Years ago, on live television, financial anchor Udayan Mukherjee was mid-sentence, dissecting market multiples with the fluency of a man who had done it a thousand times before. Mid-flow, the late Big Bull, Rakesh Jhunjhunwala, cut through the noise with a question so disarmingly simple that it stopped the conversation cold:
It was not a request for a definition. It was a challenge — flung at an industry that behaves as though valuation is a precise science, while practising it, day after day, like an art no one has fully mastered.
1 |
The Great Illusion |
Open any investment book and you'll meet the same cast: P/E, P/B, EV/EBITDA, the DCF model, the PEG ratio. Students spend months learning them. Professionals build careers on them. But if valuation alone determined returns, a Titan, a Bajaj Finance, an Asian Paints would never have compounded wealth for two decades straight — their multiples always looked expensive. Investors who waited for the "cheap" price became spectators while others became millionaires. Cheap stocks can get cheaper. Expensive stocks can get far more expensive. No formula warns you which is which.
Change a DCF's growth assumption from 12% to 15%, or nudge the discount rate by one point, and the "intrinsic value" swings dramatically. Nothing changed inside the company. Only the spreadsheet changed. A model that outputs a value to the exact rupee feels reassuring — but the market doesn't care whether the "fair value" is ₹840 or ₹910. It cares whether institutional money believes the future has improved.
2 |
Consider This Disconnect |
NMDC Steel Ltd's (₹41.42) 3 MTPA integrated plant at Nagarnar, Chhattisgarh, was built at a cost of roughly ₹24,000 crore — a state-of-the-art asset, land, blast furnace, coke oven and all, fully commissioned and running at rated capacity. Today, the market values the entire listed company that owns it at around ₹12,000 crore — about half of what it would cost to build the same plant from scratch. Why? Not some grand, foolproof mathematical formula. Simply because buyers aren't willing to pay more today.
| NMDC Steel Ltd — cost of the 3 MTPA Nagarnar plant | ₹24,000 crore |
NMDC Steel Ltd — What the exchange routinely assigns the listed enterprise owning it | ~₹12,000 crore |
The market isn't following a rational formula in reverse. It's pricing what a buyer will pay on a given Tuesday — and it can stay wildly underpriced, or overpriced, for as long as it wants to.
3 |
The PSU Proof — Called in Advance, Not Explained in Hindsight |
Most valuation stories get told after the fact — a stock rallies, and only then does the research note explain why it deserved to. Jhunjhunwala's PSU call ran the other way. Speaking at the India Economic Conclave in March 2021, well before the PSU re-rating became consensus trade, he said flatly:
His reasoning wasn't a DCF tab — it was that the credit cycle had turned and cost-to-income ratios were set to improve. PSU banks had traded cheap on every textbook multiple for years before that; nothing in the formula told anyone when the re-rating would arrive. The credit cycle turning did. Perception changed. Markets reprice stories faster than they reprice fundamentals.
The mirror image came from Zerodha's Nithin Kamath earlier this year. After meeting Dr. Devi Shetty, founder of Narayana Health — a hospital network running roughly 18,000 beds across India, known for pioneering low-cost cardiac surgery — Kamath pointed out that Narayana's market capitalisation stood at around ₹38,000 crore, less than almost any half-decent financial services business in India, Zerodha included. In his words, it is "a strange world we've built, where the businesses closest to money get valued the highest, and the ones doing the hard and essential things get priced like boring utilities."
4 |
What the Formula Never Shows You |
Jhunjhunwala's own summary of financial statements is worth remembering:
"A balance-sheet is like a bikini — it shows more, but it hides what is vital."
Ratios show a snapshot. They don't show conviction, governance quality, or which way a cycle is about to turn. And when he was wrong — which he was, plenty of times — his own answer was never a better model. It was: "I reserve the right to be wrong." A humility no spreadsheet has ever needed, because a spreadsheet is never held accountable for the call.
|
The Textbook Says
Markets are rational. Earnings are predictable. A fair discount rate produces a fair price. Cheap is safe. Expensive is risky. |
Dalal Street Delivers
Markets are sentiment-driven. Multiples stay cheap for years, then re-rate on a single catalyst. Conviction beats the model, till the cycle proves it right or wrong. |
5 |
The SumanSpeaks Verdict |
At the end of the day, all those textbook models and valuation formulas are just narratives people use to justify numbers. The blunt reality is this: a stock is worth only what the highest bidder is willing to pay for it on any given Tuesday.
If the market decides to price a brand-new ₹24,000 crore asset at ₹12,000 crore, it's not following a grand rational formula; it's simply because buyers aren't willing to pay more right now. It can stay wildly irrational, underpriced, or overpriced for as long as it wants. When evaluating assets, stop over-relying on theoretical perfection. Respect market sentiment, but recognize it for what it is: a fleeting mood, not an objective truth.
That, more than any target price on a fifty-page brokerage report, is the real answer to the question Jhunjhunwala asked on live television all those years ago. Perhaps the simplest answer is this: valuation is merely an opinion. Price is the only fact.
This article is published by SumanSpeaks (sumanspeaks.blogspot.com) for general informational and educational purposes only. The author has over 25 years of capital markets experience. This is not a recommendation to buy, sell, or hold any security, including NMDC Steel Ltd, which is cited purely to illustrate the gap between replacement cost and market valuation. NMDC Steel Ltd figures are approximate market data as of late July 2026 and will change; readers should check live prices before drawing any conclusions. The PSU banking and Narayana Health/Zerodha references are drawn from publicly reported statements by the individuals named. All data is sourced from public exchange filings, regulatory orders, and credible financial media. Readers must conduct independent due diligence before making any investment decision.
| For personalized stock market insights and guidance, feel free to reach out at: sumanm2007s@gmail.com | suman2005s@rediffmail.com |
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