India Market Risks And New Opportunities Explained Govindraj Ethiraj

TITLE: India Market Risks and New Opportunities Explained | Govindraj Ethiraj | The Core Report CHANNEL: The Core DATE: 2026-06-06 ---TRANSCRIPT--- The greatest challenge today I have ironically in a country where we talk about not enough jobs out there is finding talent to build and meet the needs of different buckets.

The only thing I can say about the world we are in with certainty is continuity of uncertainty. My first market correction interestingly was 2008 but I would rate the Jan Feb March quarter that just went by as one of the three or four most tricky quarters in my 20 year capital markets career. Number one, we’re in a highly uncertain geopolitical and macro environment. Number two is macro cycle getting shorter. And number three is there’s so much of gamification and gamification of markets. Diversification in my view is a bit of a misused word in the Indian context. But I think as I look at investor portfolios, HNI portfolios, we are exposed to a lot of concentrated risk. But there are a massive investment cycle which will be underway which is driven by four big factors. This is the second part of the navigating risk and market risk series. So I’ll give you a little bit of a background and then obviously as things should be I will not speak much beyond that. uh a friend’s father used to be you know let me take a step back uh I don’t know if how many of you have been in the cockpit of a Boeing 747 uh but it’s changed uh a friend’s father very dear friend’s father used to sit behind the pilots uh this was into the ’ 60s and ‘7s his job uh was not to fly the plane it was to navigate the reason he existed even his job existed was because there was no GPS so they had to physically plot and and match and see where the aircraft was going or had to go and map out the headings and things like that. Over time, as you know, technology replaced that role and essentially it’s the pilots who do the navigation and they use a lot more navigation aids than ever before. But the role of the pilots continues to be important and I don’t think we’ve reached a point where you can still dream of or even dare to get onto a plane which has no pilots though many people talk about it conceptually. So, which brings us to our discussion today. I think in navigating markets and market risk you need to be in the hands at least in my mind of good pilots even if there is no navigator. So on that note, I’m going to hand over to our two pilots here who will uh navigate us through what it means to to to fly through skies like this which are turbulent uh which are unpredictable uh which may have sudden uh uh winds and how does it come together in a way that not only is our flight safe and secure but we land uh in one piece. So uh I’m going to quickly introduce you both know the our guest today but Radhika is of course the managing director and CEO of Edel Wise Mutual fund. Uh her she has a very long uh bio and she’s and she’s and she’s very accomplished in in terms of what she studied and done. But uh the one interesting thing I thought was that before she joined Edel Vice she was actually an entrepreneur and her firm that’s forfront capital was bought by Weedle Vice and that’s how she came into the fold and uh then she obviously grew the business. Uh she’s written several books. Yeah. Okay. So I was I was going to come to that. So uh Navnit is uh someone I’ve known uh for a while. He’s the managing director and CEO of HDFC Asset Management Fund. He’s a CFA, a CA a and uh essentially comes from a different world. Uh I think from the more the world of accounting and finance as opposed to management and which is why all these perspectives become quite interesting. Uh both of them have uh play various roles uh within the mutual fund community uh including obviously help the industry grow between them. They manage roughly about Yeah. You’ve not read a book. pay something every year person of the year. HDFC manages roughly this is uh I mean I’m sure Navnit will bring it down to the current number roughly about 9 12 lakh crores of assets and Edelwise manages roughly about 1.9 lakh cr of assets. So between the two of them you’re looking at about 10 lakh crores of assets. What I’m going to do now is really hand over to them and ask them to speak for about six or seven minutes each on how they view navigating risk. if they were the pilots in this 747 cockpit today uh as it flies uh from maybe Mumbai to London over the state of Armas uh or around it uh avoiding Iran avoiding many other things. Yeah. One thing about yourself that’s not in the bios and then we can get down to the business of navigation. I don’t know I’ve mentioned it several times that I come from a small town in Rajasthan a place called BA. I grew up there. You you talked about my CA. So I did my CA article ship from there. I gave my exam there and first time I took a plane because it talked about the cockpit when I was I think 22 or 23. I hadn’t seen a physical plane before that. So that’s my background. But the other thing what uh not that something unique about me that I should be talking about but very relevant for the world we are in today and to navigate this world. So I’ve done vipasna twice. Millions of people in the world have done that. Those 10 days are really worth it if you really want to navigate the world we are in. Okay. Okay. Okay. Um, at this point I feel like everything about me is on the internet especially after doing reality television. So what about me is not on the internet or my ah yes I am potentially the best antakuri player in this country. Okay. Now I can’t sing to save my life. I sing like a frog. Um but because my father lived abroad all my life uh I didn’t learn Hindi in school. I learned Hindi from reading Bollywood song lyrics. Uh and I told Jave this once. I said so. So I know the lyrics to every song cold even though I can’t sing to save my life but so I’m a killer Antaki because I use songs to learn Hindi. Right. And we have a director from a very large production house here uh who may be wanting to reach out to you but I’ll introduce you later. Okay. So uh let’s come back to the theme. So navigating market risk seeking new opportunities. I think we’re trying to look at what could be the new opportunities. What are the kinds of opportunities one can look at even as we wade through this present phase. So that’s really the theme and let me ask Radika to speak for about five or six minutes and then Nabit. So firstly amazing uh thank you thank you Govinda for having me. Uh it’s amazing to be here. Uh Goven in true journalistic fashion at least didn’t tell me what uh I was up for and then uh I see this face Navnit and I were talking at the back and I have to confess that both of us were a little scared because there are some extremely erodite faces uh in this group here on a uh Monday morning and at least I don’t have an answer as to what Donald Trump is going to tweet tonight. So uh I’m lowering the bar on what I’m going to say. Um but I think a few thoughts um the topic was navigating market risk and of course we live in tremendously uh interesting times. Uh my first market correction interestingly was 2008 uh when I was a uh young analyst on Wall Street. But I would rate the Jan, Feb, March quarter that just went by as uh one of the three or four most tricky quarters in my 20 year capital markets career from an equity market point of view, from a bond market point of view, from a commodity market point of view. So I think we live in extremely challenging times. Uh in January we were worried about Trump attacking our exports. uh in February we started uh worrying about AI taking away our livelihood and then in March we were worried about whether we would have an LPG cylinder and all of this has happened back to back to back um I don’t think that volatility in itself is new and if I were to go back to your plane analogy I would say for that for those of us who fly and flying may or may not be a pleasurable experience I think we have to realize is turbulence is part of the process. If you expect to sit on a plane and go through a plane flight with no turbulence, uh I I think you should stop flying. Uh I think what is important is resilience. So for me, I think the critical word in the last 3 to 6 months, the last 12 months and through investing has been how do you build portfolios that can survive? Uh I think survival is really the key. So, a little bit of turbulence is okay, but a fuel engine failing is a problem. A pilot collapsing is a problem. How do you build portfolios that can survive? Um, and I think the real answer to that lies in diversification. Uh, diversification in my view is a bit of a misused word in the Indian context. But I think as I look at investor portfolios, HNI portfolios, we are exposed to a lot of concentrated risk. It could be equity only risk. It could be single country risk which you know we can talk about. Uh it could be exposure to a rush of liquidity. It could be exposure to one kind of founder or one kind of environment. And I think as we think about portfolios of the future, one needs to think how can I build a portfolio that will survive and how can I really get different kinds of exposure. Um I’ll give you very quickly a few headline ideas. Um I think when I moved back to India in 2011, uh the first thing I started to do after a poor entrepreneur had some capital to invest was actually go look for a global fund. Now this was not the time today when everyone was searching for a global fund to invest in. I think Navnit may remember but there were probably four or five global funds offered by the industry then none of them were Adel wise and I actually had nothing to do with Adel Wise mutual fund but I always believe that having some non-India exposure is an important part of your portfolio. Now whether that is US, whether that is China, whether that is something else, we can debate that and we can have a longer conversation about that because frankly India is a fantastic market but there will be themes that are just not present in us as a country. So that that that was one play of diversification. Um the second thing I started doing and I know there are some private equity veterans uh a few years ago is just started looking at alternative assets and different places where return profiles could be different. So for me for instance the whole unlisted space and participating in some opportunities that are not present in the listed market but are present in the unlisted market became an interesting area. Uh and the third is uh and some of you asked me this casually as we are chatting. Most of our returns in India tend to come from what I call beta. So we are either betting on equities doing well. We’re betting on fixed income doing well. We’re betting on gold doing well. But now you have the emergence of alternative asset classes. You have this whole SIF space where you’re really trying to earn returns that are not coming from beta. So they’re coming from more absolute return kind of idea. So I’ve started doing some of that. So I think exploring diversification in its truest form is sort of the key to navigating through the turbulence. Uh I also think a lot of conversation and maybe these are the last few things I’ll say are centered around what to buy this fund that fund this asset class. I think sizing of the portfolio is where a lot of mistakes end up being made. So you like unlisted but suddenly 50% of your portfolio will end up being illlquid things and then you know you have a problem there. So taking the right quantity of bets uh taking the right size of bets I think has become increasingly important. I would certainly say that. And finally at least my learning in all of this is that finance is an increasingly social business. Uh and in the era of social media, I always joke that everybody is making money on Twitter. Everybody is having a fantastic vacation on Instagram and everybody is getting promoted on LinkedIn. Uh reality is often uh not that I think finance should not be social. Finance is deeply personal. Portfolio decisions are deeply personal. And I’ve seen in my own 15 years of investing, there have been at least three distinct phases in my own personal asset allocation journey and my decisions have swung so differently because my needs have changed and we are constantly evolving people. So I think the question really you should ask is what am I investing in but why am I investing in it? what purpose does it serve in my portfolio and what are the risks I am knowingly taking and happy to take and once you do I think the plane journey then ends up being a lot more survivable so let me stop there Navnit thank you Radika and you talked about the volatile world the world we are in the only thing I can say about the world with certainty the only thing I can say about the world we are in with certainty is continuity of uncertainty uh there are three things about the world we need to keep in mind whether investing or in any sphere of life number one is everything is unpredictable everything is unpredictable and I don’t have to go back last 25 years but look at last 5 years how 2020 started and where it ended 21 how it started where it ended 22 I mean this whole theory about the six sigma you know the left tail events I mean event which have very low probability of happening but we have deep impact I mean they should happen once in 100 or 200 years they happen like every year so first like everything is unpredictable. Number two is everything is faster. I’ve not seen in my investing career like you know the the macro cycles, investment cycles moving at the pace they are moving. And the third is more important. So one is everything is unpredictable. Second everything is faster. Third is everything is questionable because we have information overload. Our ability to process that think deeply is is actually shrinking. One of the most important book that every investor should be reading is the default by Cal Newport. It’s not about more data, more information, more knowledge, more understanding. I think you make money through wisdom which is kind of like shrinking because people are just kind of seeing news flow or whatever everything that’s coming in WhatsApp or Twitter or by the way I’m not there on any of the social media handle. I post one post on LinkedIn that’s only only for last four five years. My previous 17 letters are not there. Uh the other thing I want to talk about the world uh so the third part I I’ll talk about everything is unpredictable. There are so many known known known unknowns but unknown unknowns keep getting hit today. If I think of the known unknowns then we know about the West Asia crisis. What we don’t know is the duration that’s a big known unknown in front of us and few others we can we can discuss that later. the other thing but within that everything is questionable because we are constantly getting bombarded with what’s happening in the world and there is so much of momentum bias in every market I I’ll talk about that a little later in our conversation with uh go and everything is questionable there are some very large big trends that get completely missed out because currently we are looking at oil in February we were looking at India US deal India EU deal GST reforms have happened foreigners are investing investing things are looking different and suddenly know everybody’s attention is on on the West Asia crisis oil and how badly India’s macro will get impacted there are few very large trends in the world that get missed out in 2014 I used to have a slide which had pictures of some of the global leaders and I said the world is changing and changing for something which we really don’t know and that was uh my theory was that for 40 years our generation has been one of the luckiest generation in human in history. Our generation has been one of the luckiest generation in human history. World has never seen so much of peace and so much of prosperity. This is exceptional. This never happened in human history because when 17th, 18th century, 19th century when Europe was doing well, there were few million people. When 20th century US did well, there were like few million people in United States. Large part of the world didn’t grow for a very very long time. This time in 40 years we have created unprecedented prosperity in the world. I mean think about it a billion Chinese a billion Indians a billion people in Latin America and other parts of Europe etc got inducted into the world the whole wave of globalization since 1980 fall of Berlin wall the world coming closer the spread of like the best days of the liberal democracy and all of that led to an unprecedented prosperity in the world and that created like you know amazing markets this gives huge ability to policy makers to really navigate any crisis last 40 years The playbook has been very clear. If there is a crisis anywhere, if there’s crisis in Mexico, LTCM, 911, GFC, pandemic, whatever happens, central banks come and print money, the governments borrow more money because I mean the rates which were at 15% in 1980 fell to 0%. At one point in time till few years back, we have forgotten that $17 trillion worth of bonds were trading at zero or less than zero. We brought down that interest rates. Why we could brought down? Because of the globalization, countries like China, Mexico, Vietnam exported cheaper and cheaper and cheaper goods. Countries like India, Philippines, we we exported cheaper and cheaper and cheaper services. We brought down inflation structurally and we made like money more cheaper because inflation risk wasn’t there. A big macro crisis wasn’t there and that created so much of prosperity particularly in the financial markets. Now it’s reaching a stage where it’s not only the real economy which impacts the financial but the other way around. It’s no longer the dog ws the tail but the tail wags the dog but that’s for a discussion on a on a different day. That picture was used to be like if I look at the world and I look at a in Japan I look at Duty in Philippines I look at Jooko in Indonesia I look at like India MBS Theisa May Victor Robin Theresa May says if you are a citizen of the world you are citizen of nowhere. I look at the rise of Trump, Javier Malai, you look at like Marin Len in France and I said something is happening in the world. If there is so much of peace and so much of prosperity, people are looking for some change and a big change. What is that change? and a level below. I when you think a little deeper why people want this this change and I thought maybe large part of the developed world where they are looking for this change is that globalization led to like a massive prosperity as I said at the global scale but it also created challenges for certain sections of people because the inequality increased and on this whole debate of Tom Piketi of like whatever inequality inequality I’m in the campfare the famous quote of Churchill is that the sin of capitalism is it distributes prosperity unequally. The sin of socialism is it distributes poverty equally. So we have to choose what is good. But it wasn’t an easy choice for anyone to make. And they made certain choice. We were in a world where if you are rich you got bailout. We are in this like last 30 40 years. If you were rich you got bailout. If you are poor you got hand out. Millions of people were getting food coupons in US. If you’re rich you get bailout. If you’re poor, you get hand uh hand out. If you’re somewhere in the middle, you get left out. And a large part of the middle class started feeling really left out because a larger proportion of gains were going to capital and labor was getting squeezed in many places. Now it created like a positive implications for labor in India. Millions of jobs got created here. But there was somewhere else who were losing their jobs and maybe politicians failed in understanding at a forum where something needs to be done about this world. Now we are seeing a big reversal and this is just the beginning. This is just the beginning. We’ll have to navigate a world which we haven’t seen. The world worked in a certain manner. Post World War II you had like all kinds of UN, WH, WTO, NATO, all kinds of institutions that got built. It worked in a certain manner. You had a playbook. This happens and then this happens. This happens and this happens because you could read the politicians mind because they could read the what was happening on the ground people’s mind. Now when such a big change and transition is happening it’s very very difficult investors don’t know it what investors are doing it today buying the momentum buy what is going up for whatever reasons if it is TSMC today you’ll get the best story if it was silver uh so Radika we launched silver fund on 2nd September 2022 the silver prices were $18 with great difficulty with SDFCMC franchise some of our distributors sitting here at $28 80 offices. I mean thousands of people in sales, hundreds of thousand distributor. We got 20 crores. Silver prices were 80. I feel good because we launched gold and silver that day on the on 14th September and got 10 crores at $120. They were like cues outside the office. So and it’s every security in the world, every market in the world. This is because the other thing I have markets about the three things. Number one, we’re in a highly uncertain geopolitical and macro environment. Number two is macro cycle getting shorter. And number three is there’s so much of gamification and gamification of markets. Large part of the money is moving to passive funds which just buy what is going up. They just buy what is going up. If Nvidia is going up, the weight goes up, you buy more. If something is going down, weight goes down and you sell that more. So they’re creating a momentum bias. On top of that, you have a hedge fund industry which lever it up like several times. They become so big. Then you have the whole ALGO industry and HFT industry. And then the Robin Hood zero dha grow investors who are just continuing with that momentum. There is momentum in every market and nobody’s really thinking as deeply where the world is is going. But two more minutes or maybe later. So the the other thing I said the one is that there is massive change happening which is unprecedented. It’s not only about I covered the geopolitics aspect of it, a little bit of geoeconomics but the world has grown so much because we had a massive fertility boom 40 50 years of unprecedented fertility boom with a huge advances in in healthcare and that gave a lot of prosperity to the world that has ended. In my last year or year before last letter I wrote that I belong to a generation which I won so many essay and debate competitions on population control. My kid would be writing on the great fertility challenge for rest of his life and humanity has to think about it. I have way different views on AI. AI was my person of the year in 2022. But I think the world will be discussing about shortage of people and not more people not having jobs. We can come to discuss that later. I mean there are investing implications of that. The so one is this like massive change then the technological disruptions is unprecedented in human history. The four big revolutions that have happened in the human history. First was agriculture. But thousands of years it took for humanity to figure out the way agriculture we know it today and and you could still be in any part of the world eating in different manner. Then the industrial revolution took several decades. There were there were textile mills in Manchester but handoons were working in Vanasi and the world was fine with that. It took like hundreds of years for them to reach every corner of the world. Even the information revolution. So let’s say telephone came in like early 1900 but in 1970 when I was born 71 in my entire lane in Bhawar we were the only one with telephone and everybody in the street used to have our number as PP number after 70 years nobody had telephone or 80 years till like ’90s you had a queue outside YTLBsl to get a telephone connection and now you have like intelligence revolution where like in a few weeks time billion subscribers and now it’s a very different one we discuss AI separately. So there is like technological disruption. There are disruptions in lot of changes in the human behavior which is very very distinct than history. But beneath all this lot of this disruption I’m super positive on all of this is leading to a massive super cycle of investments in the world. It will take last one minute and I wrote it year before last year before that I can paint a picture which is really worrisome in the world from a political perspective. you read the headline and as he said we really don’t know in evening what he will write or what Iran will write or what BB will do in Israel or or anything else we have forgotten about many other crisis going on in the world they don’t even get the headlines but there are massive investment cycle which will be underway which is driven by four big factors number one is defense spending for rest of our life will keep going up in every country is on its own the put option written by the America that I will say I mean we won’t allow like a peace to disrupt global economy any I mean a violence to to disrupt a global economy that put option has been taken away which means everybody’s on its own so from Japan to Germany to India to Saudi Arabia to Abu Dhabi to Mexico to everybody will be investing more and more and more on defense number two is supply chain because we’ve got hit so much in last couple of years whether it started with the trade war between China in US in 2016 but whether it was the pager attack by Israel whether it’s like the API disruption in 2020 whether it’s all kinds of supply chain disruption now the straight of hormood which means that everybody will have to produce more locally which is means massive investment several years the third is climate change it is for real I’m a big proponent of ESG but not the way people taught us I think India is going to teach what ESG is all about climate change is for real world will have to invest so much energy transition ition, EV transition, all kinds of things. Last but not the least is AI and quantum computing. It requires humongous investments. So all these four put together means on one side we can paint a highly uncertain environment. On the other side underlying there is massive investment that’s going to happen for next several years. This will change the nature of jobs. This will change the nature of industries. This will change the way businesses deal with each other. Countries deal with each other. humanity deals with each other and all of that with huge implications but I just thought I’ll set uh context of few of the top of- mind ideas. Okay, thank you for that. So Radika let me come back to you. So you know you talked about building portfolios that survived. My question is this um the portfolio that you were let’s say starting to construct whether on your own accord or for the funds that you were managing for others say about 10 years ago. what has changed today from that approach and what’s the reason for that change? So I think over time and you know I I agree with Navnit’s point about momentum at least my learning is and I absolutely agree with him that predictability is very low market cycles have become very short when I started my career as a finance student I was told market cycles move in 8 years and you would sit and you would buy and hold uh and that would work uh and I I don’t think that works. So I think there are two changes that we are making as we think about being an asset manager and we were having this conversation just yesterday. One is that there are existing funds that we’ve managed. We manage traditional equity funds, funds that everybody invests in flexi cap funds, large cap funds and I absolutely agree with Nit that if I have a 5 10 year old outlook you know on things I’m very very optimistic I’m the greatest greatest optimist particularly on India but I think we are a lot more agile in the way we manage that money. Um so we try not to have biases, value bias, growth bias. You know typically as an asset manager the first question you ask is are you a value investor? Are you a growth investor? I believe we are just investors. Value, growth, quality, these are all labels that the market puts on you. We are investors. We are very happy to invest in a company that is cheap relative to pricing or we are very very happy to invest in a new age sensible new age highly growing company that justifies its valuations. I mean today you’re talking about S Samsung going 6x in earnings in the next year. So we are very indifferent to these labels that the market ascribes to value growth etc. And we are a lot more nimble in our approach. So that’s one side. The second side is in the actual basket that we manage. I think the Indian asset management industry has evolved dramatically in the last 20 years. Even in the last 8 n years since at least I’ve been a part of mutual fund industry we had an industry that was largely in terms of consumer offerings fixed income and equity and there was actually nothing else. I mean silver as Navnit said and gold were reasonably as financial assets newer concepts. Today we have an industry that caters to actively managed funds, passively managed funds. Somewhere in the middle when they have got these fancy names like smart beta and all, we have an industry that caters to global funds. We look at listed, we look at unlisted, you have this whole asset class of real assets, REIT and invit which I am particularly uh optimistic on as I think about India’s capital needs over the next 15 years and then you have asset classes like global investing, you have asset classes like hedge funds. So I think the range of offerings, the range of solutions that we’ve given to the consumer are far wider and you know sometimes and this is the last thing I’ll say here go we are accused of saying there are too many offerings out there and I don’t know why a consumer should ever say something like that. Um, you know, I always say that in old motherly wisdom, if you go to a supermarket today, the shelves are full. And when a Demart stocks one more good, nobody says, “Yeah, Demart.” Because when my mother goes to a Demart or wherever she shops or Costco, how does she make a decision on whether to shop? She goes with a list. And the list is carefully made depending on the needs of the household members. And I think we are increasingly becoming a financial supermarket where there are a lot of things available to satisfy different needs, different time horizons, different market situations. Uh from uh speaking from within the organization, uh what does it take to build that kind of wide portfolio and doesn’t is it not sort of stretching your skills and your bandwidth? It’s actually not stretching skills and bandwidth. greatest challenge and I wrote a long LinkedIn post on this. What it takes to build this is talent of different kinds and uh the person who is managing a midcap fund is a very different kind of talent than the person who is trying to make a decision on international investing than the person who is doing a lot more aggressive trading to run an absolute return fund. These are actually three different skill sets. The greatest challenge today I have ironically in a country where we talk about not enough jobs out there is finding talent to build and meet the needs of different buckets and uh I’m going to come to questions as well uh to the audience in a moment. So but you’ve launched for example many offshore funds uh you have a greater China the US uh value Europe dynamic and there’s a gift city. What’s your experience been and what can you share from your experience with our students? Okay. So I have we are perhaps one of the oldest seller of global investing and I I have hilarious stories on this. So we acquired these funds in marriage. Okay. They were given to us when we acquired JP Morgan AMC and the total AUM these funds then was 150 crores of five funds and this was in 2016 when nobody cared about global investing. I was told so we said let’s continue it and I didn’t have too much of an idea but I was a big proponent of global investing um and then in 2018 or 19 the Chinese market had a phenomenal run in fact someone wrote an article that Adela’s greater China fund is the best performing mutual fund of all time over the last 10 years it must have been talked about momentum We used to have lines outside our office to invest in Adelaise’s greater China fund. The week it was Chinese New Year. People used to call and complain that my NAV is not going up. That’s how people used to chase global investing. Then you all know what happened in China for 2 years after that and we got a lot of criticism etc. And then of course uh you know the funds have had so I think there are two parts to this whole global investing thing. On a serious note, I think for serious investors, it should be part of their allocations. And there is a segment in India that has realized that listen, India is not the only cookie in town. And so people are looking at US as a market seriously. People are looking at China as a market maybe a little less seriously in the recent past and I think this is recency bias. They’re excited about Taiwan and Korea. the principle that I need to have maybe 10 15% of my money abroad I think is there um you know the fact that we don’t have too many limits for people to invest prompted us to launch all these funds in gift city uh and uh I’m hoping that ecosystem develops my only guidance to people is that when they look at this consider it a part of the asset allocation and have the same 5 10 year horizon that you have for Indian equities don’t invest in my China fund today and come back to me in a and say China has not made money, India made more money. The reason the funds exist and you invest multi- country is that different things do well at different times. But I would say the mindset has different definitely opened up. I should not say this on camera but this is today uh our limits are done in our international funds. Um we allow only 5,000 rupees via the SIP mode in all our six funds. You know there are people and this is genius Indian mind and we allow 5,000 rupee monthly SIPs. There are people setting up an SIP every day to game the system. So that is a little bit of momentum. So uh Navit Radika is a social media influencer. She has to say something which is like I shouldn’t say this in front of the camera. I’m not there on social media but I understand all that. If I had to say something like that, I would say something else. Right. So, Navid, I think there is a conditioning and reconditioning of investor approaches which is perhaps called for. I think Radhika sort of referred to it in a way saying that you know you got to think of global without getting emotional about it and make it a scientific part of your portfolio. So, as you look ahead, what how are you thinking and how do you feel investors should be thinking in the way they allocate funds? And I’m talking about the thinking, not where specifically the money is going. And and this is and and and of course the context is everything that you’ve talked about. You’ve talked about super cycles. You’ve talked about 40 years of uh prosperity and the big shifts. Some are hidden, some are not hidden. So all of this has to come together somewhere. So where is that? Yeah. So uh some of my friends from the CFA community are here and uh we were taught all the capital market theory and the trillions of dollars that run. Everything is like Harry Makovich and the whole generation of people who not only got many Nobel prizes but over the years I think have really shaped the way capital markets think globally right the whole efficient frontier I mean for every unit of risk return the only freelance that you get is diversification and this is how you diversify so I’ll talk about the India a little later but you know think about it in 1974 there was study in US that all the pension funds have a home buy We don’t invest outside. US is already like 36% of the global economy. We are such a large part of the global market. So we shouldn’t have all our eggs in one basket. We should invest outside outside US. In last 50 years they would have underperformed every bit of so they would have gone from like 0 1% to now maybe 18 19 20% but that 20% of the portfolio is what is underperforming for them. Maybe I don’t know since 1990 to now if I look at S&P versus let’s say rest of the world maybe 3 4% perom outperformance in in in dollar terms and thinking about the diversification of Indians again I I I say this on many forum whether I’m speaking on EG or on capitalism or or on investing there’s a lot that India will tease the world it’s just that we have to arrive there uh and we will arrive hopefully uh uh not I mean hopefully sooner than than lot of people think today that in investing who taught diversification to the world there has to be like lot of literature to be written that Indians have understood it since time immemorial we were the ones who sold turmeric and black pepper and all kinds of things which we couldn’t use beyond a certain whatever in our meal and got what we got gold we got silver we got pearls we got rubies we got like all kinds of things from rest of the world for thousands of years. That will like real currency diversification or or a real diversification and we have been doing it for thousands of years knowingly or unknowingly. Anybody who lives in South Bombay buys some plot in Alib somewhere they have a farm in in Dhanu and people think about like the private credit. We were thinking of a of a product like global private credit. Of course, it’s not a good word, but we think a time will come when the time will be just right between like what the public perception is and what the opportunity is as Soros says that just wait for for that time for the right thing and um and I keep thinking like you have to go to Kalba, you go to CP tank, you go to like opera house and then you know what private credit is all about. This is how India has been has been running the credit. So I think we understand it very well by nature that we we diversify in India. The alternative has been the public equities which we have just started. Everything else we have been investing is an alternative. Uh whether it’s gold, whether it’s fixed income, whether it’s private credit, whether it’s real estate, everywhere, commercial, residential, everything. The equity has just started and and we have a long way to go on the global side. I mean, I was very bullish on the whole AI and I still think it is underhyped and overhyped. Overhyped in terms of the way people are looking at investing. They’re like classic science of everything we have seen in 90s we have seen in 2007 people have forgotten like today is it Nvidia now or because it’s like very neck to neck right Nvidia and and Alphabet Nvidia still is is higher right yeah ahead so Nvidia is the largest market cap company and asked them like who was there in 2000 it was Cisco and the whole theory was networking the whole theory was like whatever the JDS unifi and andel and Cisco and and all of them were the largest in the world simply Because this is how the world is going to network video conferencing and how it will grow. Infosys were the first one to showcase how a video conference can happen and we could have projected in 25 years time everybody in India would be doing video conference like 1.4 billion people Indian are doing it every day. So how much the growth potential but Cisco has just overtaken the price that it the peak it touched in in 2000 and same is the case so in 2007 which company was the largest market cap in the world anyone Walmart no you’re very close no Chevron you’re very close China the whole thing one was the oil the structural growth story the per capita consumption of oil will keep going up and number two like China is the is the next place right so theory was absolutely perfect China did extremely well so going back to that US point actually the uh the US the theory was that US is one-third of the global GDP it will fall over a period of time it has fallen 36% would have become maybe 20 less than 25% today but the US markets are like a bigger proportion of the global market today US is 65% of the global equity market and if you add all the memory trade the uh Samsung and and whatever TSMC and SKH highix and all they are play on like the whole US AI trade then effectively like US is the market uh today and uh they are like 50% of the private markets private equity private credit they are uh 40% of the global bonds they are like one quarter of the global commercial real estate and all that I think reached a stage where I think experience teaches is me there is something cannot grow to the I mean trees go don’t grow to the sky whatever their theory is so something is going to break and at this point in time when rupee has weakened so much and uh India has underperformed of course I think I used to show in my presentation and every time bullish story on India the three challenges with India number one like climate change it is structural and we need to think about it as we grow number two is we don’t invest as much in innovation We need to do a lot more as corporate, as government, as academia. And third is inequality. In a democratic society for rich people to get richer, it’s very important to take very good care of the poor people. So these three things we have to take care. Anytime we miss that, we’ll have challenge and innovation has really kind of in a way uh hit us. But we are getting there. I think by maybe compulsion than than the conviction. So I don’t feel like as today is the time to diversify because rupee has weakened because other markets are doing so well at the same time as I said diversification has its merits maybe I don’t know I think structurally emerging markets do better than developed market this is my view for yeah you want to pitch in quickly on that radika on diversification I know you already talked about it I’m going to come to questions after this so I I do agree I think the US has US is 65% of the world market cap um I I I do take Navit’s point about Cisco and then you know remember there was a time in uh 2021 when a company called Zoom had a larger market cap than Goldman Sachs because we thought we would be on Zoom for the rest of our lives but I do believe that and this is not a call on emerging versus developed but I think tech as an industry has always been disrupted disruptive now what tech is the tech of the moment that will constantly change we run a US tech fund for instance But the nature of tech has always been that a new incumbent will come and disrupt something out. And actually, if you look at the S&P 500 earnings, even in the US, most of it is actually a bet on technology. So, would I take a call on the US? I would take a call on the US being the center of innovation, having an ecosystem that attracts the best innovation in the world and technology whether it is AI today or video conferencing in 2000s or the internet in an earlier era still being very relevant. So I would look at that. Um I think if I give people a simple construct you know a lot of people come to me and they say we want to make a global portfolio what do we do? So I have this core satellite approach and I said that if you have a 15% portfolio that you hypothetically want to allocate globally. Think about the US being 65% of the world and maybe that is your core asset allocation. Now you know if the US has run up a lot that 10 could become eight but you know it shouldn’t be missing. The second largest market in the world is China. Now China at some point used to be a 7P market but finally it is a large economy and we’ve seen China become a leader in segments it was absent in I mean 10 years ago China was absent in the whole EV play look at it today. Uh and the third is you can then have some satellite allocation to some of these emerging markets. One of my criticisms or some of the emerging markets that I also question sometimes is that if you look at Korea, how much of the market cap comes from one company? If you look at Taiwan, how much of the market cap comes from one company? Now, there’s a lesson there in producing worldclass outsized companies with disproportionate outcomes. But finally, these are markets that are dependent on one or two companies. So I I do think US and China still remain the core and these are smaller emerging markets and I by the way I I think India has a a lot to learn out of this and and we’ll come back to that as we conclude. Okay, questions and comments. Yes, please keep them short. I’ll collect them and then yeah last peaked at the early of last century where there was actually a lot of the US was actually overextended in terms of debt which had to pay back to investors and you’re seeing sort of like an equivalent here at the end of the large debt cycle. uh you then land up in a period of like let’s say uh deflation there’s too much uh interface shoot up and the markets all crash so I just want to get your sense on are we in the end of a large debt cycle based on the radial theory okay I’ll just collect a few more yeah anyone else yeah hi um just a related question actually um you all spoke about you know market cycles and you know both mentioned kind of going through the GFC and you know what was what was the peak then right a lot of similar immarities between what’s happening today versus what’s happened at the peak of other cycles as well. How are you all sort of you know positioning yourselves as well as you know your institutions in terms of trying to understand kind of how much further these cycles kind of can go right not kind of specific to just what’s happening today but even if you look at you know the macros sort of across the board uh how do you make sure that you’re still kind of capturing what’s left in the market and at the same time kind of not putting yourself in a position where you’re sort of you know overcommitted got it okay goal and then I come back uh one to um uh Navnit which is do you think there’s been adequate transmission of US interest rates to other markets and to Radika do you think there’s been adequate transmission of interest rates to equity pricing especially stocks that run on vanity metrics you know the US markets work on earnings the Indian markets work on vanity metrics the answer short question so one one on the public diet and the radar point. So honestly I mean I wrote this line about us last year that you know the dattors can’t be choosers but they have been like uh this is exceptional. I mean every time the world has this kind of debt we had a challenge. So in 2012 we thought I mean Europe is bankrupt but it got saved and the Portugal and all of those countries 20% interest rates became zero. Same thing happened in like ’90s 2000. So we have been in this era of 40 years of globalization where you didn’t have to worry about inflation. You didn’t have to worry about the size of the central bank’s balance sheet and you didn’t have to worry about the government deficit but everything can be stressed to a certain level. I think they have overstressed it. Now the way they are trying to solve is to buy doing this whole innovator the let’s say ’90s they created such a big bubble on that whole internet thing that lot of the pain got washed out. I mean a lot of the thing got washed out. This time they’re creating even bigger $1.5 trillion IPO out of like nowhere or $1 trillion IP out of nowhere. I don’t know. No, I mean they may succeed in this and then maybe the diet and the other problems will look very small innovation cycle takes over but I think the there will be a challenge of the public debt even in the 2008 was like the day of reckoning but what happened I tell them I tell the world that why didn’t really collapse the world because simply what happened that the the genesis of 2008 was too much of debt we shifted that debt from private balance sheet to the public balance sheet and we kept doing it again and again again and again in 20 we did the same like in US I’m talking about so if shift shifted so much of that to the public side private debt is lower but at some point in time that has to be paid back and there would be uh challenges and correcting with you Gopal why the world hasn’t really seen that 4 and a half% US but what will happen that US were like 2% inflation India were like 7% and the gap used to be and with the country premium etc the difference between 10ear US treasury and India used to be 67 800 basis point now it’s come down to like 200 basis point 250 because India’s inflation will be four and their inflation will be three times. So the inflation differential is structurally is coming down. Anti-immigration, anti- trade, all of these things and the so much of investment they are making is structurally inflationary. Investment cycle is structurally inflationary in the beginning. World will have like over supply of everything 10 years later. That’s a different investing theme for a different day. But till such time world will consume a lot more of of everything. Yeah. And I think short answer to Gopal’s question in at large I think in all this Trump oil etc we forget that there is a fundamental shift in a world where interest rates were zero and not just US but uh even Japanese yields are at 4 5%. And you know beyond Indian bond markets I think it has very serious implications for equity markets including unlisted equity markets because if you remember many businesses that came out of co they came out of the Japanese carry trade and cheap funding. Now where are Indian equity markets? I think Gopal to be fair if you look at any 5-year period or 10-year period and look at what the driver of Indian public equity returns I’ll come to private in a second is public equity returns are earnings have been the dominant component so that I think is the good news actually multiple rerating has not been such a large component of equity market returns the dominant energy is coming from your earnings growth that said in any and I also think even in the unlisted to-list listed world I mean if you remember the IPOs of 2021 2022 I argue that you could have a loss-making company and price it on what I call price to dream ratio I think some of that has come down and entrepreneurs have finally realized that there is a movement you have to do down the balance sheet so I think there has been some maturing even of that segment that said are there segments of froth that continue to exist I think absolutely If you ask me one area I would caution and I’ve been cautioning for a long time, it is this whole preipo category. Uh we have this belief in India that just because something is in preIPO and it is sold, the IPO has to be at a higher price. It it doesn’t work like that. The IPO is a point in the life cycle and there is something called gravity in financial markets as well. Okay. More. Yeah. With all this uncertainty, you know, one would have thought at every year beginning that, you know, there’s so much uncertainty, there’s so much problem, interest rates at this at the rates that there are, something’s going to give, you know, we’re talking about bubble territory. 65% of the world is US market uh you know, high and all of that. Is this sometime going to burst? Are we are we potentially looking at and what are the kind of markers that one would need to track to see what is likely to happen? uh you know the 2008 kind of the pitch how do you foresee this applied tech would impact different economies to have a global market share or investments here okay so how can we benefit from this AI boom I know we not talked much about it but uh is there anyone else yeah last question hi um if I’m an 18year-old who’s starting his investing journey what are some of the principles that you would say over maybe the next two three decades that I should keep in mind uh given all that you’ve been saying and all that you are seeing and and why aren’t you revealing your real age huh okay so uh anyone else yeah thank you that’s really well done um I would there’s a question of dependencies right India seems to be woefully underprepared for the world that you laid out of you know each for themselves. We have to be friends with China. We have to try and find you know relationships with the Middle East. Uh we have to still stay friends with the United States. Do you think that we’re missing a trick and do you genuinely think that India is ready for the world that is to come? Can I just like one line? There are countries in the world which are determined to do well. The US, Singapore, there are countries which are destined to do well which is India. I think the the big shortage of the people is going to be nurses in the world. I mean Indian nurses will rule the world. We are only looking at AI engineers. Silicon Valley won’t need as many people as we have exported. The world world will lot many more physiotherapists. They will need counselors and I think India will be like the savior of the world and it’ll the jobs will be so damn different. A decade later we’ll be talking about different kinds of jobs that India has got. So we are talking about GCC and the software the real work which is done by hands and minds India will rule the world. Okay. So we’re going to but I I’ll just take that uh on on the the on the tech investing there are striking I I wrote it two years back there are striking parallels between the big tech companies and the imperial powers of 17th 18th century. The way Dutch and Portuguese and the French and British were behaving they are exactly playing the same rule book. This is the lagan we are paying. That time they wanted two things land and labor because that was the only valuable thing on if you are on uh planet earth land you could get minerals you could grow food you needed labor for both they that’s why they went around Latin America to Australia Asia to America everywhere in today’s world the value of land and labor is very small because everything is industrialized it’s all about your attention and the mind which is now they have controlled completely we have become slaves without realizing it we have worse quality slaves than 1857 what British did to us today world will realize I think politicians are smart they will realize it and there is going to be something I don’t know in what manner it will come but this is the rise of east India company somebody will write a book this is the rise of east India company the way these guys are rising and something will happen to kind of control that they took again as I said cycles are shorter it took 200 years for the world to struggle against them this time it won’t take as long Okay. Uh so you know before we close uh I think one of the questions was how are you institutionally positioned in this time and or positioning yourself in this time um and I guess I would add to that how are you uh picking themes or stocks in a broad sense uh as as you look ahead because this is what people want to know. That’s that’s one question. Second and let me try and end with the analogy that we started with. So uh you’re both now co-pilots uh alternating you know alternating command. What would you be telling your passengers as you take off today in what clearly is a difficult flight? Uh, co-pilot fast. I mean, commander, co-pilot, you keep alternating. Yeah, I I think the good advice is to fasten your seat belt, wear some headphones and watch a nice movie or do vapasa and ignore the turbulence and not to worry too much about the unruly co-passengers around you. That’s the best advice I can give to a sitting pilot because finally you’re in the hands of a capable pilot. Your long-term prospects if you are an Indian investor and spoke about that are reasonably so you you know that you will land at your destination a journey so you wear headphones and you watch a good movie and ignore the co-pilot you know the passengers who saying this plane will crash this pilot doesn’t know his job Singapore Airlines is flawed that that is the advice I would give. Okay. and uh how are you institutionally positioned that’s the other okay so I think the we you know we always get this question on how are you positioned on sectors and I can give you an answer today for or in general I mean in a very macro sense okay so I think firstly sectoral positioning of mutual funds and I I’m taking a minute here we get this question all the time I think it’s a bad question to ask us because our sectoral positioning changes very very fast today for instance as a house uh we are excited about financial services as a theme because valuations a we are excited about power as a theme we’re excited about defense as a theme if you came to me 6 months later I might be convinced that tech is at the bottom of the cycle and we excited about tech as a theme so I think we run broadly diversified portfolios and within that we remain agile and I really think India is not about sector selection it’s about finding good clean companies that are going to become market leaders And again we are not an economy like Korea where a single stock is going to dominate a large part of the returns. I think many many sectors offer exciting opportunities. So that that’s my genuine answer to this question. Got it. Uh last so but you asked like if I were 18 today what should I do as an investor? You were 18 30 years back. That day the answer was same what it is today. So your 18 year old should do the same what you should have done 30 years back which is invest in SDFC flexi cap fund and on on a serious note on a serious note I didn’t pay this to go but but on a serious note on a serious note so in last 30 years and I can go back I tell people I have experience of 45 years of looking at markets and say you don’t look that way I’ll I’m a marvari because I I we smell money before we smell milk so the Um I I I I I started at like 198182 when I was 10 or 11 and I’ve seen like death of Indra Gandhi and I’ve seen like markets there was like despair in the country and then I saw like 405 seats of Rajiv and markets like a new high I’ve seen then again 80s and then you know 91 country bankrupt people are talking about currency crisis I’ve lived through 91 and I know country was bankrupt we placed our gold and then the mother of all bull market in my life I hope once more I’m going to to see the bull market I’ve seen in ‘92. I haven’t seen yet after like since ‘92 then we have seen all the coalition governments and poker and whatever sanctions and everything and then we had like 2000 bull market and then we had 2008 and again I think the the world is really uncertain as an informed citizen remain as informed watch the news watch everything but just remain invested in like whatever a plain vanilla SDFC flexic f you’ll do very well 30 years later on a serious this is not marketing page on a this is where my money is this is where all my money is in my plain vanilla simple actively managed fund that’s where all my whatever money is okay so Radika you deserve a response I have to get a response because Navit does this to me on every panel I just want to tell you and he does this because Adel wise is younger than HDFC but Nit I’m younger than you so I can take advantage of age right uh so you can also invest in a wise midcap fund which has a 15-year track record not an 18year track record but on a serious note I have an answer to an 18year-old. Um I think you should feel tremendously fortunate that you are 18 in the India of today. Uh it’s a great time to be a young Indian and quite frankly I don’t think in your 20s you should be worried about whether you’re invested in HDFCwise or ICICI flexi cap or midcap fund. When you are young especially in a country like India the greatest asset you have is not a financial asset. It’s your time and talent. Make the most of the time and talent. You don’t need to worry about passive income. You hardly have capital, right? That should be stuff that people like us should worry about. So, make the most of your energy, time, and talent when you’re 18. I would kill to be 18 again today. It’s a wonderful note to end on. Uh we’ve run out of time. Thank you both for joining me and uh piloting uh our way through this. Uh thank you also to uh the quorum for hosting us as always and the edge community for partnering with us and see you at our next navigating risk series. So thank you once again.