Nikhil Kamath | Zerodha | Paytm: Public memory is short; by the time

On Nov 23, 2021

“A correction in the market is probably healthy from a long term perspective. If I were to call the next five years of stock markets, I would rather have the markets correct 10-20% now and then rally and run in those cycles. If the correction happens after too much of a one-way rally, the damage is a lot more than when one has cyclical markets,” says Nikhil Kamath, Co-Founder & CIO, Zerodha.

You had a very interesting tweet on the 10th of this month where you said “Nykaa lists at 1600 times price to earnings, they sell cosmetics online, Paytm next. The best thing for a value stock investor might be to go on a really long holiday right about now.” Do you think it is time to extend that vacation?
I might have been a bit more critical than I should have been. Markets are frothy today — be it in the private place, be it in the public space. I would argue that not just Paytm but there is something to be said about everything else which has listed in the last one year. Everything from Zomato to PolicyBazaar to CarTrade to Nykaa — all seem expensive and a lot of these have also been OFS. They have been earlier investors exiting for retail. The rally we have witnessed in India in the last 18 months has been so stupendous that we are kind of jaded by our own past in a way. People are talking like the world is ending with a tiny two-three day correction.

We often forget to realise how much we have rallied even for November! Net-net, we are down a percent or barely flat on midcap and largecap indices. So nothing really has happened in November. I have heard so much critique of Vijay Shekhar Sharma and Paytm in the news. I think something has to be said about him as a person and as an entrepreneur. He is a guy from a small town who has come out and built this humongous enterprise. Maybe it is priced incorrectly and so maybe at a certain amount of correction, there is value in the company. I feel at some level, there is value in the company. The pricing might have been wrong, the IPO might not have gone in the manner that it should have but at some point, these companies will become reasonably priced — Zomato, Nykaa, Paytm — all of them.

This correction in the market is good for the ecosystem. It is good for the retail of our country. I am not talking about the people who got allotments in the IPO. I am talking about people entering the equity markets from a longer term perspective. There is some amount of rationality coming into the entire ecosystem and I think that is a good thing.

You are the constant contrarian. The last time we spoke when markets seemed unstoppable, you warned about the froth and today you are saying it is not the end of the world. Do you think we are in a consolidation phase or this is just a little pause?
I hope we are, not just for India’s sake but for the world. Global markets have rallied ahead of fundamentals everywhere in the world. There are plenty of intrinsic fundamental issues at hand, not just to do with the…