discuss some bad events that have happened in the companies that we covered earlier:

Let’s talk about them one by one:

1. Lawsikho: They filed a defamation case against Aditya Garg, Ashish Goel which was dismissed by the Delhi High Court and more over imposed Rs. 1 Lakh cost for non-disclosure of full tweets.

This is a very negative incident for the company that in our opinion has affected future earnings.

This incident raises questions about:

1. The founder’s temperament
2. The company’s practices

Earlier, in our post on Addictive Learning (under the Risks section, point no. 7), we highlighted that Mr. Founder is highly active on social media and frequently shares his personal opinions publicly. This concern has now materialized, creating unnecessary trouble for the company.

The stock price will ultimately follow earnings growth. However, we remain cautiously optimistic about the promoter and his aggressive presence on social media. Given these concerns, we are skeptical about holding the company for the long term.

This fall is purely sentimental and we are holding strong, hoping for a relief rally in the coming weeks. Booking such a huge loss at this price doesn’t make sense.

2. BEW Engineering: The unfortunate demise of Mr. Prakash Bhalchandra Lade, Chairman & Director, on December 29th has impacted market sentiment toward the company. Additionally, revenue degrowth in H1FY25 was attributed to delayed deliveries caused by extreme rainfall across key chemical industry regions in India, creating a double whammy.

We feel that this short term fall (67% from the top) is a boon for long term investors to accumulate at this level, 13x TTM earnings (Median being 34x). We are currently doing the same.

3. Phantom Digital: The entire VFX industry is currently underperforming. There is always an inherent risk from AI. However, the primary reason for its decline in the market is the increase in receivables. The combination of both—negative market sentiment and fundamental weaknesses—has led to a 72% drop in the stock from its peak.

Let’s compare all the valuation metrics for the companies operating in the similar space:

It can be seen that Phantom is trading at the lowest valuations compared to the other two.

In our opinion – A bet can be taken on them at this level keeping in mind that reduction of receivables can re-rate the stock. Investors should ask questions to themselves like what can go wrong from here?

4. Earnings disappointments:

a. Macpower: Q3FY25 Revenue was down around 10% YoY and PAT was down around 36% YoY. This was mainly due to payment delays from the Banks and Financial institutions because of which they couldn’t book the revenue. They do not want to book revenue on credit which is a very good long-term strategy. The management is confident in growing the biz at 20-25% CAGR in the coming years.

Developing new machines with their own in house technical knowledge. They also added 200 new employees in the last 9 months, their productivity will be seen in the next 6 months time.

The stock price corrected 50% from the top and that’s perfectly fine. We are holding the company with an intention to add more if we find it below 25x TTM earnings.

TLDR; the management is taking the right steps in our opinion to grow a sustainable business in the longer run.

b. Titan Bio: Q3FY25 Revenue was down around 16% YoY and PAT was down 48% YoY because of which we could see 20% LCs in two consecutive days post-earnings announcement. The management doesn’t talk about its business quarterly so we don’t know the reason for such poor numbers. 

One update by the company: Titan Bio now holds 48.44% of Titan Media Ltd.

c. Cenlub: Q3FY25 Revenue was down around 17% YoY and PAT was down around 20% YoY.

Again, similar to Titan Bio, no commentary by the management.

One or two hiccups in between are normal. We are continuing to hold shares in both companies because they have demonstrated stability and the ability to endure over the long term.

Now, Let’s look at some good things that are happening now:

1. Recent promoter acquisitions showing confidence in the following companies which we had covered earlier:

• Premier polyfilm
• Advait Energy
• MK EXIM
• SKP Bearings
• Resgen
• SGRL
• Infobean Technologies
• AVG Logistics – conversion of warrants into equity shares at Rs. 222.6 per share
• Sakar Healthcare – conversion of warrants into equity shares at Rs. 384 per share

2. People are ready to take money out off the market at any price showing the pessimism at extreme level. This is a good opportunity for the Long term Investors to study and keep their accumulation list ready.

3. Return expectations, which soared to the moon over the past two years, have started to come back down to earth.

• Less Speculation, More Fundamentals – Focus shifts from hype to business strength.

• Better Risk-Reward Ratio – Lower prices improve long-term return potential.

• Healthy Market Cycles – Prevents bubbles and unsustainable rallies.

• Strong Hands Stay, Weak Hands Leave – Reduces short-term speculation, creating stability.

• Compounding Works Best – Sustainable growth allows long-term wealth creation.

What are we doing currently?

Okay, so we are also currently stuck in Lawsikho, BEW, Techknowgreen etc.

We are reviewing our portfolio and studying new businesses that appear attractive given the current valuations. We may consider switching to a new company or an existing one from our watchlist if we are not comfortable holding certain stocks for the long run.

What are we buying? We feel that BEW and Phantom Digital are at a good level to add.

Any new business that we find interesting now? Yes, 4 new names that we find interesting at CMP:

1. Shree Pushkar
2. Ameya Precision
3. Remsons Industries
4. Orient Technologies

What would we add if we had cash?

If we had cash right now, in the next 2-3 months we would be slowly add these 6 businesses:

1. AVG Logistics (Mcap 376 Cr)
2. Ameya Precision (Mcap 75 Cr)
3. Remsons Industries (Mcap 420 Cr)
4. Chatha Foods (Mcap 230 Cr)
5. BEW Engineering (Mcap 205 Cr)
6. Phantom Digital (Mcap 296 Cr)

Closing our thoughts with some actionable steps:

1. Control your emotions and don’t overthink—everyone else is going through the same.
2. Focus on what you can control: your buying price. That’s it.
3. Think of this fall as an opportunity – every panic sell-off was, and always will be, an opportunity for long-term investors.

Lastly, we suggest focusing on studying and identifying good businesses, staying invested in them for the long term, and avoiding the distraction of watching tickers daily.

Happy Investing,

Team PrudentParrot

Disclaimer: This article is provided for informational purposes only and should not be considered as an investment advice