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The Collection Wed, 07 May 25 |
Multiple stories, multiple perspectives, one theme worth your time—every week. |
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“Never let a good crisis go to waste.”
If I had a dollar for each time this mantra is regurgitated during economic uncertainty, my windfall would be like that of a successful short seller.
And still, few actually pay heed to the adage.
Trump’s “Liberation Day” announcement on 2 April, when he rolled out what he called “reciprocal tariffs”, triggered a nosedive in stock markets across the world. While we have seen a 10% rebound in both the Nifty 50 and Sensex since the first week of April, volatility remains the new normal.
The nature of the country’s bourses has changed. And if the markets look different, surely the old doctrines won’t be enough. In such a scenario, how should one think about their investments for the next 10 years?
That’s precisely the theme of The Ken’s next live event ft. Zerodha’s Nithin Kamath, Capitalmind’s Deepak Shenoy, and Fiduciaries’ Avinash Luthria.
As a newbie investor, I’m particularly looking forward to it.
You can get your tickets here: https://the-ken.com/event/the-next-10-years-of-investing-wealth-and-markets/
As for this week’s edition of The Collection, we look at just a few of the risks that may crop up for investors in India’s markets, and the wins some have found with their counterintuitive bets.
An investor might buy shares of a particular stock based on its performance. But what if the metrics that companies use do not give the most accurate picture of its financials?
Take the case of Eternal (formerly Zomato).
In its latest quarter, it reported an “adjusted EBITDA” of Rs 165 crore—a 15% fall from the same period a year ago. Its EBITDA, per our calculations, would have been Rs 72 crore—a 19% fall. But its net profit, which was just Rs 39 crore, saw a 78% decline.
The company wanted public attention to be on the gentlest dip, so it gave the limelight to its adjusted EBITDA in its earnings report. And it’s not just Eternal that does this.
“The Ken found that about half of the 20-odd companies on the BSE Internet Economy Index prominently highlight adjusted EBITDA in their results”, wrote Anand Kalyanaraman, The Ken’s finance editor, just last week.
This raises two uncomfortable questions.
Why are many Indian startups so reliant on adjusted metrics? What does this mean for you, the investor?
Zomato, Firstcry, and others love this ‘magical’ number. You should hate it
With adjusted Ebitda, accounting again manifests as the art of the possible
Then, there are cases of unscrupulous actors who toy with and increase volatility in the market.
In January, Anand wrote about one such case in options trading, where a “mysterious player”—probably a deep-pocketed foreign hedge fund—manipulated the market and gained at the expense of many others.
The mystery fund playing God and wreaking havoc on the stock market
Wild moves on weekly expiry days leave the country’s options traders scrambling and at the mercy of a mysterious player
When the equities market started falling last September, the stocks that were hit hardest were small-caps and mid-caps. The thing is, a good portion of retail investors believe there’s a better chance to grow their portfolios’ value by placing their bets on small-caps.
Why was this a problem?
“Many retail investors tend to punt on penny stocks and on the basis of tips, including from ‘finfluencers’ whose social media feeds are filled with such recommendations,” Haldea added.
[…]
“Small stocks are more susceptible to being driven up by operators, sometimes in connivance with promoters, in pump-and-dump operations,” said Haldea.
Meanwhile, there are experienced, contrarian figures who had the foresight to stay away from these. Take the case of Siddhartha Bhaiya’s Aequitas Investments. Before the crash came in September, the fund was already reducing its holdings in these two segments, paring the share of small-caps and mid-caps from 63% to 14% between May and December 2024.
By January this year, around 68% of Aequitas’ portfolio was in a gold ETF.
Siddhartha Bhaiya’s Aequitas is the fund for the ultra-rich that can win by not playing
He has spent over a decade making the ultra-HNIs richer in a capricious market—though if it picks up again, he might just have to pay for that luck
Aequitas chose gold to hedge against turmoil. On the other end of the spectrum, there is Counter Cyclical.
This Nagpur-based fund has high exposure to small-caps—95% when we covered the firm in April. It’s a position that, by conventional wisdom, should have spelled disaster.
Yet, Counter Cyclical thrived and delivered returns others simply couldn’t. How did it do this? What was its strategy?
My colleague Archishma Iyer uncovered some fascinating answers.
This tiny PMS firm makes millions where large rivals fear to tread
With 95% exposure to “small-cap blue chips”, Nagpur's Counter Cyclical is delivering returns the big-city boys can’t match
Some fund managers recommend another counterintuitive strategy: invest in US stocks.
The US is at the epicentre of all the crises we’ve seen sparked off this year. Why do the fund managers say we should stand on the shakiest ground? And what are the challenges that Indian investors face in global markets these days?
Yet another story by Anand sheds light on both these questions and more.
Buy the dip, ignore the Donald: why Indian fund managers still want US stocks
But the best investing route is still shut for the retail investor
At least some people aren’t letting a good crisis go to waste. Perhaps the real lesson isn’t where to invest, but how to think about the very definition of opportunity when everyone else sees danger.
What do you make of the future of the market? You can leave a comment on our on-site edition or write to me at [email protected].
You can read this week’s collection of stories below.
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Rahul leads the promotion and distribution efforts for the journalism produced by The Ken. He works at the intersection of the publication's editorial and business operations.
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