India's New Bull Market: Sectors, Signals & How to Position Before Stage 2 | Gautam Baid | FWS116

What is the highest returns you've made in a single year? — I was up more than 100%. — Wow. — With experience, I've learned one very big investing lesson, Sharon, that even though it may be a great business, if that company is operating in an industry which is not enjoying a sectoral tailwind, you will not make money. Since 2020, governments across the world have become all too powerful and now they are determining the winners and losers of each bull market cycles. If you are able to invest in industries with which are having this focus of the government as well, you can make a lot of money. For example, — what are the sectors that I should look at which you have analyzed? You want to be successful as an investor Sharon? You have to make friends with the word new. How do you understand if a business is a high quality business? It has to have three characteristics. Number one. Secondly, third and most important. One asset class you would completely avoid right now. — If you ask me this question in January, I would have mentioned gold and silver because it was complete euphoria. — So now gold and silver is still okay or no? I think — Mr. Gotham welcome to the one person club show. — Thank you for having me Sharon

— Gotham. It's not every day that you know I have a personality whose book has been written by none other than Mr. Warren Buffett. So can you tell me what is the book that you have written and how did Mr. Warren Buffett ended up reading it and talking about it making it a global phenomenon. — So Steve Jobs has very famously said that you cannot connect the dots you know looking forward but you can connect the dots looking backward. I had a habit of documenting you know all the great articles and content that I was reading and collating all of that into a word document for many years. I had this habit of just collating very good content. I already had the material ready with me. So I thought you know why not why don't I just self-publish this and it may help a few people and I may also come in touch with like-minded people in the value investing sphere. So that was you know how I self-published the first edition of the joys of compounding and at that particular point of time in uh 2018 I thought probably it'll sell a few hundred copies and you know I'll may get in touch with a few you know good like-minded people in the investing community but the book took off. It sold a lot in US and Canada. Being a value investor, it was always a dream. It's always a dream for us to get published by Colombia Business School someday because that is where the discipline of value investing originated. Benjamin Graham who's the father of value investing. He used to teach invest value investing in Colombia University only — and you and Warren Buffett studied there. — Yes. Under Benjamin Graham. But you know but Colombia had a very big condition. They said you know you have included a lot of uh cooperated content from Warren Buffett's annual letters in your self-published book. But in order for us to publish your work and distribute it across the world, you need to get formal written permission from Buffett himself that he's, you know, he's okay with you sharing his content in your book. So I said, how will that be possible? You know, why would he approve my request? You know, he's he gets hundreds and thousands of such requests frequently. Why would he, you know, approve my request? But that was a hard condition. I still, you know, just published, you know, printed out the manuscript of my book and I wrote a very, you know, emotional heartwell letter to him. and wonder of wonders. Not only did Warren Buffett know uh approve of me using his copyrighted content from his shareholder letters in my book, he also wrote separately a handwritten note to me in which he praised the joys of compounding. He said that you know this book deserves success and when I put that uh letter picture on Twitter, it just exploded. It just went viral and uh that made the book very much high-profile and the investing community and the rest is history today. The book is an international bestseller in nine countries around the world. — Wow. And how many copies has it sold? — Around about 100,000 copies in six years. — 100,000 copies has been sold. Wow. All over the world. — Around the world. Yes. — Wow. So, let's talk about what exactly did you write in that book which made it so popular. But before I get into that, I want to talk about some quick numbers uh to sort of understand what kind of money you manage because you are actually a fund manager right now. So

what is the amount of money that you manage and what has your performance been like in the last few years? If you could reveal that please. — So I'm the founder and fund manager of Stella Wealth Partners India fund. It's a US-based hedge fund. It's based out of Delaware State and I accept capital from accredited investors in the US. — What is the minimum investment size? — Yes, the minimum ticket size is $250,000 from accredit investors in the US and I invest that capital into the Indian stock markets. I've been investing in the Indian market since December 2007 and for the last 18 years. This has been my biggest personal passion for me. You know, this is more than just making money. It's just a intellectual pursuit of just gaining constant wisdom and just trying to figure things out all the time. I just find it very interesting. The fund went live on 3rd October 2022 and in the first three and a half years as of 15th of April the fund has delivered a net return an INR of 92% after a performance fees and if you look at it in USD it's you can reduce the rupee depreciation of 1516% that is the net USD return performance so far and this includes the full impact of the bare market in India small cap midcaps from September 2024 till 31st March 2026. — Wow. And if I had to put a CAGR number to it, what would that be? — In INR, it would be 21%, in USD, it would be probably a few percentage points lower. — Wow. So, not everybody has 2 and a half crores to invest because you said minimum $250,000 to invest in this fund. So, for the people watching over here, let's begin the process of investing as per how you invest this money. How do you invest money? Let's say you have 1

cr to invest. How do you think about allocating this capital? — So at st level partners you know we follow a investment philosophy which is based on two key pillars. Number one focus on quality of the business and number two management and the second pillar is a focus on prudent diversification. I'll talk about all these aspects one by one but first let me talk about what does prudent diversification mean? At any point of time we hold between 20 to 25 stocks diversified across industries and risk factors to avoid single factor risk. We are flexi cap fund. We are market cap agnostic, sector agnostic. We invest wherever we find opportunity and uh no new stocks are purchase purchased with a weight between 3 to 5%. And I sub subsequently average upwards if the management executes above my personal expectations. Individual stock level exposure limits are kept at 15% of AUM and individual sector level exposure limits are kept at 30% of AUM again to avoid single factor risk. This is about the uh diversification aspect. So now I'll talk about the quality aspect, quality of business, quality of management. How do you understand if a business is a high quality business? It has to have three characteristics. Number one, a return on capital which is more than the cost of capital that gives you the free cash flow yield. Secondly, there has to be some form of a competitive advantage or what we call a mode which sustains this spread of the return on capital or cost of capital for a long period of time. And third and most important, the business has to have sufficient reinvestment potential or opportunities within the company at high returns on capital. That is how you get a compounding machine. There are many consumer companies in India. For example, Nestle, Hul. They have very high returns on capital, but they're unable to reinvest that capital back into the business at high ROIC. So, they have to pay out large dividends. So, high dividend yield stocks are good for preserving wealth. But to create very large amount of wealth over the long run, you need a compounding machine. That is where you have to focus on. So, this is about quality of the business. Now, how do I understand the quality of the management? You know so for many of my US citizen investors in my fund and they ask me you know Goautam you live in and work in the US how are you able to assess management quality while being based out of you know a different geography. So Warren Buffett again has a very good uh know advice here he has said that the best predictor of the future performance is the past track record. So first of all you check whether the company has been able to grab market share from it from its competitors. The lesser the competition the better you know and has it been able to grow over the last 5 10 years without resorting to equity dilution or without having to raise debt if it's if it can have very healthy organic revenue growth not inorganic not M& A led without having to resort to external capital and if it can fund everything with internal approvals that's a very high quality business also check the stability and consistency of the operating margins over the last you know 5 to 10 years if it's too volatile you'll understand it's a cyclical business. It doesn't have too much pricing power. It only has pricing power in good industry times. But if it's consistent across market cycles over the last 10 years, then you know that this business has to have some form of a competitive advantage and it has pricing power. It has stability in its business. Those are the kind of businesses you want to basically back. — I would like to ask you, do you do this from a bottom up or a top down approach? Do all of this analysis. — It's both. It's a combination of both. I'll tell you why. Earlier I wish to be more of a bottom-up investor but over time with experience I've learned one very big investing lesson Sharon that even though it may be a great business you know in terms of management quality and past track record if that company is operating in an industry which is not enjoying a sectoral tailwind you will not make money. So basically you know if you invest in you know for example Ober real estate or loa developers or other D know big companies like DF in a real estate down cycle even though these are you know pretty well established companies you will not make money so you have to go top down you have to look at the whether the industry is actually enjoying a push or support from the government as well because after co what has happened is since 2020 governments across the world have become all too powerful — and now they are determined mining the winners and losers of each bull market cycle. So — wait wait you're saying after co governments have become all too powerful — all too powerful. Can you explain that? So basically governments have you know basically because earlier most of the liquidity used to be infused by central banks through monetary policy but after covid governments across the world engaged in fiscal stimulation fiscal stimulus. So now they you know introduce you know tax breaks. For example, if I talk about the Indian government for example in 2025 Indian government put in fiscal stimulus through making income up to 12 lakh rupees taxfree in the budget last year. They also rationalized and reduced the uh GST rates that was a fiscal stimulus you know again from the government size on indirect taxes. So government is basically now if you are able to invest in industries with which are having this uh focus of the government as well you can make a lot of money. For example from April 2020 to September 2024 the focus of the government of India was on boosting government capex. So you saw a flurry of multibaggers coming from industries like solar, renewable energy, smart meters and railways defense PSU companies. basically you have to f you know closely follow where the government is putting its you know energy and focus but since last year in the last 12 months a very distinct shift has happened now if you see if you just combine the multiple measures taken by the government be the income tax cuts or the GST cuts or the interest rate cuts from the RBI it's very clear that now the government is focusing on boosting domestic consumption — so you have to re that's why you have seen a d-rating of many of these government capex led stocks even though the stocks continue to give a good earnings numbers but the stocks are undergoing valuation derating and that can be a very painful exercise for an investor.

— So let us do that exercise right now right I I'm sure you do this every day but let us start from level zero let us say today you have 100 crores of a fund and you have to do this exercise right now on what are those industries and sectors from both a bottom up and a top down approach which you'll want to invest in. So can you do that step by step in front of us right now? — First of all you have to see uh before I talk about the sectors and themes which can do very well you have to understand which stage of the market cycle we are in that's very most important for active fund managers. I personally believe that India has entered stage one of a new bull market and I'll explain why later on we can discuss you know the various stages of a bull market and a bare market. Every bull market goes through three stages and every bare stages. And this is based on you know uh actual you know research and study of past market cycles. I've come to a you know conclusion that you have to understand which stage of the market cycle are you in. So in stage one of a bull market what happens Sharon is the most beaten down stocks or the just concluded bare market tends to tend to bounce the hardest. So in the last 3 weeks just look at the kind of stocks which have gone up the most. Reliance power jarash power gallant is path electra green techch comp and many theme companies which had gone up g 80% and they have gone up 30 40% in the you know last few weeks and in stage one of a new bull market what's going to happen is you know the these companies or the of the stocks which were displaying the maximum relative strength towards the end of the bare market relative strength means that those stocks have not fall are not falling much when the rest of the market is falling towards the end of the bare market. — But because those stocks did not fall much to begin with, — they don't go up too sharply in the stage one of the bull in the of the new bull market. — Basically the new sectoral leaders reveal themselves just at as a bare market is ending but not go up very sharply in the stage one of a bull market. Once stage one of a bull market gets over then you go on to stage two. So just to summarize, stage one is when the companies which have fallen a lot during the last phase of the bare market have — the lower quality businesses. businesses have gone up very fast. Uh that is stage one of the bull market. — a bull market. Basically in this particular phase you know all businesses good and bad go up rapidly. There's a broad there's a broad-based recovery in this stage two. — This is stage one. — Stage one. This is you know this is stage one in which you know many you know people think you know who have bought those lowquality businesses or know uh those stocks which crashed the most in the previous bare market they think that okay now we'll get back our capital but just if you do the math if something falls from 100 to 20 even if it goes up 40% you're still at 28 you're still down 72% right but — it raises false hope among many investors this instead of rotating capital from the from those losers into the new sectoral leaders they still tend to hang on to the you know past losers. That is a mistake which you should not do. The active fund managers or the active investors we tend to do what is called switching within the portfolio. So towards the end of a bare market we switch from the lagards or the weaker businesses which have now been identified into the new stocks or the new businesses which have which are showing relative strength. Uh and then you basically reshuffle your portfolio and move into those kind of businesses. those businesses go up like for example in the last two weeks small cap midcap index in India has gone up 15%. So your high relative strength stocks from the previous bare market uh they have also gone up by 14 15% only they have not gone up 40 50% because they did not fall to much to begin with but they bear fruit in stage two. The stage two of a bull market is this is when uh active stock pickers really shine. This is the longest phase of any bull market. So once stage one gets over then the market starts becoming narrow. The market starts to differentiate and it rewards strong earnings growth and management you know growth visibility good commentary very handsomely in stage two. This is where active stock pickers get handsomely rewarded — in stage two. This phase lasts the longit the longest. — Have we reached that stage yet? — No no we are right now in stage one because everything — I'm already enjoying stage one in my portfolio. So — it's stage one right now. basically right now. But stage two is the phase which runs the longest. Basically this is the you know longest phase of the of a bull market and this particular stage two of a bull market is characterized by sectoral rotation. So basically every new bull market has got a new se set of sectoral leaders there are three four sectoral leaders in every bull market. For example in 2003

to 2007 bull market you had real estate, infrastructure, commodities, organized retail. In stage two, what happens is stocks from one leader go up for a few months, then they pass on the bat to the next uh sector and then stocks from that particular sector starts going up. All of them do not go up together. So suppose you have a portfolio of 20 stocks from these new uh bull market uh leading sectors, you will notice that in you know uh for the you know for initial few months a certain group of stocks from a single industry are going up while the others are resting. Then uh after a few months a new uh set of stocks from industry number two the se uh leading industry two they start rising. So basically it's a kind of you know passing the baton from one set one sector to the other. This is stage two. Market is narrow and sectoral rotation keeps on taking place after certain intervals and then we enter stage three of the b bull market. This is when basically you know there are certain indicators which will you know which will uh you know come to your view if there is a record issuance of QIP. QIP means qualified institutional placement of insider stake sales 2023 calendar year India had the largest amount of QIPs on record 53,000 kores. So what does that mean qualified institutional? — Basically the promoters of the insight or the founding members of the company or the private equity players they sell some stake in the secondary market to mutual funds and other institutional buyers. It's basically insiders reducing their stake to take advantage of the — basically insiders cashing out a little bit. — Cashing out to take advantage of the you know uh euphoric market conditions. — Yeah. — So you know you have to have certain uh indicators in place to understand as a fund manager that the bull market is about to come to an end. This pattern has repeated multiple times in the past, but I'll talk about the most recent example. So from April 2020 to October 2021, we had a bull run. From November 2021 till March 2023, we had a bare run, bare market. From April 2023 till September 2024, again 1 and a half years, you see there's a pattern here. 1 and a half years, we had a bull run. And then from September 2024 to 2nd April 2026 we had a bare run one and a half years it's happening. — So how do you how would you how could you have assessed in August or September 2024 that the that particular bull market is about to come to an end? There are certain there's a combination of data points and indicators which you have to use together. — So in 2023 calendar year we had QIP or insider stake sales of 53,000 Kores. This went up to 1 lakh crores in calendar year 2024. You combine that with the fact that in calendar year 2024 Indian markets world over globally had the largest amount of IPOs by value. So the value of IPOs in the Indian market was the largest in the world in calendar year 2024. So what is what does that again indicate? — There's a lot of euphorian frenzy. People are being able to raise money very easily. So you combine these two factors secondary sales uh in the secondary market through QIP and promoter stake sales through IPOs in the primary market. Okay, secondary market primary market both are on fire. Along with this you add a third indicator. This is most important. Look at the quality of IPOs coming to the market. So in this stage three as the bull market is about to come to an end you'll see companies with very dubious business quality or lack of any business coming to the market to raise money especially in the theme exchange and they'll get overs subscribed in a very big way for example in late August 2024 there was a company called resource automo it was the poster of the previous theme bull market this company was to just have two Yamaha dealerships in Delhi and they wanted to raise 12 cr rupees from the market basically next to nothing business but they still tapped the market to raise 12 crores and the IPO was over subscribed 200 times they raised there was demand for 20 almost 2500 crores for a company having two Yamaha dealerships that gave that should have set the alarm bells ringing as a active fund manager okay this we are in stage three now something very bad is about to happen you you'll also suddenly notice that every day almost for many weeks in a row you know almost all the stocks in your portfolio across sectors, across quality, across market caps, everything is going up together at this rapidly at the same time together. — Momentum — momentum. There's complete euphoria. — Yeah. — This is how you know that you're about to, you know, enter into a very brutal bare market. It's going to happen anytime. Then this is and after this there's a transition phase from phase three of a

bull market or stage to stage one of a bare market. during the and how will you catch that transition as a active stock picker? You'll start noticing Sharon in October and November 2024 just as the previous uh bull run was coming to an end you'll notice that stocks suddenly stopped responding to good earnings results good earnings good results stocks was stocks stopped going up they started actually falling or staying flat even after good earnings growth in October and November 2024 this is the phase you know you're about to transition into stage one of the bare market uh most recent bare market took place in January, February, March of 2025. There was a big fall 20% fall in the small cap midcap index and you know there was a fall of 25 30% in many stocks many small cap midcap stocks and but stage one of a bare market is characterized by buy the dip mentality. There is no fear as such because the previous bull market has just ended a few months ago. People are thinking that well this is just another routine correction — just a random again routine fall in stock prices it'll again come back because a bull market always climbs wall of worry and you know dips in bull markets are bought and they again recover back and go to all-time highs but in a stage one of a bare market the people who are buying the dip they fall into a pit basically that is what happened they have this buy the dip mentality there's lack of fear confidence is still not low this confidence still high that India story

is great everything is good we'll again bounce back and Then finally we have got stage three the most brutal phase of a bare market. This is how a bare market actually concludes and come comes to an end that happened this year earlier this year in January February March 2026 was when the final stage of the bare market took place and uh in just to you know uh again I'll use a combination of multiple indicators. I mentioned to you how you know and you can understand that the bull market is coming to an end and how do you transition from the end of a bull market to start of stage one of bare market. Now I'll talk about how do you know that you're entering stage three the final stage of a uh bare market first data point of first indicator severity of price damage. So as from September 2024 to 2nd of April 2026 any guesses how like what was the median fall in stock prices for companies below 3,000 crores market cap in India? Any of guess how much they would have fallen on median basis? — 40%. — It was 66%. So 2/3 of capital was gone if you were in the small cap micro cap space between those one and a half years that and thousands of stocks fell 70%. So this is a necessary condition for a bare market to end. The prices of you know all the weaker business models and dubious promoters those stocks have to get demolish demolished. — Until that froth is completely taken out the bare market cannot come to an end. — Remember that those two companies I just mentioned a short while ago resource automo and OSI hyper retail — who basically raised the were able to raise money in the bull market euphoria in se August September 2024. — What happened to them? those two stocks fell 80 to 90% from the prices then — so the necessary condition that this could not happen in January February March 2025 because they had just fallen 25 30% but by but because when you once you extend the time period this once this froth has been cleared out 80 90% fall has happened in those companies the poster boys of the previous bull market mania that is when you know that okay this first necessary condition which is severity of price damage the removal of the froth has taken place. So now you know that you're entering stage three or about the new bull market is around the corner. But uh you know now you're in the final stage. The second uh big thing big indicator you have to look at is the month in which the uh bare market is ending. It's characterized by the largest monthly FI outflow on record. If it's coupled with the worst month for the Indian currency, the rupee in a long time that's even better. Both these things happened in March 2026. Largest FI outflow both in stock and bond markets and the worst monthly fall for the Indian currency, the rupee in March 2026. You add this indicator as well to the first indicator, severity of price damage. Third indicator, there's something called the volatility index basically which shows the level of fear in the market. In end of March 2026, this VIX this went above 25. It was even higher than the VIX level which all high VIX or highest VIX levels observed in 2022 when Russia invaded Ukraine. Oil prices went up 50% short very sharply shortly in a short span of time and there was a 30% fall in the small cap index in between February and June 202 uh 2022. So the VIX in March 2026 was even higher than what it was uh 4 years ago. So that was another indicator you have to add that there has to be fear in the market for a durable bottom to be made in a bare market. Fourth, you know, you also see that the large cap stocks or the Nifty50 that collapses or falls hard only at the very end of a small cap, midcap, bare market to have a market bottom in place, the large caps have to capitulate the quality large cap stocks. For example, HDFC Bank, COC Bank and you know very other you know high quality large cap stocks they have to fall very hard in January, February, March of 2026 these stocks fell 25 30%. So you know and Nifty50 in March 2026 had the largest monthly fall since covid March 2020. So biggest fall in six years. You add this indicator as well that okay large caps are finally the institutional investors the very large money from o from overseas they panic at the very end small cap midcap is mainly driven by HNI retail money they tend to panic more easily but the institutional guys they will only panic when they see this heavy losses on the currency Indian currency that is when they finally panic at the very end. That is why I mentioned you know I mentioned this after the currency point that you know the currency has to depreciate that is when these foreign guys panic and then they start selling. So the large caps have to fall. This was the fourth indicator fifth indicator most important. So if when the percentage of stocks in the n00 or the BC 500 falls below the 200 day moving average that is when you get a durable market bottom. So when the Nifty 500 falls below the 200 day moving average, — percentage of stocks trading above the 200 day moving average, it this ratio has to be fall below 20%. And when you combine this with the other indicators I mentioned, — I'm confused. Percentage of stocks in Nifty 500 — which are trading above their 200 day moving average has to be below 20%. Which means that 80% or more of the stock of the top 500 stocks of India — should be — have broken their long-term moving averages. — Yeah. And basically you know uh this is they're basically trading at very rock bottom prices. So this is a very durable indicator. In fact this indicator went below 20% in March April 2025 last year also. But because the other condition was other conditions which I mentioned was missing. That is why that was stage one of a bare market. It was not stage three because the other indicators I mentioned were missing. So apart from these five indicators now I'll mention three sentimental indicators. Okay. First sentiment indicator. This is a very popular one. So the Google search trends for the term multibagger in March 2026. The search trend if you just look just do a simple uh search on Google trends uh for the term multibagger. — This went below COVID lows in March 2026. So — investors had lost all hope. No one was interested in the stock market. No one was searching for multibaggers anymore. — Yeah. — Complete depressed bombed out sentiment. Very important. — So these are alternative data points that you look at. — This is sentimental data point. You have to combine all these data points together. This is when you get as a you know when you see start seeing all of them aligning together you know that this is the time to — either raise fresh funds from new or existing investors or know just stay put you actually become excited because you know that okay finally this one and a half year of pain is coming to an end. People who don't know this how the cycles work they they become despondent and you know very fearful but you know if you understand patterns then you start getting excited. Okay, now a new bull run is about to start. You actually get started getting looking you start looking forward. So I mentioned about this sentimental indicator of multi term multibagger search on Google trends. Along with this you'll suddenly notice people retail investors will start suddenly start abusing and blaming the government for this problem on social media. This happened in March 2026. — This happened in 2018 19 bare market also which I've talked about in my second book the making of value investor. Human nature does not change. So again now they're starting to do the same thing. Last month they started blaming the government for the troubles. — But you know you you're accountable and responsible for your success and failures. You mature and grow up as a person when you take full responsibility you know for the outcome. So this is one indicator final sentimental indicator. People will start saying why are we investing in such a market like India? US is the market to invest in. Now you know ind money west trade all these platforms we don't have any collaboration with them. They started talking about you know on social media that you know these through these platforms you should invest in South Korea, Taiwan, US forgetting the fact that the bull in US AI has been going on since — November 2022. It has been already three and a half years have passed. Now you're trying to get in at peak profitability, peak margins, peak valuations. What's going to be the odds are not stacked against you? You want to on the other hand the odd in India was stacked in your favor because one and a half years of price damage has already happened. Stage three has just ended. And how do I know that the bull the uh bare market in India ended on 2nd April specifically on 2nd April I know this listen to this very carefully on 2nd April there was a big gap down big fall in the morning on opening take 9:15 a. m. thousands of stocks down more than 3% but by the end of their trading day most of the stock of the stocks had flipped back into the green. So there was complete exhaustion of sellers exhaustion of selling. This is when you know that okay even the sellers have become tired. Now there's no sellers left. This is you know you have to look for that big reversal day. It's not a day when just market just go up for you have to have a big reversal day — for a durable market bare market bottom to take place. This is how you identify that you're in stage one of a new bull market. And that's why what I feel that you'll see there's a saying that bull markets climb a wall of worry right in bare markets when bare markets going on stocks and markets will not react to you know whatever good news it comes. For example I mentioned last year RBI cut interest rates by 125 basis points in calendar year 2025. Governments made income up to 12 lakhs taxfree. Government reduced GST rates and rationalized again big boost there as well. We had very good monsoons. All the good news was ignored by the market. Why? Because we were in a bare market. Now see what's happening. The war is still not over. We had a very fragile ceasefire. No. Now the US has started blockade of ships going out from Iran. That's even worse news. But you know markets do not react negatively to the same bad news twice. markets respond to the intensity of the bad news and the delta or the rate of change of a bad news unless this war escalates unless anyone goes nuclear from here on even though you'll see you know both the sides engaging clashes if the incremental clashes between US and Iran is not more than what they have already done in the last month and I feel both the countries are not tired of fighting they've already you know done so much damage to each other and uh they are not getting tired the republic of US especially is now not getting tired they are get us out of this war. We didn't want to do anything with this war, right? So, as long as the incremental news flow regarding the war does not get worse from here, I think market will sh you'll see that you know that market is just shugging off all the news which is coming from on the war side. Yeah. — Unless there's some new war which breaks out or China Taiwan is some something happens or some new big negative thing happens — and unless the oil goes up again to 120 130 or more and stays there for a sustained basis. I believe this new bull market has started in India and this is the time when you want to you know allocate smartly as a individual investor and active fun and manager into what you feel is going to be the new sector leaders now — so when you can accurately determine that we are entering a bear what do you want me to do that time like if I can predict it based on what you said what is the action I should take like should I try to time it and pull out the money like how would you advise me — I will tell you what I would do now from Now on I know earlier and now I used to take a cash call but I think going forward in future once I you know get a sense that we are entering stage one of a bare market I would not mind getting my fund into 20 or 30% cash let's say 30% cash I've come into now I'll tell you why this is important for fund managers let's say that the portfolio falls 20% in a bare market okay or one and a half years so 20% of 30% cash call is six you straight away added 6% alpha to your clients right away and everyone earns beta in a bull market shar But al true alpha is generated only when a when you're in a bare market. — That is when basically the you know if you see all the successful fund managers they are the ones who are able to generate alpha or survive bare markets because it's very easy to enter this profession during a bull market. — But the people who really sustain and survive over the long run and thrive in the stock market are ones who can actually survive bare markets. That's why I wrote my second book. The subtitle of the second book is what a bare market taught me about investing. — Got it. So now let's talk about you know the sector rotation strategies that you are talking about you know the strategy that we need to follow in the stage two of the bull market which you're saying we're about to enter right now. So what are the frameworks that I should keep in mind? What are the sectors that I should look at which have strong tailwinds which you have analyzed and which you are personally looking at right now — as if you want to be successful as an investor Sharon you have to make friends with the word new management new industry segment new product vertical new government catalyst there has to be some big catalyst or something new has to be there for a sector to be a bull leader in a new bull market for instance previously You know, prior to one year ago, India was, you know, often, you know, criticized by world leaders for not being very trade friendly. We never used to do bilateral trade deals. But in India, I always tell my, you know, friends and colleagues and investors that India is a country which always autocorrects after every crisis. India is a country, be the Congress government or the BJB government, we have always acted or taken hard reform steps only during times of crisis. Last year when Donald Trump imposed the 50% tariff on India, 25% trade tariff plus 25% penal tariff for importing oil from Russia. It was effectively a trade embargo. We could not export to the largest consumer market in the world because exports collapsed. Dollars start stopped coming into the country. Rupees started depreciating. It was a cris basically crisis that spurred the Indian government into action and we have signed since then we have signed a plethora of bilateral trade deals with countries like UK, Oman, New Zealand. Recently the mother of all trade deals with European Union after so many decades. Finally this happened. We also signed a very good trade deal with America as well. This is the first thing which I just mentioned to you new. This is new something very big and new. Now you want to look for where does India compared to Vietnam, Philippines, Bangladesh, where do we actually have a advantage over these countries. Okay, we cannot compete with China in you know uh low skilled labor that's very difficult. But in industries where very highly skilled labor is required for example prec precision engineering exports you know this is where I think you know we are going to find the next set of market leaders for I'll give you a simple example there are auto o there are auto companies and in particular auto ancillary companies if you can make an auto ancillary you can basically easily use your existing skill to venture into uh making parts for defense and aerospace industry as well. So precision engineering exports aerospace you know after many decades Airbus and Boeing the two dominant you know air this company companies now they are basically finally starting to outsource to India finally after a long time and there are just a few select handful of companies in India which have the capabilities of being a tier one or tier 2 supplier to these two big giants. I think aerospace precision engineering exports driven by this FDA signed this is this will do very well. Along with this

something very interesting is happening. I mentioned the word new to you. AI is new relatively new right AI is compressing the timeline for clin clinical trials in pharmaceutical industry. Doug the timeline for drug discovery is getting compressed very sharply very it's becoming shorter. So the uh challenge now is not drug discovery. It's having about having the necessary compliant manufacturing capability to manufacture these drugs for these large big pharma companies of the western world in India again has got a big advantage. We have got this industry again requires very highly skilled labor and scientists and there are certain CDMO true CDMMO companies one contract development and manufacturing organization companies one which works with innovator pharma companies not genetics not the low margin commodity generic companies these are companies which are working with innovator large pharma companies of the western world this is again an area which I think will lead over the next few years in India so innovator CDMO auto ancillaries especially those with poss No capabilities for going into defense and aerospace industry separately and innovator pharma I think these industries will do know pretty well in addition to this power related ancill ancillaries this is a segment I'm very bullish on because this is the single biggest bottleneck today in AI power energy — so if you can find companies within the data center value chain and power industry value chain which can know

solve this problem that is also is going to be a bull market leader in my view and you can how do you know that by how I was able to shortlist all these sectors these were the very sectors whose leading companies and strong companies their stock prices were actually rising in March 2026 when there was a big crash in March 2026 these stocks were actually rising or they were flat that is but just you don't just buy a stock because you see uh the prices not falling that is where the actual grunt work the hard work begins for active investors like us then we open the latest annual report, the last four you know conference call transcripts, the last you know few presentations, press releases, look at the past track record on uh you know tools like screener. in or the juror finance. This is where the actual work actually begins. Initial screening part is easy — but then you start going deep into each company and then investing in those companies where you have relatively good valuation entry point and which falls within your circle of competence. — Okay. So um essentially your sector allocation is mostly towards new age businesses which are going to benefit from the macroeconomic changes that's happening in the country. So you're not in financials, not in consumption, not in automobiles. — Um — automobiles we are playing it through auto ancillaries. — Huh. U healthcare you mentioned through — innovator CDMO. — Huh. Uh what about IT? All of these sectors you don't invest in. — Let me talk about it right now. So for last 25 years since 2000, Indian IT services has primarily been be been a headcount driven model. You hire more people earn more revenue. Simple. What is AI all about? Removing headcount. Now basically a single person who is good in AI can do the work of 20 more people. 20 people using AI tool, right? — TCS had still reported good um revenue recently even though AI — in fact in the most recent in Q4 of FI26 TCS for the first time since its listing in 2004 reported year on year negative constant currency growth in dollar terms for the first time in 22 years. — Okay, in dollar terms it is negative. — That is the key metric you want to look at the dollar constant currency revenue growth year on year. For the first time in 22 years, Sharon TCS, the bell weather of Indian it has reported a negative yearon-year growth. Look at what has happened to the Indian currency versus the euro. — While the Indian currency fell 12% against the US dollar over the last 12 months, do you know how much the Indian currency has fallen versus the euro in the last 12 months? — About 25%. — 25%. So if you are a FI or an institution based in Europe, you will not look at India again for many years. You're out. — Yeah. — Because 1/4 of your capital just got destroyed just by currency uh crash in India. So now going to Europe will be very expensive for us. — It's going to be very expensive. That's why you know you should know apart from INR investment. So you should try to also invest in a hard asset or a hard currency for example a USD uh based investment or something like gold which you know basically gives you the benefit of rupee depreciation every year or you can you know through money invested all these different platforms you can also look at how you can even make USD investments. It's very important to preserve your purchasing power. What about new age internet internet commerce companies, internet marketplace companies like know Zomato, Swiggy, urban company? These guys have no competition. Huge barriers to entry. Pricing power you don't look at these companies. — You mentioned blinket there again you know so much competition is coming in. Amazon is entering the space. Flipkart is entering the space again. — It's basically something there's a concept called capital cycle in the stock market. Whenever any industry you know starts attracting a large amount of capital you can expect the future know profitability of the incumbents and existing players to get impacted that is when you basically want need to be cautious or take an exit. So basically I try to avoid competition — the Warren Buffett again has said that the secret to life is weak competition. So this is something which I like to focus on the lesser the competition the better. — In investing you know you do not you know get points for degrees of difficulty or complexity. Investing is all about you know trying to maximize your returns over time with the lowest amount of risk and you know you don't have to you know this is not like the Olympics right know you have to just you know try to do something very difficult you just want to go for the easy route let the other people let you know people in highly competitive industries fight with each other you while you make money in less competitive industries — so you mentioned about the need of investing in the US but you also said that the AI boom has been going on for a while now the bull market of US has been going on for 2 3 years and now there's a lot of interest from Indian investors to invest in you know US — recency bias yeah — recency bias so would you say that is a wrong thing to do right now should we sit on cash with our US portfolios right now you think it's too much heated up — no I'll give you data point it should be data driven at all times so anthropic you know one of the you know frontier uh you know models there basically just in the month of uh March 2026 their annual revenue run rate from a few months ago it was $9 billion annually. It is now they've hit an AR R of 30 billion which means — that the enterprise AI use case is now clearly getting established. We are just on the verge of the exponential takeoff. You know as enterprise AI adoption scales up exponentially from here there are certain you know pockets within the value chain of AI you know where you basically want to now focus your efforts on. So no just don't focus on the magnificent 7 you know you have to basically see where the indust is industry is evolving towards and which are going to be the new beneficiaries from this — during this exponential you know adoption phase — earlier you know basically the first phase was driven by compute Nvidia required a lot of compute to train these models Nvidia did very well — now the you know uh the — hyperscalers are basically diversifying there's no and they're also backward integrating Google through their TPUs or Amazon through tr uh you know their

in-house chips basically now they are trying to diversify away from Nvidia. — Yeah. — So you know that is not what you want to focus on. You want to now focus on which are going to be the new you know bene beneficiaries of this new inference cycle. Inference basically you know basically is that now you ask AI question and basically it just you know it has to recall everything and give you the answer back. So you know now look at certain pockets within the memory chain for example maybe they'll know they will do very well from here. Agentic AI you know took off a few months ago and because of that there's suddenly an explosion in CPU demand. — Yeah. — So AMD and Intel these are not talk recommendations. I don't have positions here but they do may do very well from here because they are predominantly in CPUs AMD and Intel. — In fact Intel recently oh just as a it's very close to its stock price which was seen last in year 2000. So if any company's stock price breaks a 26 year high after a long time it doesn't stop at just 10 15% it goes vertical after that if the fundamentals improve. So these are stocks to look at. — I think Goautam I'm your fan now. I think I have not learned so much in a span of one and a half hour. I think Gotham before I let you go I want to ask you a quick questionnaire on our rapid fire round. So are you ready? — Sure let's go for it. Okay, question number one. If you had to put all your money in just one sector right now, which one would it be? — Power ancillary. — One asset class you would completely avoid right now. — Um, one asset class I would complete any asset class which is over overblown. For if you'd ask me this question in January, I would have mentioned gold and silver because there was complete euphoria. Any place where there is euphoria about that asset class. — So now gold and silver is still okay or no? I think in the long run there's a you know a trend of deep dollarization. So gold may still do well over time but silver is very volatile. Yeah — that is something I would avoid. — Okay. Um one global market apart from US which retail investors should look at. — You can say nothing also. — I would say Europe and within Europe again not all the you know not the Europe ETF but Europe is rearming itself just like Canada is doing the same. So European defense sector is something which you can definitely look at. — Okay. European defense sector — because Europe because know NATO is in jeopardy and if NATO collapses then Europe will have to spend hundreds of billions of dollars on you know improving their defense capability. — Uh tell me the most underrated thing in finance that most people miss like I'm talking about normal retail investors not experts. that you can still, you know, you can buy an expensive looking stock and still make money. It all depends on which stage of the company life cycle the company is in. If it's in the early growth stage, even if you pay a high P multiple, you'll still make a lot of money. But if you buy a high P stock in the decline phase of an of a company, then you will lose money. — Tell me three favorite books of yours which you would recommend every finance enthusiast to learn from today. — The first book I would recommend is poor Charlie's Almanac. It's one of the best books on multi-disiplinary thinking which contains Charlie Munger's thoughts. And the second book I would recommend is seeking uh wisdom by Peter Bevelin. One of the best books again on multi-disiplinary thinking. The third book I would recommend is called All I Want to Know Is Where I'm Going to Die So I'll Never Go There. It's again by Peter Bevelin. It's the best book on the topic of inversion. Inversion basically means that once you know what to avoid in life, business, relationships, and investing, then you automatically arrive at what you need to do, what you should do. And tell me a book that changed the way you thought about life, not just about investing, life in general. — Die with zero by Bill Perkins. It's the best book, one of the best books I've read in a long time. In fact, the lesson from that book was Sharon that — life has got an expiry date. — Yeah. — But enjoyment in life should never have an expiry date. So once you make it in life, then you should definitely, you know, pursue your passions and live life to the fullest. Don't pursue, you know, uh, delayed gratification endlessly. M — you know you have to you know because your time on this planet and this world is limited right — so you know you should just try to make yourself as happy as possible — what is the highest returns you've made in a single year — in a personal capacity in 2017 I remember in my personal account I was up more than 100% so that was the biggest year — and most amount of money you've lost in a single year — that was in the year 2018 it was a stock called Bundan Bank I remember that stock it was a large you know very big allocation and uh you know they had a big you know uh crisis in their asset quality because of problems in Assam and best Bengal so I lost a lot of money in that stock — like can you talk about percentage dip — I remember 60% I sold it at 60% down from the top price high price — you would call that as the biggest mistake finance mistake — biggest yes for sure because there was a reason for that there's something called lacking bias — there was a book called Bundan the making of a bank by Tamil Bandhabad in which Chandra Shagar gosh the founder of pandan banks story was written I got very emotionally attached to the founder without understanding that you have to separate the stock and the from you know I know and the promoter from the economics of the business. You have to remove your liking for the promoter from the economics of the business. If the economics of the business is getting disrupted — you should take a dispassionate exit. So you have to have this — approach of you know not getting too attached to you know stocks. Don't get married to stocks. — Perfect. Gotham, thank you so much for coming here and explaining to me like I'm five about how the world works, how investing works, how finance works, and how you importantly look at the future of where the alphas are going to be created. Thank you so much for patiently sitting and explaining to me and all the people who have been watching until the end and uh I look forward to talking to

you once again and I'm sure I'll keep calling you up for any doubts and questions that I have. If you have time, please pick up my phone. — This was a pleasure, Sharon. Thank you so much for having me. — Thank you so much, guys. Thank you so much for watching till the end. Please feel free to drop any questions in the comment section which you feel like I missed out on asking. That will help me become better at what I do. And please feel free to drop any guest recommendations down below. Uh so that I can try bringing them on the next one. On that note, guys, I'll see you in the next one. Before you go guys, if this video gave you even one insight and made you feel differently about money, don't just keep it to yourself. Share it with your friends or family member who could use it too. And if it has sparked a new thought or even made you disagree with me, drop a comment below and tell me why. Your critique helps me make this conversation sharper and more useful for you. As long as you have me subscribed, I'll make sure that you walk away with one new thing every Wednesday and Saturday.