What if you invest in companies that give the worst returns?

Can you beat the markets with a Loser Portfolio?

Valuation guru Aswath Damodaran says it works in the US.

Is it possible with Indian stocks? Let’s find out. A 🧵 We did a simple exercise to put this theory to the test.

Every year, we picked the worst-hit stocks (by price decline) and invested an equal amount in each.

The idea was simple: We wanted to check if big losers bounce back.

Nifty 500 crashed 3.42% today.

But this isn’t new.

Markets have tanked as much as 13% in a day.

And they’ve always bounced back — sometimes in less than a month.

But here’s the interesting part: SIPs recover even faster. A🧵 We analysed past market crashes using the Nifty 500 index.

For each crash, we looked at:

1. How long the market took to recover
2. How long an SIP took to recover

We assumed a monthly SIP of ₹5,000 starting 3 years before the crash.

The idea was to check how quickly the SIP recouped its losses.

233 stocks from BSE 500 have fallen over 20% since Sept 2024.

How do you pick the best quality stocks trading at reasonable valuations after correction?

Here’s a 9-step framework to separate gems from traps. A 🧵

Using this, we got a list of 15 stocks (covered in tweet 14). What is this framework?

We tested companies on 9 metrics related to profitability, leverage, liquidity, and efficiency. (See image)

Now, this isn’t just any checklist.

Known as Piotroski F-Score, it is a proven framework by Prof. Joseph Piotroski.

Your HR will soon ask: Old Regime or New Regime?

After Budget 2025, the New Regime looks like the obvious choice.

However, for some taxpayers, the Old Regime can still make sense.

How will you decide? Let’s break it down. 🧵 Let’s start with how both these tax regimes work.

Old Regime

It allows you to lower your taxable income through various deductions (PPF, ELSS, NPS, etc.) and exemptions (HRA, LTA, etc).

Let’s understand this with an example.

The Nifty Smallcap 250 Index fell 12.64% in February.

But your SIP returns (XIRR) might show a shocking -80%.

Does that mean your ₹10,000 SIP investment is now worth just ₹2,000?

No!

Then why does XIRR show such a big drop? Let’s break it down. 🧵 In SIPs, each instalment is invested on a different date.

So, some investments get more time to grow, and some get relatively less time.

Since the time of investment varies, simple return calculations don’t give an accurate picture.

That’s where XIRR comes in.

Last 1-year returns:

Nifty Smallcap 250: 6.5%
Tata Small Cap: 15%

This outperformance isn’t a one-off.

The fund has consistently beaten the index as well as its category average.

Its biggest strength? It protects your returns when markets fall.

A 🧵 on its investment strategy. 1. Focus on minimising losses

Corrections in small caps can be brutal. But this fund has handled them effectively.

Since its inception, Nifty Smallcap 250 has had 29 negative months. Tata Small Cap outperformed in 26.

In 10 months, when the index fell more than 5%, it did better in 9.

A simple hack before Mar 31 can help you save tax on the gains you made from stocks and equity funds.

Here’s what you can do:

- Sell your investments
- Book profits & losses
- Repurchase immediately

This is called ‘Tax Harvesting’. Let’s see how it works.

A 🧵 A few basics before we jump to tax harvesting strategy

Your profits from equities are divided into two buckets:

1. Short term: If you sell within one year (of purchase)
2. Long-term: If you sell after one year

How can you make the best returns, taking the least possible risk?

Nobel Prize winner Harry Markowitz spent his life researching this 👆.

His study led to Modern Portfolio Theory, which revolutionised investing.

Here’s a simplified version that every investor must know.

A 🧵 First, let’s understand Markowitz’s principles.

He showed you can earn better returns by taking lower risks if you diversify.

But is that possible?

Equity can grow at 12%-14%. Debt offers just 6%-8% returns.

Can a low-return asset make your portfolio more efficient?

IT’S POSSIBLE! 👇

Funds that usually fall less during corrections tend to do well over the long term.

Parag Parikh Flexi Cap is a good example of this.

But how do you pick funds like PPFAS Flexi Cap in other categories?

Here’s the framework and a list of 8 similar funds across categories.

A🧵 Before we share the names (it’s in tweet 10), let's quickly examine how we selected them.

We looked at 5 popular fund categories.

(1) Multi Cap, (2) Large & Mid Cap, (3) Flexi Cap, (4) Mid Cap and (5) Small Cap.

We filtered them in 3 simple steps.

Have you started an SIP recently and feel underwhelmed by the returns?

There’s something called the 8-4-3 SIP rule.

It explains how returns truly work over time.

Let’s understand this in detail. 👇 🧵 8-4-3 is a compounding rule.

First 8 years – Returns are usually modest. This period can test your patience.

Next 4 years – Your corpus nearly doubles.

Next 3 years – Compounding accelerates.

Let’s understand this with an example.

Are markets still overvalued?

Sensex is down 13.6% since it hit an all-time high in Sep 2024.

The pain is worse in mid and small caps:
BSE Midcap: -21.4%
BSE Smallcap: -24.2%

Despite such a steep correction, markets are still not fairly valued, as per long-term data.

A🧵 To answer that, we'll analyse 4 key valuation metrics:

1. Price-to-Book (P/B) Ratio
2. Cyclically Adjusted P/E (CAPE) Ratio
3. Market Cap to GDP Ratio
4. Bond Equity Earnings Yield (BEER) Ratio

Let’s start.

Mid-cap & small-cap stocks have seen massive corrections.

Will PPFAS MF use this opportunity to increase allocation in them?

In a recent call, the fund house addressed this question.

It also shared many more insights, which can help you in your investing journey.

A 🧵 Will PPFAS Flexi Cap increase mid- and small-cap exposure now?

The fund house is exploring opportunities but is still cautious.

Since 2017, they’ve kept mid- and small-cap exposure below 20%.

By Dec 2024, small-cap allocation had fallen to just 2.81%.

Market realities are changing.

What are the trends you should watch out for?

A 🧵 on 5 trends that smart investors are tracking (that you might be missing). 👇 1. Small caps appear to be in the worst shape

Markets have been weak, but the real pain is in small-cap stocks.

Check how different indices have fallen from their peak in Sep 2024:

Nifty 100: 17.4%

Nifty Smallcap 250: 26.14%

The answer to this is in their earnings.

Many equity schemes of Invesco MF (@invescoindia) gave stellar returns in 2024.

-Invesco Contra: 31.37% vs Cat Avg: 21.97%

-Invesco Flexi Cap: 36.51% vs 21.99%

-Invesco Focused: 44.95 vs 21.00%

What has worked for them?

Are they using some high-risk strategies? A 🧵 1. Growth Investing

Fund managers of Invesco MF don’t mind high valuations if the growth potential is strong. This is clear from the high PE ratio in their schemes.

As of Dec 2024, all Invesco equity funds had P/Es above 60, while P/Es of key indices ranged between 20-40.

Imagine having a fund that makes returns amid both rising and falling markets.

This is possible through long-short strategies, which mutual funds don’t offer.

So, SEBI is introducing Specialized Investment Funds (SIFs) for retail investors.

How will they work? A 🧵 What Makes SIFs Special?

Like mutual funds help you ride on the stock-picking skills of fund managers, SIFs let you leverage their expertise in derivatives trading.

With long-short strategies, SIFs will aim to profit in both rising and falling markets.

Markets are bleeding.

Nifty 100 is down 15.35% from its peak in September 2024.

The fall in mid-cap and small-cap indices is even worse.

But even in this sea of red, a few stocks have stayed afloat.

Which are these companies? A thread. 🧵 Let’s start with large-cap stocks. 

The Nifty 100 index touched its peak on Sep 26, 2024. 

Since then, 94 out of 100 large-cap stocks have delivered negative returns.

Only six are in the green, with Bajaj Finance leading the pack.

See the other 5 stocks in the table.

ICICI Pru Bluechip Fund has beaten the Nifty 100 across different periods.

It is also the biggest large-cap fund.

Lately, it has gained traction amid valuation concerns in mid-cap & small-cap stocks.

So, we reviewed its performance & strategies. A 🧵 In this analysis, we will cover 3 key aspects:

-Performance (SIP, calendar year, and rolling returns)
-Ability to protect losses during tough times
-Stand-out investment strategies

Let’s start. 👇

India’s 64-year-old Income Tax law is getting a complete makeover.

A new Bill promises a simpler and more modern tax system.

There are 6 big changes. Let’s have a look. 🧵👇 Before discussing the changes, let’s first talk about what has NOT changed.

The old tax regime is NOT being abolished.

You can still choose between the old & new regimes.
And no new taxes are being introduced.

The bill is about simplification, not increasing your tax burden.

Hexaware Technologies is making a comeback to the Indian stock markets with a massive ₹8,750 crore IPO.

This is the biggest IT services listing since TCS in 2004.

Should you consider subscribing?

Let’s find out🧵 Hexaware was delisted in 2020 by its previous owner, Baring PE Asia.

A year later, Carlyle Group acquired the company.

Now, Carlyle is taking it public again.

Stock splits and bonus issues both increase the number of shares you own.

But why does a company choose one over the other?

And what does it mean for investors?

We break it down. A🧵 Let’s start with stock splits.

A stock split is when a company divides its existing shares into smaller units.

Mathematically, this should lower the price of each share but keep the total value of your holdings unchanged.

The RBI just slashed the repo rate by 25 bps to 6.25%—the first rate cut in nearly 5 years.

But buried in the announcement were 3 important updates no one is talking about.

Let’s break them down. 🧵👇 1. RBI’S BOND TRADING PLATFORM MADE ACCESSIBLE

The RBI and the government have been trying to expand India’s bond market for years.

Both have taken several measures to increase retail investor participation.