Hiren Ved on The BroadView with Nikunj Dalmia: Investing Through Market Cycles

ELI5/TLDR

Hiren Ved, founder of Alchemy Capital, walks through constructing a five-year portfolio for India 2030. His thesis: most bad news is already priced in, but the real opportunity lies in identifying companies at inflection points—those with large external opportunities, superb management, and the ability to adapt to disruption. His 30-year track record (1,400 crores to 6.5 lakh crores with Bajaj Finance) rests on one principle: buy great companies when sentiment is worst and risk-reward favors you.

The Full Story

How Much Pain Is Already Priced In

When war, oil spikes, and forex headwinds hit, the immediate gut check is whether the market’s correction went far enough. Ved’s answer is pragmatic: 80-90% of the damage arrives in the first few days. The Nifty dropped 2,500 points in a matter of weeks. The harder question isn’t just price, though. It’s whether these shocks are temporary (a few weeks) or structural (months). A temporary shock shouldn’t crater earnings much. But if oil stays elevated for quarters, company margins get squeezed—as they did in 2022 when Russia-Ukraine war broke out and commodity prices rallied. There’s always an adjustment lag before earnings catch up to the new reality.

The macro setup is transparent to everyone: oil, flows, forex. Every fund manager has the same data. But like any kitchen, it’s the chef that matters.

“In the business of investing, everyone gets the same set of ingredients, the same macro, the same set of earnings report, and the same underlying valuations. But the dish always works when there is a great chef.”

Why FIIs Are Leaving—And Why It Matters Less Than You Think

Foreign money is flowing out, but not because India is fundamentally broken. The real driver is relative attractiveness. Outside the US, there’s no major capex story except AI. The US market is being dragged higher by AI-powered productivity expectations, and for now, India’s earnings backdrop looks muddier after elections and geopolitical noise. So on a risk-adjusted basis, foreign money is playing the AI game in the US.

Meanwhile, FIIs hold large chunks of two sectors that haven’t rewarded them: banks (HDFC Bank is still at 2019 prices five years later) and IT services (perceived as deflating due to AI). They own the wrong stocks, and the relative return elsewhere is too tempting. That’s a flow story, not an India story.

India 2030: Building a Model Portfolio

Ved lays out his five-year India portfolio in four layers, sized at 50% core, smaller allocations in alpha, multibaggers, and contrarian bets.

Core (50%). Companies with large external tailwinds and best-in-class execution. He likes the structural shift of Indians moving from savers to investors—hence BSE and HDFC AMC. On lending, Bajaj Finance is his pick (already demonstrating AI-driven competitive moats). Premium consumption anchors in United Spirits. R&D-driven manufacturing gets Divi’s. Then energy: power will be critical in the AI and renewable era, so Hitachi and ABB, which benefit from capex in transmission, data centers, and automation.

Alpha (differentiated growth). MCX (commodity trading still early-stage, options just launching). Zomato (fastest Nifty entry, large TAM, tight execution). CarTrade (understated, two great classified properties, transaction platform, founder balances entrepreneur DNA with cash-flow discipline). Ethos (luxury retail still in infancy). Force Motors (old OEM, under-researched, solid products, engineering chops).

Multibaggers (explosive runway). Centum Electronics (electronics + defense + space at inflection). Dynamatics (aerospace supply chains coming to India as it becomes a major defense/commercial aircraft buyer). A specialized software shop with rare skills in silicon design, satellite communication, and automotive devices—been around for years but waiting for the right macro moment.

Contras (fallen angels). L&T (corrected hard on Middle East disruption, but has great capex capabilities and is pivoting into software, data centers, shipbuilding, defense). Wockhardt (out of favor, inconsistent, but product trumps everything—has unique complex antibiotics in pipeline with US FDA approval potential, and nobody is doing R&D on infectious diseases anymore).

Expected return for this blended portfolio: late teens, or if luck cooperates, 20%+. That’s phenomenal when nominal GDP is 9-10% and Nifty earnings have been struggling.

Why HDFC Bank Got De-Rated (And Why New Incumbents Didn’t)

Old franchises like HDFC Bank were rewarded when consistent superior execution was rare. Markets got what they paid for—stellar growth, high ROE. But the world has churned. Today, there are far more companies executing as well or better, and far more disruption to business models. Markets no longer front-load all growth into a handful of blue chips.

“Markets are always looking for large opportunities, companies that can execute well and grow much faster than the average.”

Bajaj Finance proved that even when established players (ICICI, HDFC) dominated consumer lending, superior execution and innovation could win at scale. It did. Structurally, lower rates and inflation have expanded P multiples, and domestic savings are flowing into equities in a structural shift. But the real story is simpler: the churn in leadership is accelerating. The “dada” companies are feeling the heat. The youth companies with growth are gravitating upward.

This isn’t old vs. new for the sake of it. It’s survival of the adapters. The EV revolution showed the pattern: one shooting star took 40% market share, then executed poorly and lost half of it. Ather and the established incumbents (TVS, Bajaj) adapted quickly and thrived. The rest crashed or faded. Execution matters.

His Greatest Triumphs—And What They Teach

Bajaj Finance in early 2010 at a 1,400 crore market cap. Fifteen years later, it’s 6.5 lakh crores. Annual profit is now 20,000 crores. That’s the multibagger blueprint.

Varun Beverages in late 2015, early 2016—when people laughed because he compared a bottler to an FMCG company. But he saw the intricate distribution moat, the founders’ decades of DNA in the business, and the global partnership with Pepsi (expanding market share in every country they operated). At entry, they controlled less than a quarter of Pepsi’s volumes in India. Today, 96-97%. That required guts to buy when everyone was skeptical.

Paytm when regulatory problems hit. He saw it as “the Colgate of UPI”—a brand so strong that people say “Paytm karo” the way they say “Google it.” When sentiment was worst, he saw the moat.

“When bad news is right, go all in. Especially when the risk-reward is in your favor.”

Risk as the Centerpiece

Ved pushes back on high-risk-high-return. Controlled risk, yes. The people who entrust him with money worked hard to build wealth. His job is to protect it first, earn above-average returns second. You take risk—there’s no return without it. But you don’t bet the house. The Rakesh Jhunjhunwala wisdom applies: buy when price and turn in market align, when bad news has priced everything in and risk-reward favors the contrarian. Not always. But when it does, go all in.

Key Takeaways

80-90% of bad news arrives in the first few days. Earnings adjust after, but there’s a lag. The real opportunity is asking whether the shock is temporary or structural.
FII outflows are a flow story, not an India story. They’re chasing relative returns (AI in the US). Own the wrong stocks, see better opportunities elsewhere, and leave. It’s rational, not a verdict on India.
Portfolio architecture: core (50%) + alpha + multibaggers + contrarian bets. Balance large-cap execution with inflection-point growth and fallen angels with asymmetric upside.
Disruption kills the unprepared and rewards the adaptive. HDFC Bank didn’t fail; it was simply outcompeted by faster, more adaptable management teams in a world with more disruption than their era had.
Execution trumps opportunity. A mediocre team with a great macro tailwind loses to a great team in a mediocre macro. Bajaj Finance, Varun Beverages, and Paytm all proved this.
Buy when risk-reward is favorable, not when sentiment is good. The best opportunities come after storms. Price dislocation is your edge.
Controlled risk is core to institutional investing. High returns matter, but not at the cost of the capital you’re protecting.

Claude’s Take

This is crystalline investing thinking from someone who’s earned the right to be direct. Ved doesn’t sell complexity—he sells a process: large external opportunity + best-in-class execution + ability to handle disruption, sized with risk discipline. His examples (Bajaj Finance, Varun Beverages, Paytm) are not accidents; they all fit this framework.

The macro commentary is sensible without being sexy. War, oil, flows—traders obsess over these. But a 30-year investor asks whether the stock price already reflects them, and if risk-reward has tilted in his favor. That’s the mental move most investors skip.

The India 2030 portfolio is opinionated without being reckless. He’s betting on structural shifts (retail to equity, power demand, defense/aerospace supply chains) and founder quality, not on India “working out.” That’s the right way to think about it. The portfolio mix of core, growth, and contrarian bets is sensible diversification for someone willing to stay through cycles.

One useful note: he acknowledges that even great companies can deliver poor returns if the market reprices them downward. HDFC Bank is exhibit A—great business, no returns. That pushes him toward companies where the market is still skeptical, where growth hasn’t been consensus-priced-in. That’s sound contrarian logic.

His weakest moment is acknowledging he should have held Naveen longer, and his partners say he needs to learn to sell. Even the best stock picker struggles with the exit. That humanizes him and is honest.

Score: 8. Deep thinking on market cycles, portfolio construction, and risk management. Not groundbreaking framework, but well-reasoned, humble, and proven over 30 years. Good for anyone building a long-term India portfolio or learning how real asset allocators think.