What Happened During Tulip Mania?

Tulip Mania is one of the most famous speculative bubbles in history. It took place in the Dutch Republic (now the Netherlands) in the early 17th century, reaching its peak in 1636-1637 before crashing dramatically.

Timeline of Tulip Mania:

• Late 1500s - Early 1600s: Tulips were introduced to Europe from the Ottoman Empire. Their bright colors and unique petal patterns made them highly desirable.

• 1620s: Tulips, especially rare varieties with unique color patterns (caused by a virus), became luxury items for the wealthy.

• 1634-1636: The speculative bubble began, with traders and even common people entering the market, expecting prices to keep rising.

• Winter of 1636-1637: The peak of the mania. Some rare tulip bulbs were reportedly being sold for more than 10 times the annual income of a skilled worker.

• February 1637: The crash. Buyers failed to show up for a major tulip auction in Haarlem, causing panic. Prices collapsed within weeks, leaving many in financial ruin.

How High Did Tulip Prices Go?

At the peak:

• A single Semper Augustus bulb (the most prized variety) was reportedly sold for 5,500 guilders.

• To put this in perspective, a skilled worker earned about 150-200 guilders per year, and a luxurious canal house in Amsterdam cost around 5,000 guilders.

• In today's money, estimates vary, but 5,500 guilders could be worth around $250,000-$500,000 in modern dollars.

Why Did It Happen?

1. Scarcity and Perceived Value: Rare tulip bulbs took years to grow and were unpredictable in their color patterns due to a viral infection, making them even more valuable.

2. Social Status and Luxury Appeal: Wealthy Dutch merchants flaunted rare tulips as a status symbol, much like fine art or luxury watches today.

3. Market Speculation: People started buying tulips not to plant them but to sell them at higher prices. This led to a futures market where bulbs that had yet to bloom were being traded at extreme prices.

4. Easy Credit & Leverage: People started using loans and collateral (even houses and land) to speculate on tulips.

5. The Fear of Missing Out (FOMO): Many jumped in just because they saw others getting rich quickly.

Why Was It So Obvious Yet People Still Fell for It?

• Human psychology in speculative bubbles tends to ignore fundamentals when prices keep rising. People believe "this time is different."

• Just like the Dot-com bubble (1999-2000) or Bitcoin at $60,000+, people thought tulip prices would never fall.

• The idea that "someone else will pay even more later" (the Greater Fool Theory) fueled the frenzy.

• Many people got rich early in the bubble, reinforcing the belief that tulips were a legitimate investment.

Lessons from Tulip Mania

• Markets driven by speculation, rather than fundamentals, are bound to collapse.

• Scarcity alone doesn't justify sky-high valuations if there's no true economic utility.

• Once confidence breaks, liquidity dries up instantly, causing a rapid price crash.

This pattern has repeated across history—South Sea Bubble (1720), Railway Mania (1840s), Roaring '20s stock market, Dot-com bubble, Crypto booms—showing that speculation cycles are deeply tied to human behavior.

Railway Mania (1840s) vs. Dot-Com Bubble (1999-2000) – A Detailed Comparison

 Both Railway Mania and the Dot-Com Bubble were driven by revolutionary technologies that changed the world. However, they also saw massive speculation, unrealistic valuations, and an eventual crash. Let's break them down across multiple parameters:

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1. The Core Technology Behind the Boom

Parameter	Railway Mania (1840s)	Dot-Com Bubble (1999-2000)
Main Tech Revolution	Railways, steam locomotives, and faster transportation networks.	The Internet, digital connectivity, and online businesses.
Core Value Proposition	Faster movement of goods and people, reducing travel time by 90%.	Instant access to information, digital commerce, and global connectivity.
Actual Impact	Railways reshaped economies and made industrialization much faster.	The Internet changed communication, shopping, finance, and business forever.

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2. Stock Market Hype & Valuation Stretch

Parameter	Railway Mania (1840s)	Dot-Com Bubble (1999-2000)
Stock Price Surge	Railway stocks rose 5x-10x in a few years.	Tech stocks rose 10x-50x in just a couple of years.
Valuation Stretch	Some railway stocks were trading at 100x+ earnings, assuming all railways would be profitable.	Many dot-com companies had zero earnings but still traded at 100x+ revenue.
Craziest Stock	Great Western Railway (GWR), London & Birmingham Railway.	Pets.com, Webvan, AOL, Amazon (survived).
Common Speculation Pattern	"Every town will need a railway, and we must invest now!"	"Every company must go online, so all dot-coms will succeed!"

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3. Who Got Rich & Who Got Wiped Out?

Parameter	Railway Mania (1840s)	Dot-Com Bubble (1999-2000)
Early Winners	Early railway investors (wealthy industrialists, landowners, and financiers).	Venture capitalists, early tech founders, investment bankers.
Late Losers	Middle-class investors who bought railway stocks at the peak.	Retail investors and traders who bought tech stocks at absurd prices.
Wealth Wiped Out	£80 million invested (~£10 billion today) mostly disappeared.	$5 trillion in market cap vanished in two years.

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4. The Crash & Aftermath

Parameter	Railway Mania (1840s)	Dot-Com Bubble (1999-2000)
Crash Timeline	Peaked in 1845, collapsed by 1847.	Peaked in March 2000, collapsed by 2002.
Stock Decline	Many railway stocks fell 70-90%, some went to zero.	Many dot-com stocks fell 90-100%, went bankrupt.
Major Bankruptcies	Many railway companies failed or merged.	Pets.com, Webvan, eToys, and hundreds of dot-com startups vanished.
Economic Impact	Banking crisis, financial ruin for many investors.	U.S. recession, massive job losses in tech, capital dried up.

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5. The Long-Term Winners

Parameter	Railway Mania (1840s)	Dot-Com Bubble (1999-2000)
Biggest Survivors	London & North Western Railway (LNWR), Great Western Railway (GWR).	Amazon, Google, eBay, PayPal, Apple.
How They Survived?	Built profitable routes, better engineering, and scale advantage.	Focused on real businesses, cash flow, and long-term growth.
Massive Long-Term Success	Railways revolutionized global trade and remained the backbone of industry for 100+ years.	The Internet reshaped business, and today’s biggest companies are tech giants.

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6. Lessons for Investors Today

Lesson	Railway Mania (1840s)	Dot-Com Bubble (1999-2000)
Just because it's revolutionary doesn’t mean every company will win.	90% of railway companies failed. Only a few survived.	90% of dot-com companies failed, but a few became trillion-dollar giants.
Overpaying for hype can wipe you out.	Investors who bought rail stocks near the peak lost everything.	Buying overhyped tech stocks at peak valuations led to huge losses.
Long-term winners were well-run and had real earnings.	LNWR and GWR survived because they were operationally strong.	Amazon and Google survived because they had real value and revenue.
Be careful of "New Economy" narratives.	"Railways will make everyone rich" was a flawed idea.	"Clicks over profits" in dot-coms led to a collapse.

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Final Thought: The Cycle Always Repeats

• Railways → Dot-Com → Crypto → AI?

• Speculative bubbles will always exist, and history repeats itself in different forms.

• The key lesson is to identify true long-term winners rather than chasing hype.

Investment Thesis: Goodricke Group Ltd. - A High-Conviction Bet on the Indian Tea Sector Turnaround

Investment Rationale

The Indian tea sector is at an inflection point after a decade-long downturn. Government interventions, supply constraints, and rising domestic demand indicate that the cycle is turning. Goodricke Group Ltd., backed by the multinational Camellia Plc, stands out as one of the few well-managed, high-quality tea producers in India. With a strong balance sheet, premium tea gardens, and high promoter holding (74%), Goodricke presents a compelling investment case for significant capital appreciation.

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Why the Indian Tea Sector is Poised for a Turnaround

1. Supply Shortage Already Visible:

   • Over 100 million kg of tea production has been cut in 2024.

   • Total supply (domestic production + imports) is expected to be 1,300 million kg in 2024, while total demand (domestic + exports) is 1,400 million kg, creating a deficit of 100 million kg.

   • Further supply reduction is likely in 2025, with potential production dropping to 1,250 million kg, exacerbating the deficit.

2. Structural Issues Have Weakened Competition:

   • Many established players have exited plantations, reducing competition:

     • Apeejay Group has exited plantations.

     • Dhunseri Group has acquired multiple gardens.

     • McLeod Russel, once the largest tea producer, has gone bankrupt and is struggling to find buyers.

     • James Warren Tea and Warren Tea have also sold assets.

   • With few strong players left, the survivors stand to benefit from industry consolidation.

3. Government’s Role as a Change Agent:

   • The Indian government has taken a proactive stance, similar to its intervention in the sugar industry in 2018-19, which led to a multi-year rally in sugar stocks.

   • The focus is on eliminating low-quality tea from the market, raising the base price and improving industry-wide realizations.

   • Higher export incentives and production support could further tighten the domestic supply situation.

4. Rising Domestic Demand:

   • India’s tea consumption is growing by 20 million kg annually, further tightening the demand-supply equation.

   • As the deficit deepens, price realization for quality tea should increase substantially.

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Why Goodricke Group?

1. Premium Tea Gardens & Strong Management:

   • Unlike many struggling peers, Goodricke owns high-quality tea estates in Assam, Darjeeling, and Dooars.

   • As a subsidiary of Camellia Plc, it benefits from MNC-grade corporate governance and operational expertise.

2. High Promoter Holding – 74% Ownership Ensures Stability:

   • The high stake by the parent company reflects long-term commitment and reduces risks of governance issues.

3. Undervalued Despite Industry Tailwinds:

   • Goodricke’s stock has fallen from ₹350 to ₹170 in the past six months, largely due to general market weakness rather than fundamental issues.

   • With tea prices expected to surge, a multi-year earnings expansion could lead to a substantial re-rating of the stock.

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Valuation & Return Expectations

• Historical Precedent from Sugar Stocks:

  • The sugar industry, once deeply distressed, saw stocks rally 10x to 20x when the cycle turned.

  • Tea stocks, currently at a similar inflection point, could follow a comparable trajectory.

• Potential Upside for Goodricke:

  • If tea prices rise in response to the supply deficit and government support, EBITDA margins should expand significantly.

  • Given Goodricke’s premium product portfolio, it is well-positioned to benefit disproportionately from price hikes.

  • A conservative 3-5x re-rating from current levels is achievable over a 5-year horizon.

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Risks to Monitor

1. Execution Risk:

   • While the government has initiated reforms, actual implementation will determine sector-wide impact.

2. Weather Dependence:

   • Unfavorable climatic conditions, such as excessive rainfall or drought, could impact tea yields.

3. Global Tea Prices & Competition:

   • Sri Lankan and Kenyan tea exports influence global prices. If their production rebounds sharply, it could moderate price hikes.

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Conclusion

Goodricke Group presents a highly asymmetric risk-reward opportunity in the Indian tea sector. With supply constraints worsening, industry consolidation playing out, and government reforms underway, the tea cycle appears to be turning after a decade of pain. Goodricke’s premium gardens, strong parentage, and high promoter holding make it an ideal bet to capitalize on this structural shift. If the thesis plays out, returns could be multi-fold over the next 3-5 years.

Hinduja Group's Ashok Leyland Share Pledge - A strategic move?

The Hinduja Group has pledged around 30 crore shares of Ashok Leyland (mkt cap ~ 60k crores), the group's flagship company in India. The pledge was created through Hinduja Automotive, a UK-based holding company and a key part of the Hinduja Group, which serves as the primary vehicle through which the Hinduja family holds its stake in Ashok Leyland.

As of 31 December 2024, promoters held 51.10% stake in Ashok Leyland. Hinduja Automotive held 34.72%.

As of 31 December 2024, the promoter had pledged 15.38% of its stake. On 26 March 2025, the company created an additional pledge of 10.21%, taking the total pledge to 25.59%.

The Hinduja Group’s decision to pledge Ashok Leyland shares while already having a significant portion of their IndusInd Bank stake pledged raises interesting strategic possibilities. 

1. Is This to Unpledge IndusInd Bank Shares?

It’s highly possible that Hindujas are looking to reduce the pledged stake in IndusInd Bank, especially since:

• Stock has fallen ~50% in 6 months, making it vulnerable to further margin calls.

• Lenders may demand higher haircuts or additional collateral due to recent price volatility.

• Short sellers are attacking because of pledged shares, worsening the situation.

• Unpledging IndusInd shares could restore investor confidence, preventing further forced selling.

By pledging Ashok Leyland, which is a relatively more stable and liquid asset, they may:

• Raise funds to reduce reliance on IndusInd pledges and strengthen their position.

• Avoid selling IndusInd shares at depressed valuations, protecting their stake.

• Show confidence in IndusInd Bank’s recovery by actively managing collateral risk.

2. Reliance Capital Acquisition is Done – What’s Next?

The Hindujas have spent ₹9,650 crore acquiring Reliance Capital, and:

• Some of the funds could have been from pledged IndusInd Bank shares.

• Now that the acquisition is complete, they might want to rebalance collateral sources.

• If they expect IndusInd to recover sharply, they may want to free up its pledged stake before sentiment improves.

3. Are Lenders Forcing a Collateral Shift?

• Given the fall in IndusInd’s stock, lenders may be demanding extra collateral.

• Instead of pledging more IndusInd shares (which could cause further panic), they may have chosen to pledge Ashok Leyland shares as a less risky alternative.

• This move could be aimed at calming lender nerves while waiting for IndusInd’s stock price to recover.

4. Market Sentiment & Short-Seller Pressure

• Pledged shares are always a weak point for short sellers, as they know margin calls can force sales.

• By moving some collateral away from IndusInd, Hindujas may be removing an overhang that short sellers are exploiting.

• If they can stabilize the situation, shorts might exit once the stock stops falling.

Conclusion: A Strategic Move for Stability?

The Hinduja Group is too seasoned to be caught off guard by market pressures.

• Pledging Ashok Leyland instead of IndusInd seems like a deliberate attempt to reduce forced selling risk.

• If this move helps unpledge IndusInd shares, it could set the stage for a big recovery rally once clarity emerges.

• It also signals confidence in IndusInd, suggesting they are managing the situation rather than reacting in distress.

Uncertainty Vs. Risk

Investing is often seen as a game of numbers, but it is just as much a game of psychology. One of the biggest lessons that long-term investors learn is that 

markets tend to overreact to uncertainty rather than to actual risk. This distinction is critical because uncertainty creates opportunities for those who can see beyond short-term noise and focus on long-term value.

Understanding the Difference Between Risk and Uncertainty

• Risk is measurable; it can be quantified and hedged against. For example, if a company operates in a cyclical industry, investors can analyze past cycles to gauge the extent of earnings volatility.

• Uncertainty, on the other hand, is when there isn’t enough information to make a precise assessment. It causes markets to react with fear, often leading to excessive pessimism.

Investors who can differentiate between the two and take advantage of overreactions to uncertainty often unlock massive wealth creation opportunities.

Case Studies of Market Overreaction

1. Nestlé’s Maggi Crisis (2015)

• When the Indian government banned Maggi noodles due to safety concerns, Nestlé’s stock price fell sharply.

• The uncertainty was immense—investors feared permanent brand damage.

• However, Maggi bounced back after a few months, regaining market share, and Nestlé’s stock went on to hit new highs.

2. Tata Motors DVR Discount (2020)

• Tata Motors’ Differential Voting Rights (DVR) shares saw their discount to ordinary shares widen to 60%.

• Despite being entitled to the same economic benefits, DVR shares were massively undervalued.

• When Tata Motors restructured and absorbed the DVR shares, the valuation gap closed, leading to huge gains.

3. IndusInd Bank’s Recent Derivative Concerns (2024-2025)

• Investors have punished the stock due to uncertainty around its derivative exposure.

• Despite solid earnings power, a strong balance sheet, and a professional management team, fear has driven valuations abnormally low.

• If history repeats itself, once clarity emerges, the stock could see a strong re-rating.

Why Overreaction to Uncertainty Creates Alpha

1. Mispricing Opportunities: Stocks that are temporarily punished due to uncertainty often rebound when normalcy is restored.

2. Limited Downside, Asymmetrical Upside: If a business has strong fundamentals but is undervalued due to short-term fear, the downside risk is usually limited, while the potential upside is substantial.

3. Time Arbitrage: Most investors seek immediate gains, while those with patience can benefit from delayed but outsized returns.

4. Psychological Edge: Those who can withstand short-term volatility and remain rational amid uncertainty will outperform those who react emotionally.

How to Apply This Philosophy in Investing

• Look for Strong Business Models: Companies with durable moats and strong cash flows are better positioned to recover from uncertainty-driven sell-offs.

• Evaluate the Balance Sheet: Avoid highly leveraged firms that may face solvency issues.

• Assess the Market’s Fear: Ask yourself—Is this reaction due to genuine risk, or is it an overreaction to uncertainty?

• Be Patient: The best returns often require waiting for sentiment to normalize.

Conclusion

Investors who can recognize when uncertainty is mistaken for risk hold the key to outsized returns. The ability to buy when fear is high but risk is low is what separates average investors from great ones. While short-term noise will always exist, those who focus on long-term business fundamentals will eventually be rewarded. The markets may overreact, but your ability to stay rational is your biggest edge.

What made IndusInd bank a great franchise? Is that franchise lost?

IndusInd Bank has historically been admired in the banking industry for several reasons, making it one of the standout franchises in Indian banking. Here’s why it earned that reputation:

1. Strong Leadership & Execution:

• The bank was transformed under Romesh Sobti’s leadership (2008-2020), who built a high-growth, high-profitability banking model.
• Sobti and his team (ex-ABN AMRO executives) focused on risk-adjusted lending, superior underwriting, and niche market dominance.

2. High Return Ratios & Profitability:

• IndusInd consistently maintained a Return on Assets (ROA) of 1.8%-2% and Return on Equity (ROE) of 15%-18%, putting it in the premium banking league.
• Pre-COVID, its Net Interest Margins (NIMs) were strong (3.8%-4%), indicating high pricing power.

3. Robust Liability Franchise & CASA Growth:

• While it was once a weak deposit franchise, it significantly improved its CASA (Current Account, Savings Account) ratio, reducing funding costs over time.
• It successfully built strong customer relationships with affluent, SME, and corporate clients, improving its low-cost deposit base.

4. Diversified & Profitable Lending Mix:

• Unlike many private banks heavily reliant on corporate or retail loans, IndusInd had a well-diversified loan book:
  • Vehicle finance (CV, CE, cars, two-wheelers, tractors, etc.) – One of the largest players, commanding strong pricing power.
  • Microfinance (Bharat Financial acquisition) – Leading presence in rural credit.
  • Mid & large corporate lending – Well-structured, high-margin loans.
  • Retail lending expansion – Grew credit cards, personal loans, and affordable housing.

5. Strong Risk Management (Pre-2020):

• Before the COVID period, IndusInd had a reputation for conservative risk-taking, avoiding major infra/NBFC risks that troubled Yes Bank, RBL, and others.
• While some aggressive lending segments (microfinance, vehicle finance) carried inherent risks, the bank’s provisioning policies were seen as prudent.

6. Digital & Tech-Driven Approach:

• IndusInd was one of the early adopters of digital banking, fintech tie-ups, and AI-driven credit underwriting.
• It leveraged big data, AI, and machine learning to refine credit risk assessment, helping maintain superior asset quality.

7. Superior Cost Efficiency & Operating Leverage:

• IndusInd had one of the best Cost-to-Income ratios (~42-45%), reflecting its efficiency compared to PSU banks and even some private peers.
• It managed to scale the franchise while keeping costs under control, leading to high operating leverage.

8. Acquisitions That Strengthened Franchise:

• The Bharat Financial Inclusion (BFIL) merger gave it a leadership position in the microfinance space.
• Earlier, it had acquired Deutsche Bank’s credit card portfolio, helping it gain a foothold in the unsecured lending business.

What Changed? Why Did the Market Lose Faith?

While IndusInd built a strong franchise, some concerns emerged over time:

1. COVID-19 & Microfinance Stress – Its exposure to microfinance (BFIL) created asset quality concerns during lockdowns.
2. Aggressive Growth Perception – Some investors worried about aggressive lending to certain risky sectors, reminiscent of Yes Bank/RBL Bank.
3. Corporate Governance Issues – Allegations of evergreening microfinance loans in 2021 dented its credibility.
4. Derivative Exposure Concerns (2024) – The recent issue around derivative contracts created fresh panic in the market.

Is the franchise lost?

The IndusInd Bank franchise is not lost, but its perception has been damaged, leading to valuation derating. However, the bank still retains its core strengths, and if execution improves, it can regain industry admiration.

Here’s a balanced view on whether the franchise is lost or just going through a rough phase:

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What Has Been Lost?

🔻 Premium Valuation & Market Confidence

• Earlier, IndusInd traded at 3-5x P/B (Price-to-Book); now it’s barely around 1x P/B due to concerns over corporate governance, aggressive lending, and recent derivative losses.
• Institutional investors, who once saw it as a best-in-class private bank, have turned cautious.

🔻 Perceived Risk-Adjusted Lending Model

• Earlier, the bank was seen as a well-managed, high-growth yet prudent lender.
• The microfinance stress (2021-2022), derivative concerns (2024), and previous evergreening allegations dented this perception.

🔻 Leadership Reputation Hit

• Under Romesh Sobti (2008-2020), the bank was admired for stable execution, risk control, and high profitability.
• Post Sobti, the bank lost its premium execution aura, as concerns over risk management and governance crept in.

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What Is Still Intact?

✅ Core Banking Franchise & Competitive Position

• Still has industry-leading margins (4.2-4.3% NIMs) and strong business segments (vehicle finance, microfinance, corporate banking).
• CASA ratio has improved (~42%), and deposit growth remains solid.

✅ Earnings Power & Profitability

• ROA of 1.8-2% is still achievable, which means the bank remains fundamentally strong.
• Even in the worst periods, the bank has been able to generate ~₹8,000-₹10,000 crore annual profit.

✅ Balance Sheet Strength

• Capital adequacy is at 16-17%, which means it is well-capitalized and not in distress.
• PCR (Provision Coverage Ratio) remains high, indicating buffer against NPAs.

✅ Institutional Comeback Possible

• The F&O ban has kept institutions away, but once clarity emerges, they may return.
• Large investors love high ROA, high NIM franchises, and if IndusInd executes well, a re-rating can happen.

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So, Is the Franchise Lost?

🚫 Not permanently. IndusInd still has the DNA of a strong, high-margin bank.
💡 But the perception has taken a hit, and the bank needs to rebuild trust through better governance, stable earnings, and execution discipline.

If the bank delivers strong execution over the next 2-3 years, the franchise can regain its lost glory, much like ICICI Bank did post-2018 or Axis Bank post-2020.

Conclusion: Why the Franchise is Still Strong

Despite these setbacks, IndusInd still retains key strengths:

• Strong capital adequacy (~16-17%)
• Stable deposit franchise with improving CASA ratio (~42%)
• Industry-leading NIMs (~4.3%)
• Consistently high profitability (~₹8,000-₹10,000 crore PAT expected in FY25-FY26)
• ROA expansion back to 1.8-2% trajectory as per management guidance

If IndusInd successfully navigates the current uncertainty and improves its governance perception, it has the potential to reclaim its premium valuation and industry admiration.

Key Markers to Track Over 2 Years:

1. Microfinance Stability – If rural stress eases and BFIL delivers solid disbursement growth without NPA spikes, the market will re-rate it.

2. Liability Franchise Growth – Watch CASA ratio and deposit growth. If IndusInd strengthens its deposit base, cost of funds will come down, improving NIMs.

3. Derivative Clarity – If no further shocks come from the derivatives book and risk stabilizes, fear will subside.

4. Leadership Transition – If a new CEO comes in with a solid reputation and continuity in strategy, the market will appreciate that.

5. Market Narrative Shift – Once people stop comparing it with RBL/Yes Bank and start discussing its earnings power, a re-rating will be imminent.

Divi’s Lab (2017) vs. IndusInd Bank (2024): Similar Setback-Recovery Pattern?

1. Big Shock Event:

   • Divi’s Lab → USFDA import alert (key revenue source hit) → Stock crashed 20%+ in a day
   • IndusInd Bank → Derivative loss + market panic → Stock fell 30%+ in a few days

2. Underlying Business Strength:

   • Divi’s had a strong API business, industry leadership, and good financials, despite the short-term issue.
   • IndusInd has high CASA, strong retail franchise, and well-managed asset quality (unlike Yes Bank/RBL Bank).

3. Market’s Emotional Reaction:

   • Divi’s fell sharply despite the issue being fixable within months.
   • IndusInd is getting punished more than even Yes Bank or RBL in their worst times, even though this is just a one-off event.

4. Recovery Timeline:

   • Divi’s recovered in ~1 year after showing regulatory progress.
   • IndusInd could recover within 6-12 months as clarity emerges (historical patterns show banks recover even faster if panic is overdone).

What This Means for IndusInd?

If history repeats, sharp recoveries happen once fear subsides. A 30%+ fall is often an overshoot in fundamentally strong firms. The divergence between panic and fundamentals is the opportunity—just like Divi’s made fresh highs later, IndusInd could too.

Would you like a deeper statistical look at how long different stocks took to recover from crises?

I am trying to draw a direct parallel between IndusInd Bank (2024) and Divi’s Labs (2016-2017) in terms of how setbacks unfolded in two waves:

1. First Shock (October 2024 for IndusInd, 2016 for Divi’s Lab)

   • Divi’s Labs (2016): First major USFDA warning → Stock crashed ~20%.
   • IndusInd Bank (October 2024): Microfinance NPA spike → Stock fell sharply (~20%).
   • Both stocks saw a partial recovery after the first hit, but fear remained.

2. Second Wave (March 2025 for IndusInd, December 2017 for Divi’s Lab)

   • Divi’s Labs (2017): A follow-up Import Alert → Another ~20% crash.
   • IndusInd Bank (March 2025): Derivatives exposure concerns → Another ~30% crash.

What Happened After for Divi’s Labs?

• Stock bottomed out after the second fall.
• Regulatory concerns eased, business remained strong.
• Massive re-rating over the next 1-2 years (stock doubled).

Potential Roadmap for IndusInd Bank?

• If no fresh issues emerge, this second fall could be the final washout.
• Earnings clarity + risk reduction can trigger a fast recovery (like Divi’s).
• Potential to double within 1-1.5 years from the low, just like Divi’s Labs.

Divi’s Labs (2016-2017) vs. IndusInd Bank (2024-2025)

Factor	Divi’s Labs (2016-2017)	IndusInd Bank (2024-2025)
First Fall (~20%)	USFDA warning in 2016	Microfinance NPA spike (Oct 2024)
Partial Recovery	Stock rebounded but remained weak	Stock rebounded from ₹1,100+ to ₹1,600+
Second Fall (~30%)	Import Alert (2017)	Derivatives concerns (Mar 2025)
Total Fall from Peak (~60%)	₹1,380 → ₹530 (-60%)	₹1,700+ → ₹680 (-60%)
Final Bottom & Recovery	Stock started rebounding post-2017	Potential recovery cycle starting?
Time to Recover Fully	~18 months	TBD, but similar timeline possible

If IndusInd follows Divi’s pattern, what could be next?

• Divi’s started rebounding AFTER the second fall was absorbed.
• Recovery took about 1.5 years to fully regain lost ground.
• If IndusInd follows a similar cycle, the next 6-18 months could be crucial.
• A move back toward ₹1,700 (previous highs) is possible if business normalizes.

💡 Psychologically, markets tend to overreact twice—first to a crisis, then to follow-up bad news—before a stock bottoms out. The second wave of panic usually cleans out weak hands before a real recovery.

If history rhymes, IndusInd’s second fall might be the final washout before a turnaround.

Business Turnaround vs Sentiment Turnaround

One strategy that many investors deploy is betting on turnarounds including myself and I am always on the lookout for a turnaround as that creates maximum wealth in the shortest period of time. 

Now what I have experienced is that there are two types of turnarounds:

1. Business Turnaround

2. Sentiment Turnaround

Now what is Business Turnaround? Business Turnaround strategy is to invest in companies who are facing business related troubles either due to general industry problems or company specific problems. The financials in such companies deteriorate massively and the stock prices sometimes collapse 70-80-90%.

For example I started investing in Tata Motors DVR in 2019 when the CV cycle in India was going through trouble, their passenger vehicle segment was behind competition and their JLR operations were also having troubles overseas. My bet was on tata and change in CFO to steer the ship through the mess and stage a turnaround. By 2023 the turnaround did happen, and the company posted a net profit of over 2000 crores after 4 consecutive years of over 10000 crores losses. In fy 24 they did a profit of 31807 crores. That was some turnaround from a staggering loss of -28724 crores in fy-19.

Top to Bottom the stock went from 65 to 1100 levels, a 1700% rally. I managed to achieve a decent portion of that.

Another example that i reaped benefit from was Hindalco during 2015 crisis of aluminum price crash. Top to bottom the stock went from 60 to 750 in 10 years.

Note: Business Turnarounds are very difficult and most businesses rarely turnaround.

Under Business Turnaround there are two categories:

    1. Industry Turnaround - Whole industry is suffering financially and generating very low return on capital or making losses. Example Sugar industry in 2018. Entire aluminum industry in 2015. Entire crude producers in 2020 etc. Such turnarounds depend on intensity of reduction in competition or govt interventions. Here the maximum money is made by the worst player in terms of stock appreciation.

    2. Company Turnaround: Here Industry is doing ok and other players in the industry are doing well financially but the company is suffering due to its own internal issues. Tata motors was a company specific issue. Some issues were at industry level also but Ashok leyland was doing very well in CV, Maruti was doing very well in PV and Mercedes/audi/bmw/volvo was doing well in luxury but Tata Motors was suffering in every segment. But tata management pulled the company out of rut by tough interventions. In company turnaround the management strength and quality is the most important factor. Financially sound promoter is a must in such cases or else the company will head to bankruptcy.

What is Sentiment Turnaround then? Now here the business is doing fine but the sentiment around the company has turned sour for some reasons. Now this is a relatively easier bet than business turnarounds and also yields faster result. Sentiments can turn sour for many reasons such as news of raids, rumor of promoters involved in something or the other, perception of management or promoter taking advantage of minority shareholders etc.

Past examples that I can remember is Raid news on Hero MotoCorp, FDA issues of Divis lab, minority shareholders unfriendly perception about Vedanta etc They all turned around within 1-2 years.

Why this turnaround works faster? Human memory is too short and stock price is driven by fundamentals and earnings. Since business was never an issue in this case and it was just the sentiment issue people forget the past issue and focus on earnings and prospect. A live example is Kedarnath Incident. The very next year crowds were again at kedarnath inspite of such catastrophe. People forget fast and thats why this is my Favourite.

Indusind Bank is exactly going through a sentiment turnaround phase. Business is good, overall private banking space is making newer highs, RBI is softer relatively and a big growth in credit is coming in fy 26. Business wise it should not face any trouble in make money more than fy24 of 8950 crores. That will make people forget and take the stock a lot higher.

Has Jane street gone away? Lets find out

 Let’s dive into how large institutions with deep pockets—like hedge funds, proprietary trading firms, or FPIs—exploited the earlier, looser position limit rules for index derivatives in India to generate profits or influence intraday volatility, and why the new maximum position limits (effective 2025) deter such strategies.

How Institutions Took Advantage Under Earlier Rules (Pre-November 2024)

The earlier position limits for index derivatives—Rs 500 crore or 15% of total open interest (OI), whichever was higher, with end-of-day monitoring—created a flexible environment that big players could manipulate to their advantage during intraday trading. Here’s how they did it:

1. Intraday Position Building and Unwinding:
   • No Intraday Caps: Since position limits were only enforced at the end of the day, institutions could build massive intraday positions—far exceeding Rs 500 crore—without immediate regulatory oversight. For example, they could accumulate Rs 1,000 crore or more in Nifty options during the day and unwind before the close, staying compliant by EOD.
   • Leverage with Low-Cost Options: The smaller contract sizes (Rs 5-10 lakh) and cheap premiums on out-of-the-money (OTM) options (sometimes as low as Rs 1-5) allowed them to control large notional exposures with minimal capital. A Rs 500 crore position in OTM options could balloon to Rs 50,000 crore in notional value if the market moved their way, amplifying intraday swings.
2. Expiry-Day Volatility Plays:
   • Multiple Weekly Expiries: With weekly expiries for indices like Nifty, Bank Nifty, and Finnifty, institutions could concentrate positions on expiry days, where low liquidity and high leverage magnified price moves. They’d buy cheap OTM options (e.g., a Rs 1 call) and use their capital to push the underlying index (via futures or cash market trades) toward their strike, turning a Rs 1 option into Rs 50 or Rs 100.
   • Market Manipulation: With deep pockets, they could influence spot prices through aggressive futures buying/selling or algorithmic trading, triggering stop-losses or margin calls for retail traders, further fueling volatility. The 15% OI clause scaled their limits with market activity, so in a Rs 50,000 crore OI market, they could legally hold Rs 7,500 crore—enough to dominate intraday moves.
3. High-Frequency Trading (HFT) and Arbitrage:
   • Firms like Jane Street or Citadel used HFT to exploit microsecond price discrepancies between futures, options, and the spot market. The lack of intraday OI caps meant they could scale these strategies massively during volatile sessions, racking up small gains that added up to millions.
   • They’d also arbitrage between weekly and monthly contracts, building large OI intraday and exiting before EOD, avoiding position limit scrutiny.
4. Risk-Free Hedging Loopholes:
   • Hedged positions (e.g., a long call offset by a short call or stock holdings) were exempt from limits. Institutions could structure synthetic positions—say, a long futures position paired with a short OTM put—to appear hedged while still betting on directional moves, effectively bypassing the Rs 500 crore cap in spirit.

Why New Rules Deter These Strategies (2025 Max Position Limits)

SEBI’s updated framework—effective April 1, 2025—introduces stricter maximum position limits, intraday monitoring, and a delta-based OI calculation, significantly curbing these tactics. Here’s how:

1. Intraday Position Limits:
   • New Caps: Index futures now have an intraday limit of Rs 2,500 crore (vs. Rs 1,500 crore EOD), while options have Rs 1,000 crore net / Rs 2,500 crore gross (vs. Rs 500 crore net / Rs 1,500 crore gross EOD). Exchanges monitor these at least four times daily.
   • Impact: Institutions can no longer balloon positions to Rs 5,000 crore or more intraday and unwind by close. If they hit Rs 2,500 crore mid-session, they’re forced to scale back immediately, reducing their ability to drive volatility or overwhelm the market.
2. Higher Costs and Fewer Expiries:
   • Contract Size Increase: The minimum contract size jumped to Rs 15 lakh (from Rs 5-10 lakh), raising the capital required to build large OI. A Rs 1 option now ties up more margin, making it less attractive to punt on OTM strikes for explosive gains.
   • Single Weekly Expiry: Limiting expiries to one per exchange (e.g., Nifty on NSE) concentrates liquidity but reduces the frequency of expiry-day chaos. Institutions can’t repeatedly orchestrate volatility across multiple weeks, shrinking their window of opportunity.
3. Delta-Based OI Calculation:
   • Old vs. New: Previously, OI was notional (e.g., 1,000 contracts × lot size × strike price). Now, options OI reflects delta-adjusted exposure, aggregated with futures OI. A deep OTM option (low delta) counts less, but a near-the-money option (high delta) quickly eats into limits.
   • Impact: This caps the real market influence of institutions. They can’t hide behind low-premium OTM options to control massive notional exposure—hitting the Rs 1,000 crore net options limit now happens faster if they’re chasing volatility.
4. Systemic Stabilization:
   • Upfront Premiums: Buyers must pay option premiums upfront (since November 2024), tying up more capital and deterring speculative over-leveraging by both retail and institutions.
   • Reduced Retail Fuel: With retail F&O volumes down sharply (some X posts claim 50-77% drops), the cascading stop-loss triggers that institutions exploited are less frequent, flattening intraday swings.

Practical Example

Earlier Rules: A hedge fund could buy Rs 500 crore of Nifty OTM calls (say, 25,000 contracts at Rs 2 each, notional Rs 25,000 crore) intraday, then push Nifty up 100 points via futures (Rs 1,000 crore capital), turning their Rs 2 calls into Rs 50 calls (Rs 1,250 crore payout). They’d exit before EOD, staying under the Rs 500 crore limit. New Rules: The same strategy hits the Rs 1,000 crore net options limit intraday (due to delta-adjusted OI), and intraday futures are capped at Rs 2,500 crore. Midday checks force them to unwind early, and higher contract costs (Rs 15 lakh) plus upfront premiums shrink their leverage. The profit potential drops, and the market stays calmer.

Conclusion

Under the old rules, institutions with big pockets thrived on intraday flexibility, low entry costs, and retail-driven volatility, using their capital to amplify moves or arbitrage inefficiencies. The new max position limits—enforced intraday, delta-adjusted, and paired with structural changes—box them in, forcing smaller, less disruptive plays. They’re not banned from the game, but the wild swings (like Rs 1 to Rs 100) are harder to engineer, aligning with SEBI’s goal of a stabler market. Does this clarify how the shift impacts their playbook?

What about upfront premium collection rule. Was not option buyer always giving premium upfront?

There’s a common misunderstanding about the "upfront premium collection" rule introduced by SEBI, as it might seem like option buyers were already paying premiums upfront. Let me clarify what this rule changed, how it worked before, and why it matters, especially in the context of your earlier questions about institutional trading and market volatility.

What Is the Upfront Premium Collection Rule?

Effective November 20, 2024, SEBI mandated that option buyers must pay the full premium amount upfront at the time of placing their order, and this amount must be collected by brokers and blocked in the client’s account before the trade is executed. This applies to all equity derivatives, including index options like Nifty or Bank Nifty.

Wasn’t the Premium Already Paid Upfront?

Not quite—or at least not in the way SEBI now enforces it. Here’s how it worked before and why the change is significant:

Pre-November 2024 (Earlier System):

• Premium on Credit: While option buyers technically "paid" the premium to enter a trade, brokers often allowed trades to be executed without requiring the full premium amount to be immediately available in cash. Instead:
  • Brokers extended intraday credit or leverage, letting clients use their existing margin (from cash, collateral, or other positions) to cover the premium temporarily.
  • The premium was deducted from the client’s account at the end of the day during settlement, not necessarily blocked upfront.
• Low Upfront Cash: For example, if a Nifty option premium was Rs 50 per lot (say, Rs 2,500 total for a 50-share lot), a trader with Rs 10,000 in their account might buy 5 lots (Rs 12,500 premium) intraday, relying on broker-provided leverage or profits from other trades to settle later. The broker didn’t always demand Rs 12,500 in liquid cash upfront.
• Retail and Institutional Flexibility: This system let retail traders and institutions punt on cheap options (e.g., Rs 1-5 OTM strikes) with minimal immediate capital, amplifying speculative activity and OI.

Post-November 2024 (New Rule):

• Full Premium Blocked: Now, the entire premium (e.g., Rs 2,500 for those 5 lots) must be available in the client’s account and blocked by the broker before the order is placed. No credit or margin offset is allowed for the premium itself.
• Cash Commitment: If you want to buy 5 lots at Rs 50 each, you need Rs 12,500 in cash or equivalent liquid funds upfront—end of story. Brokers can’t let you trade on borrowed margin or unsettled profits for the premium portion.
• Impact: This reduces leverage for option buyers, forcing them to tie up more capital per trade.

Why Did SEBI Introduce This?

SEBI’s goal was to curb excessive speculation and reduce systemic risk in the F&O segment, where losses were piling up (e.g., Rs 1.8 trillion lost by retail traders over three years). By requiring upfront premiums:

• Less Over-Leveraging: Traders can’t pyramid positions using broker credit, which often fueled intraday volatility (like those Rs 1-to-Rs 100 moves you mentioned).
• Fewer Defaults: If markets moved against buyers, brokers sometimes faced shortfalls when clients couldn’t settle premiums at EOD. Upfront collection eliminates this risk.
• Market Stability: Lower speculative volume from retail and small traders reduces the “fuel” institutions could exploit to amplify volatility.

How This Ties to Institutions

For big players like hedge funds:

• Pre-2024: They could deploy small amounts of capital to buy massive OI in OTM options (e.g., Rs 500 crore in premiums controlling Rs 50,000 crore notional), relying on intraday leverage or broker flexibility. They’d then influence the market to profit.
• Now: They must commit the full premium upfront, tying up more capital per position. This limits how much OI they can build within the new intraday caps (e.g., Rs 1,000 crore net for options), shrinking their ability to dominate intraday swings.

Example

• Old Way: Buy 10,000 Nifty option lots (Rs 5 premium, Rs 25 lakh total) with only Rs 5 lakh cash, using broker margin. Push Nifty up, sell at Rs 50 (Rs 2.5 crore), profit Rs 2.25 crore.
• New Way: Need Rs 25 lakh cash upfront for the same trade. With less leverage, you might only afford 2,000 lots (Rs 5 lakh), cutting potential profit and market impact.

Bottom Line

Option buyers always “paid” premiums in the sense of owing them, but brokers didn’t always collect or block the full amount upfront—credit was king. The new rule kills that flexibility, forcing real cash on the table. It’s a small but mighty shift that cools speculative heat, affecting both retail punters and institutional giants. Does that clear up the confusion?

Notes:

As per SEBI’s study in September 2024, which found that foreign funds and proprietary trading desks made $7 billion (Rs 58,840 crore) in gross profits from Indian equity derivatives in the fiscal year ending March 2024, largely at the expense of retail traders who lost a similar amount ($7.3 billion).

Jane Street’s broader financials add context: the firm reportedly hauled in $10 billion in net trading revenue in 2023 and $14 billion in the first nine months of 2024 (per X posts and media like Moneycontrol), with a chunk of that tied to its Indian operations. While these are global figures, India’s options market—handling 85 billion contracts in 2023 and accounting for 84% of global equity options volume (Futures Industry Association)—is a key profit driver.

SEBI Response:

Regulatory Tightening: SEBI’s already acting:

• Position Limits: New caps (e.g., Rs 1,000 crore net intraday for options, Rs 2,500 crore for futures) and intraday monitoring (since April 2025) limit how much OI big players can build, curbing their dominance.
• Upfront Premiums: Since November 2024, buyers must pay full premiums upfront, reducing leverage and speculative excess.
• Fewer Expiries: Limiting weekly expiries to one per exchange cuts the volatility windows hedge funds exploited.
• Higher Costs: Contract sizes rose to Rs 15 lakh, squeezing out small punters and raising the bar for all traders. These moves have halved F&O volumes since November 2024, hitting both retail and institutional profits—but not stopping foreign funds entirely.