Author Archives: ZerotoBillion

We woke up this morning with an innocuous headline about the Brazilian elections. The incumbent leader Lula had defeated his pro-American opponent Bolsonaro to retain power for a record fourth term. What followed was pure chaos- the Brazilian Real fell 12% against the Dollars and the headline Ibovespa index plunged 17% at the open and is still down 15% as I write this piece. It was a means to convey to the Brazilian public that if they choose to elect an anti-American person as their leader, their economy will face the brunt.

 To my mind, this event has closed all doors regarding any potential tax cut for the FII and would rather usher in tighter capital controls and possible higher taxation. Here is why I think so:

The Americans, especially Trump had openly supported the opposition candidate in the Brazilian elections and there was a strong buzz in the US media regarding his victory. The Brazilian market was also up massively in the lead up to the elections. So the FII money conveyed what it wanted the public to vote for and since the outcome was against their wishes, the hot money took the first flight out of Sao Paulo. If this is not economic colonization, what is! Look around the world and a pattern emerges. The Indonesian rupiah and its market have suffered massively because of a potential MSCI downgrade. The US treasury secretary has openly advocated economic warfare to get countries to toe their line regarding the Iran and Ukraine war. Don’t you think that New Delhi understands this!

I have earlier felt and now am increasingly convinced that the FII selling in Indian markets is strategic. It’s a way of conveying their preferences for a particular set of political setup and policies. Add this to the consistent anti-regime protests funded by the usual deep state actors. As a student of geopolitics, it is obvious to my mind that these two are interconnected and the relentless selling will continue to create an environment of gloom and doom amongst the larger public.

Vikram Sood, the former RAW chief in his brilliant book Great Power Games has elaborated in detail that in the current world order when the US is no longer the paramount hegemon, they are wary of a rising India. Their officials have on record stated that the US does not want to repeat the same mistake with India as they did by facilitating the rise of China. It is no coincidence that Brazil & South Africa are also important members of the BRICS which is the most likely challenger to the US led world order. BRICS has also talked about a potential currency of its own to challenge the Dollar and thus, the repercussions. It cannot be a mere coincidence that whichever country has talked of getting off the dollar has found its leader either killed or kidnapped- Gaddafi and Maduro being the most prominent examples.

It is in this backdrop that I state that any hopes of a tax cut for the FII is misplaced and what we should brace ourselves for are tighter capital controls and higher taxation. Let me illustrate through two recent incidents. 

John Gray of Blackstone publicly praised India for being an ultra-liquid market wherein they can easily list their holdings and take money out and the FM talked about how excessive liquidity is allowing the FII to take money out. In such a scenario, it is obvious  that any policy maker sitting in New Delhi must be very worried with the events in Brazil and will do everything possible to avoid such an event in our own markets. If I am able to connect the dots, don’t you think that the PMO and the Finance Ministry would already have come to the same conclusion. Imagine the kind of chaos if our nifty falls 15% intraday or if rupee falls 5%. It also explains the especial emphasis the RBI has placed on a particular level of the Rupee and why there is zero chance of a tax cut and that too for the FII.

When it has been deduced that the FII selling is strategic, will a tax cut not aid the outflow! If they are happy paying 12.5% to take money home, they will dance their way out if you reduce the rate. Since the government and the RBI has already taken a number of steps to stem the flow, it is only logical that if the selling continues from here, a higher LTCG is coming because if we can’t stop the FII, we can at least retain part of the earnings in India. Also, for reasons of fiscal prudence, it is natural that the government does not have the wherewithal to reduce the STT.

To those clamouring for an FII tax cut, I would politely remind them that the policies aren’t made just because our portfolios are not performing. There is a larger world away from Dalal Street. As a rational market practitioner and a proud nationalist, we must always try to advocate policies which are in national interest!

Yesterday, the AMFI published its monthly report for the month of September 2026, and one thing stood out which also drew a lot of media attention- the cumulative AUM under Small Cap and Mid Cap Mutual Fund Schemes is now respectively greater than the AUM under Large Cap Funds. Also, the monthly flow into such schemes is almost 5-10x larger than the money deployed by investors in Large Cap Funds.

Couple this with recent commentary by leading players which in effect states that the large cap indices, namely Nifty 50 or Nifty 100 may not be the true reflection of Indian stock markets and the real economy and thus, stock market performance is to be found in smaller companies. This also gets reflected in the dichotomy in stock performance by these indices- while Nifty 50 is down 12-13% from its all-timehighs, small and mid-cap indices are at near all-time highs and have also made fresh highs this year.

Thus, the new Gospel in the market is that one should forget large caps and buy small companies. We beg to differ!

To our understanding, this view is not a beacon of hope but a cry in desperation. The past two years have delivered zero to negative returns across categories and the industry realizes that the retailer religiously buying through the SIP may be losing patience. A widely referred meme on social media states that the five-year SIP returns in Nifty 50 are now less than the 5 year FD. 

This is the ultimate challenge before the industry. SIP as a product have been popularized as a means of buying into future prosperity over the past 6-7 years and delivered decent returns until 2024-25 because of extreme low base during Covid years. Come 2026, with the interest rates inching upwards and consistent selling by the FII, the gospel of equities being the only asset class worth investing is staring at an uncertain future.

Large cap companies have historically had higher float and greater FII holdings and thus are more susceptible to relentless FII selling. Smaller companies, on the other hand are either too small for a meaningful FII holding or thanks to higher promoter holding has lower float which means small but sustained buying can deliver higher prices and thus, better stock performance. 

Beginning this year, we began to realize that our markets are heading towards a downtrend for reasons listed out in our previous blogs. Increasingly, we have stronger conviction that the mid and small cap stocks are now in a territory where they will have to undergo a sharp price and a sustained time correction because valuations don’t grow to sky. The best performing stocks in favored sectors are now trading at valuations which does not make sense to us and are reminiscent of the valuations some of the then loved and now hated large caps were trading in 2018-19 period. The gospel then was to buy quality at any price and those who did have paid a heavy price and are now struggling to make sense of 5 to 7 years of zero returns. 

Why we believe that the smaller companies may not be making a lot of returns from here are multi fold:

1. The Cost of Capital is inching upwards, globally and we have been repeating this ad nauseum for almost 9 months now. The RBI did raise rates in October and that led to Indian 10Y yields at closer to 7.4% as we speak. The last time our yields were at these levels, the repo rate was 6.5%, both in 2022-23 and 2018-19. In the prevailing global scenario, we believe that the terminal rates in current rate hiking scenario will be closer to 7% over the next 2 years and this isn’t a one-off hike. We also believe that the inflation across the world will be sticky and will not just vanish overnight, doesn’t matter what the US Treasury Secretary says.

The RBI has also come out all guns blazing to defend rupee beyond the 97 level to a Dollar while also trying to draw excess liquidity from the system, thus, raising the cost of borrowing which translates into higher bond yields. If it doesn’t do that, inflation will be a natural outcome. 

2. Any supporter of the current regime will understand that the economic policy of this government is fixated on lower inflation. The BJP famously lost an election on onion prices in 1998 and since then, they are extremely wary of higher prices. So, at no point, will the finance ministry allow inflation to go beyond a certain level and the only way out is to keep liquidity conditions tight. The government, as Sanjeev Sanyal tweeted today is happy with 7% growth and 5-6% inflation rather than attempting 8% growth with 10% inflation. 

3. Fiscal Prudence is also a hallmark of this regime. With major state elections around the corner, it is pragmatic to believe that there will be announcement of usual vote-catching schemes and to balance the budget, government capex will most likely take a hit. We have heard the ministers complaining about the higher urea prices globally and the subsidies the government is bearing. In no logical world, this government will keep up with the high capex figures lest it falls foul of fiscal prudence! This is also the reason why we do not subscribe to the idea of a LTCG/STT cut any time soon. If at all this happens, it will happen closer to the 2029 elections rather than in 2027.

4. Many smaller companies trading at extremely high valuations are a direct beneficiary of higher government capex and have large order books. Those who have been in this game long enough will appreciate that order books can shrink overnight on one policy decision and the multiple contraction which follows it is generally brutal. We recently have had some policy related moves in the Insurance space, and the market wasn’t forgiving at all! 

5. Other companies which are currently favored have either the promoter selling equity or large QIPs being undertaken. In either way, excess supply will at some stage flood the markets and with numerous fresh issues and lock-in shares hitting the markets every month, it is only a matter of time that we see the stock returns disappoint investors.

To sum up:

Whenever something is a part of the consensus and making money feels easy, its time to be cautious. A couple of years ago, unlisted shares were a darling of the investors and when the IPO happened, a lot of disappointment followed. Many investors who bought in with the expectation of strong listing gains found that they are now sitting with 20-30% unrealized losses and a lock-in of a few months! Similarly, the PSU basket of 2021 has gone out of favor today along with the erstwhile quality stocks. 

We hold the belief that the Indian stock market, especially the mid and small cap part will see diminished returns over the next three-to-five-year period and the current New Gospel will also fade away, sooner rather than later!

 

Disclosure:

Caelis Ventures Private Limited is a SEBI-registered Portfolio Manager vide Registration No. INP000010362, under the SEBI (Portfolio Managers) Regulations, 2020.

 

 

There are two types of people in this world right now. One, who look at the US equity markets and think that things are still strong and will turn out to be okay and two, the ones who have slowly come to a realisation that all bets are off in the global economy and its only a matter of time before we hit the iceberg and drown collectively.  If you’ve been reading this blog then you would appreciate that we were one of the very first ones to sound a note of caution even when the US equity markets have made us look like Cassandras all through this year!

Let us examine the facts as have taken place this year. The US began to bomb Iran on February 28, 2026 and claimed to defeat Iran conclusively on the same date. In a week or so, Iran closed the Strait of Hormuz which has remained so despite Trump claiming numerously that it will open, one way or the other and Iran was begging for a deal. So a lot of people looked at the crude oil futures prices and If they fell, believed that Trump was playing some 5-dimensional chess wherein everything was ultimately controlled by the US and eventually, equities should rally. 

They believed that if oil prices rose, it will benefit the US producers and help its economy and if it fell, Trump was right all along. These people and there are a large number of supposed market experts, took their cues from the US equity markets and as long as the markets went up, everything was ultimately controlled by the US. If the US said they will open the strait, they believed it without noticing that no ships crossed through ; when the US announced a deal to stop 10 year yields crossing 4.5%, they said look, TACO trade works; when the US announced taking over of Venezuelan oil, they said oh the prices will crash without realising that it will take close to a decade for any meaningful supply and when Trump said Fed should cut interest rates, they believed it because, well US markets rallied.

Cut to today- the war had dragged on for over 7 months, brent trading over $109 as we speak, US diesel prices are at the highest in history, European natural gas prices have gone up 3x in a year, US 10 year yields are at 4.99% with multiple countries showing historic levels on their yield curves, since the US equity markets are still at all time high, the same group of people now claim that Iran is meddling in the US mid-term elections, a higher interest rate is good for stocks!

One more narrative which is doing rounds is that Scott Bessent, the US treasury secretary will be able to control the yields, the Japanese yen and oil prices in a manner which suits the US! They also claimed that Druckenmiller wrote his famous WSJ piece criticising Bessent because, well, now they can team up and control the markets and what not. So if interest rates are rising, it will benefit the US to pay off its debt by devaluation!!

It is quite astonishing that people on Twitter are openly aware of the largest market manipulation scheme in the history of mankind and are able to bet openly! To my mind, this is intellectually lazy and stupid to be honest. 

The facts are as follows:

1.      The Strait of Hormuz and now Bab-al-Mandab is under Iranian control and the US has suffered embarrassing beating from the Iranians. Every base of theirs has been bombed and deserted and every ally which depended on them- the Saudis, Qataris, Emiratis have looked for alternatives to protect their citizens. It wasn’t for nothing that the Irani President met UAE deputy PM in New Delhi during the BRICS summit. As far as the 5D chess is concerned, its plain bullshit. Everything the US claimed has either been a lie or a farce, at times comical. The Japanese might be pliant about not dumping the treasuries, but it wasn’t for nothing that Xi travelled to Delhi to meet Modi ji and Putin. The era of US hegemony is largely over and in a couple of decades, the world will be a different place. I’d request you to please re-read Great Power Games by Vikram Sood Sir.

2.     The cost of capital has risen irreversibly across the western world. You name the country- US, UK, Germany, France, Italy, Spain, Japan etc- all part of the supposed developed world and find that their borrowing rates across the tenure are either historically high or at least highest in 15-20 years. The uninterrupted bond bull market in the west and especially the US which began in the 1982-83 is now coming to an end and it will not be pretty either.

3.     The oil futures prices are not yet a reflection of the real prices of the refined products- diesel, petrol, etc. Diesel prices in parts of the US are now above $8 a gallon while nationally, they are at the highest in the history. If this doesn’t cause inflation, then nothing ever will. If high cost of capital doesn’t hurt the economy, I don’t know what will.

4.     At no point, inflation in the Western world and even globally will be transient. I have been maintaining for about six months that the US Fed will have to raise interest rates and RBI will follow eventually. ECB has raised rates twice this year while BoJ is expected to raise again on 17^th. BoE will have no other option but to follow and the global rates will be structurally higher in coming months than what we have been accustomed to see them at. The Indian WPI just came in close to 10% today and in a couple of months, the CPI will reflect the same.

5.     The world will be forced to replenish refill of its oil reserves and unless there is a severe recession in the meantime, it will have to keep buying oil at higher prices. The loony-toon world of Bessent being able to bring oil at $40 will not happen unless of course, the US goes into a severe recession at which point, it wont matter if the oil prices are at $40!

6.     The AI Titanic will eventually find its Iceberg sooner rather than later and it wont be a surprise if we all wake up one morning to a 1987 type of an event after which everyone subscribing to the 5D chess vision suddenly reads the above 5 points. For that to happen, the US equity markets will have to react violently downwards. Everything else will be clear from then on.

In my opinion, the US equity markets will not give returns anywhere close to what they have delivered in the past 10 years and in 3-5 years from now, more people will cry about global investing than they are about buying Indian Nifty. Similarly, in our markets, there is absolutely no reason why the flush of IPOs will be absorbed perennially and we will hit a phase where IPO becomes a dirty word. The small-mid and SME space will have to undergo catharsis in order to be valuable again.

 We,  at Caelis, are pretty confident that the whole narrative that since the Indian markets have not performed for the past two years so that they will breakout on the way up is going to be incorrect. The markets, especially the broader indices have to first meaningfully correct on the way down before any reasonable upside! When that correction happens, not many will either have the money or the courage to invest and that’s exactly what we aspire to do- buy when there will be blood on the streets for sure it will be a bloody time!

Disclosure:

Caelis Ventures Private Limited is a SEBI-registered Portfolio Manager vide Registration No. INP000010362, under the SEBI (Portfolio Managers) Regulations, 2020.

 

I am sure we are collectively experiencing Deja-vu all over again. The US had been attacking Iran daily to which Iran and now the Houthis have responded in kind; the conflict which was famously brokered by our Western enemy and signed with not so much of fanfare in June has come to a nought. Oil was trading above $100 a barrel as on Friday and the world now has learnt a new geographical location- Bab-al-Mandab strait!

We have maintained since the beginning of this war that the actual reason for conflict does not lie in either Jerusalem or in Tehran but in Washington & Beijing. The US is not the predominant hegemonic power in the world anymore and the global order has shifted considerably over the past four months. The world did not run out of oil but now stare at dwindling reserves, higher interest rates globally and any talks of inflation being transitory has vanished. The AI trade has possibly been stalled and possibly the top was made sometime in the last month.

This year the best trade has been to not do anything in Indian markets. Cash and cash-like instruments have outperformed every possible instrument with zero volatility and anyone who was bullish on anything else- gold, silver, bitcoin, equities have had such gut-wrenching moments that not many would have had the courage to hold on or to add to their positions over the past seven months. The Indian equities have remained in a narrow range with a see-saw pattern depending on what the FII does based on what happens elsewhere.

If you have followed this pattern carefully, our markets are not decoupled at all. Or else, the FII would have lined up at our doorsteps by now as the KOSPI tumbled close to 30% in last one month. I will repeat this at the risk of sounding like a broken tape- India markets will not be decoupled on the way down if there is a major risk-off event globally. In plain English, if the US markets go down, so will we.

This year, a large part of my study was devoted to figure out which historical pattern has emerged as we stare at the mega AI build up globally and has the unprecedented bull market finally made a mega top. In this journey, we identified similarities with the Dot-com era of 1999-2000 as far as the AI valuations and concentration was concerned, with the sub-prime era of 2007-08 regarding the private credit and with the 1970s as far as the inflation was concerned. As things stand today, and Singapore just raising its target exchange rate, the historical bells of 1970s ring the loudest. The inflation Gini is out of the bottle with all major bond yields globally making fresh highs in the last week. With dwindling SPR and US crude oil inventory at 40 year lows, we are not sure if the might of the US treasury alone will be able to keep the brent futures prices low on a sustainable basis. 

This year, the US has already released over 100 million barrels out of its SPR to contain price rise against its commitment of close to 170 million barrels and with no end in sight of the conflict, the world now needs to assess how long can the judgement day be delayed, if not avoided. The Saudis managed to supply close to 5 million barrels a day through the Bab-al-mandab strait but with the Houthis joining in the party with Iran, the defining image of a Ship up in flames after hitting a mine is likely to send a bigger signal than any Axios headline. 

With memory prices skyrocketing, it is getting difficult for even the hyperscalers to justify the valuations they are trading at. Today, a Chinese memory company CXMT just raised close to $8 Billion in its IPO, the biggest in Asia this year and is to be joined by Samsung ADRs in the US very soon. When so many companies of a particular sector raise so much money with so much fanfare, its generally not the most bullish sign but rather an indicator of how the insiders are trying to cash out as long as the going is good. Just for a reference, Space X is down over 50% from its high, erasing over $1.2 Trillion in less than a month!

Closer home, the IPOs are coming thick and fast. Large IPOs are expected to raise over 1.2-1.5 lakh crore INR over the next six months and I have my doubts if this much liquidity can be absorbed when the floor is slowly shifting. With WPI inching closer to double digits, Dollar-Rupee at all time high of almost 97 despite everything and bond yields inching up, a rate hike is around the corner. 

A central bank raising rates does not naturally mean that equities will fall. What we are trying to convey is that there is a tectonic shift globally with regards to the cost of money is concerned. In the markets, bond yields are the only gravitational force and the current bull market which was born at the altar of near zero interest rates in the entire developed world is possibly hitting an iceberg. An Entire generation of policymakers and citizens have spent all their working lives with near zero rates in Japan & mainland Europe and with rising energy prices, I have my doubts whether the current bout of inflation will not have its ramifications on domestic polity of these countries.

With NATO in shambles, the Russia has won the Ukraine war despite suffering heavily on ground. If the US can’t protect its allies in the Middle East when its own bases are attacked, who will Russia fear even if the Ukraine is admitted in NATO. The image of a burning aircraft carrier and Qatar gas-fields on fire must have had a chilling impact on the Taiwanese and the Koreans which have spent decades feeling protected under the US nuclear umbrella.

The geopolitics will have an outsized impact in the way investing returns are going to be made in the short-term which is close to three years for us. We remain skeptical on the idea of a forever rally in the Indian small-mid caps, especially in the sectors which are today considered high-growth and rated accordingly. We also have our doubts whether the US markets will deliver strong return over the next 5-7 years periods and for that to happen, a mega reset is due. It may happen this year or may be next but the equity cult in the US, Korea and the SIP culture in India will be tested strongly. The equity is not an asset class with linear returns and our friends are yet to experience a year where buying the dip means losing another 50% of the capital. 

Does this mean we are bearish on equities? No chance. The Indian equities will provide the greatest buying opportunity for those who raise some cash and keep the commitment to buy when the world appears to be ending because, the world doesn’t end that easily! The only problem is, when the world appears to be ending, people generally run out of cash or courage or both! Thus, the blog has been so titled!

This year began with the high hopes of an everlasting AI revolution- one which will change the way humans lived and conducted their lives. Half-way through the year and we have seen the great capex buildup- promise of infinite compute, historic IPOs- Space X being the biggest, almost record revenue and profitability numbers for the AI and related players and yet, something doesn’t feel right.

We have been warning about a great unravelling since the beginning of this year when we gave the clarion call- Sell, Regret and Get Rich. A lot of things which we had a premonition did come true, in strangest of the ways possible. We last wrote that we expect a significant correction in the global markets and that the Indian decoupling is a myth. Here is how things have stacked as we speak.

A.       The high beta asset classes are all in deep bear markets- Bitcoin, Silver and as we speak, Kospi is down 30% from its recent peak of 9300. 

B.       The Global Central Banks have begun to raise rates, even as the hopes of a Fed Put fades away. BoJ, RBA, ECB have all blinked and its widely expected that the Fed is more likely to raise twice in the next 6-9 months with ECB and RBI following suit.

C.      The AI mania has now ticked all boxes of a market topping formation. Space X IPO at close to 300x revenue, even when Elon Musk is an idol to me, coupled with a $20B debt offering indicates that the large players are taking money home as fast as possible. Alphabet and Nvidia raising debt is almost incomprehensible except for the fact that they all know that the liquidity is available now, it may not be available next year. Closer home, Jio raising fresh equity instead of an OFS in its upcoming IPO confirms the same. When the richest man in Asia wants to take money home rather than allowing its existing shareholders to exit, we take serious notice.

D.      The Strait of Hormuz remains shut in its fifth month and we did not believe in the ceasefire for a second. The war may or may not get over but the significant damage to oil routes as well as production will take a large toll on global economies.

E.        The private credit continues to face serious redemption pressure in the US as the AI story gets questioned increasingly. Apollo has joined Blacktstone and the likes to freeze redemptions and this is eerily like the 2007-08 build up.

So what do we think is going on!

We have identified in our previous blogs that the world is now facing three significant challenges- the three bear scenario as we had named. The first bear is reminiscent of the 2000 dot com era wherein the AI companies are now trading at such valuations and the mania in Korea, US and Japan is so strong that its almost a sin to question their valuations because AI is going to change the world. Well, internet also did change the world but NASDAQ fell 80% in 2000-2002 and it took 15 years for it to come back to 2000 levels! Kospi has already shown signs of cracking and just like it happened in Silver in January, it fell slowly and then suddenly! 

The second bear is regarding inflation. The global west is facing structural inflation after close to 35-40 years. Ever major economy- US, UK, Germany, France, Japan, Korea, Australia and the likes have their 10y bond yields at multi-decade highs. The war in West Asia has only accentuated the pace and due to extreme price hikes in fuel and memory and shortage of critical minerals and gases such as Helium, the inflation is now getting sticky. Japan has just burnt close to $75 Billion in first week of May to try to pop Yen up but to no avail. With 10Y at close to 2.9%, it is only natural that the BoJ will be forced to keep raising rates to avoid a sharp devaluation of the yen and that might kill the vaunted Yen carry trade.

We also spoke of the conundrum the RBI finds itself at closer home. Having tried every possible measure to keep the Rupee off the downward slope, including the FCNR(B) deposits and FII taxation relaxation, it is now back to 96 levels. A rate hike hasn’t been explicitly ruled out and if the Fed blinks, so will the RBI.

The US Fed was very likely to cut rates as Trump had picked Kevin Walsh in January. Well, the core CPI is now inching closer to 4% and it is now widely believed that the Fed is more likely to raise in September. The 2y is now well above 4.25%, a good 50bps above the repo and with the 10Y approaching 4.7-4.8%, no central banker will even try to cut rates and undermine its credibility.

On the third front, the private credit market is showing significant stress, and the sense is that it’s the subprime of 2026! If we combine the above three factors, we have a complete confluence of the biggest bear markets of the previous 100 years- 1973, 2008 and 2000! The only difference is that in this case, the Fed can’t cut rates to contain the damage because inflation remains high!

In the End:

We believe that the Indian decoupling is a myth. If the mother ship unloads in the US, at no point, India can remain immune and anybody saying otherwise that we should be happy that the AI story is unravelling is possibly high on a proscribed substance. The Indian mid-cap mania remains high and just that it took 15 years to make money in NASDAQ, it is not difficult to state that the Indian mid and small cap index will see diminishing returns over the next five years. You don’t believe me, right? Well, go back six years and look at the returns of the then darlings- the quality companies, the classic compounders, etc. So anyone buying a utility stock at 100 times earnings must be very conscious of what they are paying!

Are we bearish on India? Not a chance. We remain eternal bull but investing requires ability to deploy money and not buying equities as they are expensive and deploying money in droves when they are cheap is the essence of making high returns over long period of time. We believe that the winter is coming, and it will be cold and severe. We want to be the squirrels who had the food to survive and if we do, we also will thrive!

Here we are on day 46 of the US-Iran conflict with the Strait of Hormuz firmly shut under a double blockade and the US markets about to hit 6950 on S&P 500 tonight. To put this into context, the ATH for the S&P 500 is 7002. Thus, after 45 days of a 3 day war which the USA had decisively won on day 1 after completely obliterating the Iranian Navy, AirForce, Army, Air-Defense System and then losing at least 27 jets including at least one F-35 and multiple F-15s along with heavy bombing of its Aircraft Carrier which caught fire in its laundry system, the US Markets have effectively erased the war from its memory and the war has gone missing!

So, there are two parts to today’s blog, and the first one pertains to the:

1.     Art of the Deal- 

The US military might in the middle East comprised of its 13 major bases along with deployment of its Central Command HQ which also included at least one aircraft carrier. This created an environment of peace and tranquility in the Gulf and in return, the Monarchies pumped in billions of dollars into the US buying weapons by using proceeds of their oil sale which was to be denominated only in the US Dollars- thus the concept of Petrodollars. As the monarchies grew richer, they also deployed hundreds of billions into the US markets through their Sovereign Wealth Funds such as Mubadala, ADIA, Kingdom Holdings, etc. You take any US Asset Manager- Blackrock, Blackstone, Fidelity, etc. and you will see that a significant part of their money has flowed in from these Funds in the past decade or two.

Now with bombing of every major GCC country and their prized assets- Qatar gas fields, Dubai Airports, Saudi Pipeline, Bahraini refinery and so on, the bluff has been called by a third-rate power which in the words of the US President has got no navy, no Airforce, no nothing. We might not understand the significance, but it has been noticed in power corridors across the globe. If Iran can hit the aircraft carrier of the US and destroy 27 of its jets including the Unkillable F-35, if Iran can ambush the US into destroying its own jets after the fake rescue of a pilot which Trump has not talked about ever since he rescued him, does the world really think that the US is still the superpower it used to be?

Will the US be able to provide military guarantee to its NATO members against Russia when it threatens to pull out of NATO itself every second day after almost threatening to attack a NATO member over Greenland? What do you think the Germans and the French would be thinking after effectively outsourcing their defenses to this country for over 70 years since the Second World War. 

So let us see what has already happened during the 45-day period

A.    China hosted Taiwanese Opposition Party and called for reunification

B.    Australia and the UK publicly disowned the War more than once.

C.    Every NATO member has publicly disowned any joining of the war against Iran and most recently publicly denied any efforts to blockade the Strait of Hormuz

D.   The USA engaged Iran at the highest level since 1979 and still did not have a deal. Who exactly send its sitting Vice President to negotiate with a country you had defeated conclusively on day 1 of a 45-day war and still can’t have a deal which you were so benevolently offering?

E.    The Strait of Hormuz remains shut since at least March 5, 2026, which has never happened in Modern History- not even during Iran Iraq war or multiple US invasions of the Gulf.

F.    The US unsanctioned not just Russian oil but also the Iranian oil 

G.   The USA has now been literally using every means to end the war at any possible terms and has not been able to even send one of its major ships through the Strait despite having at least two Aircraft Carriers in place! The USA may claim to control Iranian airspace (which they don’t) but the Iranis certainly control the waterways!

Thus, this art of dealmaking has left Americans bruised in more ways than none and this will be remembered in more ways than one the defining moment when every minor and regional player realized that the price to stand up to the Americans is high but not impossible!

2.    The Missing War

As I write this blog, the S&P is at 6955, literally less than a percentage point away from the ATH effectively dismissing the following effects of the war, majorly:

A.    Disruption of at least 11 million barrels per day of oil after adjusting for release of Strategic Petroleum Reserves and alternate re-routing through the East-West Pipeline of Saudis.

B.    Every major airline in Asia Pacific undertaking some form of price hike and flights curtailment as price of jet fuel hovers above $220 per barrel

C.    European airports reporting potential shortage of oil beginning April end 

D.   Hundreds of petrol pumps in Australia and in France running out of at least one fuel- diesel/petrol, etc.

E.    Brent Futures price up at least 50% since prewar days, even after the fall on positive news

F.    Spot Price of Brent- the price a buyer pays to book a tanker of oil for delivery hovering around $140+

G.   Force Majure declared by Qatar Energy for contracts along with official confirmation that it had lost around a fifth of its production capacity for next 3-5 years. Please see Al-Jazeera videos on YouTube depicting the extent of damage.

H.   Every sensible head of state- Modi ji, Putin, German Chancellor, Australian PM on record cautioning that the effects of this war will be felt for long time to come.

3.    What do we see here:

If you had read my earlier pieces, I had opined that as long as the war is in place, the entire world will focus on it and the moment it goes away, the world will rejoice and the same has happened. What’s interesting is the absolute disgust with which the markets have treated this incredible phase when the realities of the physical world have worsened while the equity markets barely blinked.

The consensus view is that the moment the war ends, the world will be a happy place, and the effects of this war are so transient that it only entailed a 10% correction in Dow while the Asian markets fell around 15% and have now recovered. I do not believe that the markets are manipulated but have a clear-eyed view that the physical realities of this war are yet to be felt for the following reasons:

A.    The world has not yet run out of oil which means that the shortage is felt in some parts in some forms as the floating oil along with inventory has kept the world humming even when the prices shot up. Countries have rushed in to cushion the consumers from those prices while deploying state policy apparatus to bring in supplies in some form

B.    The futures price of Brent has not reflected the spot price, and the gap is close to $30-45 per barrel. The dinner has been served but the bill is yet to arrive

C.    American state will try to do whatever it takes to keep the brent prices down so that when they declare victory for the millionth time, the price of oil should reflect that. 

D.   Once the war is over and Trump moves on to other issues, we will be staring at the physical realities of physical oil running out while the oil in transit is stuck. I detailed this void in my previous blog so you can please refer.

E.    This is not a co-incidence that every airline which has curtailed its flights have done this for those flights which take off beyond May first week. It is also not a co-incidence that Japan plans to release 20 days’ worth of its oil reserves in May, and it is also not a co-incidence that every nation is calling on to its citizens to brace for tougher times.

F.    If the end of the war was an end to all troubles, which airline will announce their shutdowns after the announcement of the ceasefire!

4.    To sum up:

Investing is simple but not easy. Everybody claims to have foreseen the 2008 crisis or the 2000 dot com bubble and so on but not many people had the courage to sit out when the music got the loudest towards the end. We are at a junction where every bear has been thrown out of the door and the price action is so bullish that the world is willing to discount everything as “transient.”

The world has seen this movie before. It was called Nifty 50 in the 1970s; the stocks had reached a permanent high plateau in 1929; internet will change the world in 2000, and the American housing prices will never fall in 2008. 

Once the era ended, the nifty 50 stock fell 70-90% and S&P didn’t recover to its 1973 price for 10 years; Dow made a high of 300ish in 1929 and was in 40s in1932 and did not cross it until 1950s; Nasdaq which peaked at 5132 in March 2000 and it took just over 15 years to reclaim that level in 2025. 

On the Indian side, the great quality companies of 2019- HUL, Asian & Berger paints, Nestle, Bajaj twins, HDFC bank and HDFC Ltd and so on have all given negative returns over the past 6 years and inflation adjusted prices are zero for close to 10 years.

The same mania is being seen in the midcap universe, and we know the world always rhymes. 

The higher and longer this rally lasts, the worse will be the fall and what I writing is only a reasonable reading of the current market behavior. Everyone who is bullish now will feel fantastic until the landmines- private credit quality in the US, AI capex narrative and the valuations, rate cut hopes in the US for a soft landing amid rising inflation do their work as the world stare at a supply void of oil and gas. I was half bearish until February, very bearish in March and now am equally, if not bearish in April because we are not here to make money on a daily or weekly basis but to make outsized returns when the world offers us an opportunity on a platter. 

The world will soon present the greatest buying opportunity of this decade, but the question is, who will hold cash at that point!

I believe some of you might have seen a reel wherein a group of tourists are having breakfast in scenic mountains, and some snow begins to move. For the first few seconds, either the tourists ignored it nonchalantly or tried to take photographs of a memorable moment, only to realise a few moments later that an avalanche had hit them and theres no exit. The only chance to save themselves was a few seconds earlier. Something similar is happening in our markets and though I am not a doomsday prophet, I believe that the markets globally are still busy taking pictures of a scenic moment.

If you have read my earlier blogs, I had talked about three different bears trying to destabilize the markets globally. The first being the absurd valuations AI related stocks have attained which took us to the 1999-2000 dot com crisis. The second was the private credit flowing into the AI related play which was showing stress on the Private Equity books leading to a subprime mortgage type situation, reminiscent of the 2008 Global Financial Crisis. The third was the price of oil and supply shock of gas which had hit us due to the US-Iran war which took us to the 1973 crisis. (https://zerotomillion.business.blog/2026/01/15/sell-regret-and-get-rich/ ; https://zerotomillion.business.blog/2026/01/26/sell-regret-and-get-rich-episode-2/ ; https://zerotomillion.business.blog/2026/02/24/winter-is-coming/ ; https://zerotomillion.business.blog/2026/03/07/oil-on-the-boil/ )

I also wrote that for the very first time in the history of markets, all three independent variables are working in collusion and even if the war ends in a huff, the damage it would do would be sufficient to help the other two existing bears wreak havoc globally. That was almost three weeks ago. So what are we seeing now!

1.     The clock is Ticking- As we speak, the world is waking up to the geography of oil and gas supply chains. The gas crisis is real and is felt across East Asia with petrol pumps running dry in Australia to an energy emergence in Philippines to the Koreans asking people to shower a bit faster and Japan releasing the massive Strategic Petroleum reserves, etc. India is juggling an endless treadmill of diplomacy to escort gas tankers through the Strait of Hormuz which is giving a breathing space for one additional day at a time but the clock is ticking. 

With the destruction of oil infrastructure in the Gulf and closure of the Strait, there are a number of ships stranded in the gulf, waiting to cross the strait, as and when an opportunity arrives.

A rough calculation told us that every tanker which had left the Strait before the closure on March 5, 2026 has already reached its destination in Asia as per journey time of 3-4 days to India to upto 20-25 days to Japan. Now if the Strait opens today, it will take around 5-7 days for all existing vessels to cross it and will then take additional journey time depending on the destination. 

If we assume that in an ideal situation, the moment Strait opens up fully, every ship moves out immediately, the production resumes immediately and other ships begin their journey towards the gulf for future loading, it will take at least one week for the fresh ships to reach various ports in the GCC and loading of oil cargo from onshore storage facilities. They will then take their respective journey times to reach their destinations across Asia and other parts of the world.

So if you look at the timeline, there would be a period when existing ships would have reached their destination and fresh ships are on their way but no ship is arriving anywhere due to the lag in journey time. This is a void nothing can fill in global supply chain. This may be a few days to any number of days the war continues.

Now once the war ends and everything opens, the fresh ships will first load existing oil stored onshore at various ports which amounts to roughly 20 days to supply. Unless the storage capacity frees up, no country can resume their production for lack of storage and thus, for a few more day, a second void will hit the global supply chain which will cause a period where no ship containing oil and gas is arriving at any port anywhere in the world. That is the second void the world will have to witness.

Here is part of our analysis which I worked out with Claude:

The Eight Variables

Symbol

Value

Name

Meaning

Day 0

March 5, 20206

Clock start

The last significant convoy of loaded tankers cleared the Strait of Hormuz. From this point, no new cargo enters the global ocean pipeline from the Gulf.

T₀

Variable

Strait reopening date

The day on which the Strait formally reopens to commercial shipping. Three scenarios are tested: March 25, April 1, and April 7. Every downstream date is calculated from T₀.

X

4 days

Backlog clearance

Approximately 330 tankers were immobilised inside the Gulf and a further 400 were anchored in the Gulf of Oman. Under ideal conditions, 4 days are needed to sequence them all out of the Strait safely.

Y

1.5 days

New ships enter and berth

Empty tankers waiting near Hormuz navigate in and berth at Gulf loading terminals. Time from gate-open to first new ship berthed and ready to load.

Zₗ

3.5 days

Load one ship

Time to fill a single Very Large Crude Carrier (~2 million barrels) from existing coastal storage tanks. Multiple berths operate in parallel, so this is the per-berth loading time.

C

20 days

Coastal storage duration

Gulf coastal terminals held 60–90 million barrels of pre-filled oil at the time of closure. At normal export rates this inventory sustains approximately 20 days of continuous loading before meaningful depletion.

K

6 days

Upstream production restart

After coastal tanks drain, oil wells, pipelines, and gathering systems require approximately 6 days to safely restart and pump fresh crude to the coast. During this window, tanks cannot be refilled fast enough to load ships.

J

4–17 days

Journey time (port-specific)

Days for a loaded tanker to sail from the Strait to its destination at 14 knots: Mumbai 4d • Vizag 6d • Singapore 8d • Shanghai 13d • Seoul 15d • Tokyo 17d. J shifts calendar dates but does not change phase durations.

 

The Seven Phases of the Supply Shock

From Day 0 onwards, every destination port passes through the same seven phases in the same sequence. 

Phase

Name

Duration

What is happening

1

Pre-war ships arrive

Day 0 → Day J

The tankers that loaded in the Gulf before March 5 are already at sea and still arriving normally. This in-transit buffer lasts exactly J days — 4 days for Mumbai, 17 days for Tokyo. Once the last of these ships docks, supply at that port drops to zero.

2

Main void

Day J → T₀+J

Complete blackout. The pre-war ships have finished arriving. The backlogged ships have not yet cleared the Strait. Ports receive nothing. Nations draw on strategic petroleum reserves. This phase grows longer by exactly one day for every day the Strait stays closed.

3

Stranded ships arrive

T₀+J to T₀+X+J  (4 days)

The roughly 730 tankers trapped inside the Gulf and in the Gulf of Oman finally transit the Strait and deliver over 4 days. This is not fresh supply — it is oil that was already loaded and stuck in traffic. The jam clears; the factory has not yet reopened.

4

5-day mini-void

T₀+X+J  (5 days)

After the last stranded ship departs the Gulf (T₀+4 days), new empty tankers need 1.5 days to enter and berth, then 3.5 days to load from coastal storage. For exactly 5 days nothing departs the Gulf. This hits every destination 5 days after the stranded ships finish delivering.

5

Coastal storage supply

T₀+9+J  (20 days)

Gulf terminal storage tanks, filled to capacity before the war, supply a continuous stream of ships for approximately 20 days. This is genuine, meaningful relief. Oil flows. But these tanks are finite. Once depleted, they trigger the most severe phase of the crisis.

6

MAX DISTRESS — 2nd void

T₀+29+J  (6 days)

Coastal tanks run dry. Upstream oil wells are restarting but cannot yet deliver crude to the coast fast enough to fill ships. For exactly 6 days absolutely nothing departs the Gulf. This is the worst supply void of the entire crisis and cannot be shortened by any diplomatic or logistical intervention.

7

Full restoration

T₀+35+J onwards

The first freshly produced oil completes its full journey from wellhead to destination port. Normal supply resumes. This is the earliest possible date for genuine, self-sustaining normalisation under ideal conditions.

 

Why two voids and not one:  The gap between Phase 4 and Phase 6 exists because Gulf coastal storage tanks held 60–90 million barrels of pre-filled oil. When the Strait reopens, new ships immediately start loading from this existing inventory — providing 20 days of genuine supply. But once those tanks drain, ships have nothing to load until upstream oil fields have had 6 days to restart and refill the coast. That restart lag is Phase 6: unavoidable and uncompressible.

 

2.    Inflation is here to stay:

The global markets are still pricing a soft landing and a transient inflation which means that the Fed will cut rates in 2026 and there will be a soft landing without major disruption. The price of oil and supply shock has thrown that out of the window two weeks back. Every major global voice, from Modi ji to Putin to energy experts across all asset classes agree that the supply shock is much bigger than the 1973 Arab oil embargo which brought the US to its knees through a decade long stagflation- high inflation and low to negative growth and the US markets fell 48% from their peak in 1973 and the returns over the next 10 years were so bad that the media was writing about the “Death of Equities” in 1979! (https://ritholtz.com/1979/08/the-death-of-equities/)

Funnily, the markets are hardly down 10% in the US and even in India, they are down less than 15% down. Now here is something I want you to ask Claude/ Gemini when you read this article-  Consider everything which has already happened in the global markets beginning January 1, 2026 beginning with Venezuela, Silver and Gold attaining massive heights before collapsing like a pack of cards and swinging like small cap stocks, bitcoin down 50% from peak, Leading PE players gating redemptions across their private credit funds and crisis building therein, US-Iran war now on day 30^th with multiple GCC countries nursing their wounds across oil and gas infrastructure, gas crisis a reality across East Asian countries, brent oil price above $110 despite multiple Trump TACO moments. Can you explain to me how much the markets should be down in any normal year only to price in what has already occurred by considering how markets have behaved over the past 100 years under similar situations. 

The reason alone is sufficient to scare any reasonable person to not listen to the idiots on TV who are claiming a bottom with every 500 points rally on Nifty.

3.    The baseline Analysis

I have been maintaining that in a normal scenario, a 40% drawdown on Nifty is a highly like scenario. With what has happened over the past two weeks, I will be glad if the markets only fall 40% and no more because historically, in any severe correction barring Covid, the US markets fall atleast 48% from All Time Highs and Indian markets invariably fall more. So if by the end of this year, we have Nifty at 16000 and doesn’t fall further, Gods will have been mighty pleased with India. 

That aside, the current bear market which has technically not even started ( a bear market starts with 20% drop from ATH which is around 21000) is not going to be like Covid when everything fell quickly and we recovered and made a fresh high in 2020 itself. 

Most investors, including myself have never seen a market when the indices fall 20%, recover 10% and people call bottom, it falls again and people lose money only for it to recover and new set of people calling bottom before all hell breaks lose and everyone loses their shirts. Be prepared for a very painful 2026 and even considering the speed at which markets move in today’s world, a six-eight month downward journey to sub 16K Nifty is underway.

4.    What gets hurt the most:

The PM of the country stood before the Parliament twice in two days and invoked Covid times. The next day, Government sacrificed excise duty on fuel to save consumers which basically mean that the government fiscal side is under severe strain and the capital expenditure will shrink. Add to that a falling Rupee making imports dearer bringing inflation and declining Forex Reserves due to the pressure on the RBI to cushion the fall. The macro picture has turned outright ugly.

In such a scenario, the market darlings- power, PLI, infrastructure players which depended largely on government orders will suffer the most. Please go back and see the 2008 Nifty names such as JP Associates, Rcom, RInfra, Suzlon which all went to bankruptcy once the tide turned.

Also, companies with leveraged balance sheets/ low margin will suffer once the cost of capital rises and the new age players with funny accounting will all be caught naked. You can not run a loss making business in a high interest rate scenario.

Once the Global Central Banks begin to raise interest rates almost in a panic struck environment, the private credit stress will move from Private Equity books to Wall Street and everyone from Jamie Dimon to Larry Fink has seen how this unfolded in 2008 and I am sure the full blown crisis will then unfold. 

5.    If I can give you a pictorial analogy, please go and watch The Big Short. Go to the moment when the Shorts are calling the Banks as to why their prices aren’t moving favorably and then they realise that unless the Banks build a substantial short position of their own, it won’t budge. And once that happens, to which we are very close, its Armageddon. And if you want to ask me what to do, go watch that famous clip from the movie Margin Call when the boss says- sell it all before the world knows that we are selling.  

Six years ago, on Sunday, March 8, 2020, Saudi Arab decided that it has had enough with its OPEC partners and declared that it will flood the world with oil. Brent crude which was already under pressure at around $45 a barrel opened at around $36 on Monday, March 9, 2020 and in a week, the WTI crude traded negative which means, people were being paid to buy oil!

Cut to today. March 7, 2026, same weekend. On Friday, we saw oil finally catching up with the destruction in the middle east and raced towards the $95 a barrel, closing just around 93. The world is bracing for a complete shutdown of Strait of Hormuz and Qatar and Kuwait have either cut off or about to cut off their entire oil and gas production. Trump tried to talk oil down by unleashing everything- unsanctioning Russian oil, shorting futures by the US treasury, offering US naval escorts through the Strait but oil fell marginally to 80 on Thursday before racing towards the 90s. We don’t know what happens on Monday, March 9, 2026!

If you look at the above closely, oil is showing an absolute mirror image of its behaviour in the past market crash. It went down from 45 to 0 in no time because the world was gutted with supply and the buyers were loaded with inventory and couldn’t find ships or tankers to keep any more oil and thus, fall in prices did nothing for incremental demand. Today, the world production is dwindling, people are desperate to buy oil but the physical supply is choked so even if the price is rising, there is no incremental supply and if my hunch is right, we might just see oil above $130-140 barrel the next week or so, as Qatari Energy minister predicted.  History is not simply repeating itself, it is playing itself in the mirror! 45 to 0, 90 to 135- same to same, in opposite direction!

2. So where we are in the cycle:

I had, in my January post- Sell, Regret and Get Rich, mused that the world was getting into a dangerous place. It was nothing but my muscle memory which made me get to a 70% cash position by the 20-25^th of the Janaury, 2026, like I mentioned in my previous post as well. I then spent about a month and a half agonizing as to how my body didn’t feel right while the world kept moving up and then, in late February, I realized that the current cycle is a cocktail of 2000 dot com valuations colliding with the sub-prime meltdown of 2008. I was sure that the two are sufficient in itself to take this market down to 30-40% below the ATH and then, Trump happened!

Imagine there was a party of two bears- the AI valuation along with the private credit meltdown which has ignited a chain reaction in the basement of the building. These two bears are silent and are trying hard to suppress any noise before the one final blow-up which takes everyone down suddenly. These two ensured that even though there were blowups and meltdowns in multiple assets- Bitcoin, Silver, individual sectors such as Software, etc., the overall index was unaffected which trapped people in believing that everything is hunky-dory and they can buy the dip. 

Now thanks to Iran, we are now joined by the third bear who is loud, boorish and violent like no other. This is the imagery of Dubai being bombed, Strait of Hormuz being blocked, Airports being hit, empty hotels, people dying, people lining up to fill their tanks, etc. Now funnily, oil did behave very well on the first four days of the last week which made everyone believe what Trump was saying but on Friday, when the markets could not ignore the physical reality of 20-30% of global production going off, it shot up to 90s. This bear has now taken center stage and is doing all it could to bring the house down.

Here is the line which matters- the first two bears are inter-related and are silently working while the third bear destroy everything. Once the war is over and there is a rally, it doesn’t stop the first two bears from continuing what they were already doing in basement! The third has only accelerated the pace downwards and there is a real possibility that what we thought the first two could achieve in 9-12 months, the trio will take half of that!

3. The correlation on the way down is always 1:

Kospi went down 8 and 12% on Tuesday and Wednesday before recovering 11% on Thursday. European markets fell well over 3% on single day in the week while Nikkei also went up and down 3-5% on two-three days. Add to this the behavior of Silver, Gold, Bitcoin, multiple sectors such as software, private equity, metals, etc and they are all showing violent swings on the slightest of the news, both on the way up and down. This, my friends, is the truest sign of a crisis. In no normal circumstances, so many asset classes and leading indices behave like penny stocks and most importantly, whenever such behavior is observed in some asset classes, the asset classes which are still holding up and showing signs of strength almost always follow their peers on the way down. The correlation always turn out to be 1 on the way down.

So Nifty which is hardly down 7-8% will join the party very soon as well as the US markets on which our basis stands. With the amount of news flow coming out of the private equity side, it won’t be surprising if the Lehman of this crisis is some legendary Private Equity firm. Who is going to be AIG is to be seen with a lot of curiosity.

4. What do we see going forward:

I believe that in the next one week, possibly by early to mid of the week, the world will wake up to the reality that this war is now beyond the control of US administration. Unless they nuke Iran, there won’t be a surrender and if they do, it’s anyways end of the world for markets, something which Trump so dearly loves. As Iran keeps bombing its gulf neighbors, the oil supply gets choked and there is one point I want to make strongly- if countries can buy oil at 120 or 130 and still meet their demand, it only results in higher inflation and budget deficits which most countries can still tolerate. If the price rises and still you can’t buy as much as you want, it results in domestic chaos and rising inflation and weakening currency and everything else which is bad, almost like Sri Lanka a few years ago, something no country can tolerate!

As far as the markets are concerned, if I had a hunch in January that the markets will fall 40%, I now take this as a certainty that we will see markets fall at least 40% this year. We sat on cash and looked absolute foolish in February but when God’s on your side, it even causes a war for your position. We are incredibly blessed by Mahakaal that we could sell as much as we wanted to while the world partied and like we write on our website, when there is blood on the streets, we will buy with all our might because the World Doesn’t End That Easily!

It took me a month to write this blog because I was grappling with a complex puzzle- Where we are in the current market cycle and Which previous cycle does this resembles most with. 

For those of you who would like to understand the significance of the question and my quest for its answer, here is a primer; Equity markets move in cycles. There are larger cycles which last multiple years; it generally originates from the bottom of the previous cycle and lasts until it meets its end over several years. For example, in the global markets, the US markets had a long bull run from early 1980s until the dot-com crash in 2000-02 which remains one of the longest uninterrupted bull runs since then. Then it was the 2003-08 global bull run in which Indian market went from Sensex 4000 to Sensex 21000 before the Global Financial Crisis burnt it down alongside the US housing bubble fuelled by subprime lending. 

To make serious money in investing, history is your most important teacher. Since the human sins of greed, fear, hubris etc remain the same, all markets eventually follow a larger pattern as indicated above. The current cycle traces its origin from the dark days of Covid in April 2020 and since then, it was marked by global liquidity infusion at unprecedented scale, the AI story, the small cap mega run in India fuelled by domestic money etc. So if you have read my previous blogs posted in January 2026, you would have understood that I had feared of some correction in this market and I had been grappling with that puzzle ever since. Here is my assessment-

A. The cycle we are in has only one similarity with 99-00 which is that the absolute visible leader is tech/AI. Where it differs is that back then, the rally was entirely equity and the junk which went up did not have much debt on its balance sheet and it collapsed on its own due to gluttony and not indebtedness; the real issue today is that the market has already moved past the rotation from Nasdaq to Dow over the past one year and the alt assets- commodities, BTC all are not making fresh highs so the last refuge of the bull is slowly fading. Also, the real parallel of this market is the very genesis of this bull market- Mag 7 have pristine balance sheets and they can fund forever. 

However, the PE funds have all taken up the role of subprime lenders and the investment banks who are now exposed to negative cash flows of their borrowers- much like NINJA loans to strippers in Vegas. Once the contagion picks up pace, the direct lenders take heat alongside their borrowers; if it gathers steam, the borrowers of the PE funds will face the music and then the bond holders of Mag 7 might also not be in a position to buy debt because nobody opens shop to buy $100 B of Mag 7 debt and nothing alone because that’s the Manhattan of 2007- pristine. But any lender which loans for Manhattan also gets the lowest return and thus needs to invest in Vegas and Florida to generate return. 

 

B. The above assessment indicates that the time we are in resembles very much like late 2007 to early 2008 when the Dow had already hit its peak in October 2007 while Sensex went on to make fresh highs in January 2008. So if you map that today- Bitcoin made its peak in October and is down 40% plus; Silver too has corrected, Indian markets have made a fresh  all-time high in January 2026 and are now breathing heavy and so have the US markets. A closed ended fund of Blue Owl capital recently halted redemptions, much like BNP Paribas in August 2007 while the AI bubble is now being unraveled one sector at a time by AI itself- Anthropic killing software, brokerage etc. Thus, the Indian IT stocks which were already down 30% from their highs are now falling like penny stocks and the IT index is down 20% in a month- something which has NEVER happened in history. TCS is falling more in a day than it did during Covid while the global PE Giants- KKR, Blackstone, Apollo, Carlyle are all down 40% from their all-time highs.

C. Thus, the equity valuations of dot-com bubble- concentration in few names, excessive narrative about AI is now meeting with the credit crisis of 2007-08 and the market now moves at 5-10x the speed of even 2020. Thus, what could take 18 months back then can happen in six months or less with sharper corrections, ferocious short-covering sucking everybody in before resuming the downward spiral. It’s not a possibility but almost a certainty that we are going to witness a carnage as severe as last seen in 2008 but on a bigger canvas fuelled by lightening velocity of algo-driven trading. How much the markets will fall, how long will it take remains to be seen but I have zero doubts that the Winter is not coming but has already started.

D. The great Indian decoupling myth-

1. The SIP story: Every time there is a rally in Indian markets, we are told that India is different, and the market has decoupled from global markets, and we will be saved by the SIP flows. Let’s stay here for a minute. These people believe that the people investing through SIPs are not worried about negative returns over long periods of time. This is like saying 9 crore Indian investors will keep pumping money irrespective of the rate of return in the markets without natural greed and anxiety! The SIP was sold to millions of households as an instrument to make 12-15% CAGR over multiple years and once the 3-year return turns to low single digits, any reasonable person will first rush to stop his next monthly debit. SIP was an instrument to bring household savings into markets and not to create an artificial floor to allow FII and Promoters exit at stupid valuations. 

Just look at the Mutual Fund ads from early 2020s to now. First it was SIP as a medium to dream home, dream car, 15% at least over long term etc. Now it is- please continue your SIPs. The veterans know what’s happening. The same pattern was played with ULIPs in 2006-08 when millions of Indian households were sold assured return type plan which made the entire generation wary of any insurance product. I don’t know if the SIP will become such a word but once the Nifty falls below 21000, the three-year return will be zero and then who knows!

2. In every major global correction, the Indian markets fall with a lag and fall more on the way down. In 2008, we were first told that Indian banks have zero global exposure, our domestic consumption has no relation to US subprime lending etc. but when the tide went out, US markets fell 50% and Sensex fell from 21000 to 8000! Nifty went down from 6500 to 2500. During early days of Covid, we were told Covid is only for cold weather, Indians drink turmeric and ginger so it won’t matter etc. but while the S&P 500 fell 34%, Nifty fell 40%. The Indian markets are decoupled ONLY on the way up- we may not rally while the world rallies but on the way down, the correlation is not just 1 but greater than 1! If the US market goes down 20-30%, rest assured that the Indian markets will fall 25-35% at least.

3. If the decoupling was even remotely true, ask yourself this question- why did Indian IT stocks fell like a pack of cards when they had already time and price corrected over the past three years. Now replace IT with Indian markets and read that again- the so-called market experts are saying that since we have already corrected over the past 18 months, we will not fall much. Say that to people who bought TCS at 3000 after the India-US trade deal only to see it fall to 2550 today. Only till such time when the Indian markets do not take cues from the US markets, the theory of decoupling has some semblance. Once the mother ship catches fire, our markets will have no place to hide

E. To Conclude, I believe that we will witness once in a generation market correction over the next 12 months. The top has most likely been made sometime earlier but nobody knows how markets will behave. One thing is for certain, the winter has begun its onset and is going to be brutal and frosty. Our cash position which looked foolish post the US trade deal announcement is beginning to look decent and if Lord Mahakaal blesses us, we will remain active buyers when the street is soaked in blood and for those of us who are prepared and are willing to remain sober, this will be the generational buying opportunity!

In my last post, I had outlined my idea of being bearish on the markets and reasons thereof. Since then, we have had some correction in the Indian markets and some large moves in multiple global markets- Natural Gas, Japanese Bonds, Silver, etc, all of which has led to the Episode 2 of our original post. 

A.       First, a quick look on how things have progressed on various fronts:

1.        Geopolitics- The gathering at Davos this year has been incredible. Canada sounding a somber note on the death of rule-based global  order; France lecturing the US; EU announcing the mother of all deals with India to counter US tariffs and a lot of bickering between various NATO members. At the top of it was the public humiliation of Denmark by US Treasury Secretary, EU by its Commerce Secretary and of everybody else by Trump along with a renewed claim on that piece of ice- Greenland.

Unbelievably, the infighting along with imposition and then repeal of additional tariffs on European nations by the US has only heightened our case that we are in a time of major flux, with a flurry of events only reminiscence of those leading up to the Second World War. It is incredible that until the beginning of this year, nobody was even thinking of 1939 but now everybody is picking up their history books to draw parallels from the famous decade of 1930s, both about the Great Depression and the Great War. 

2.        Markets- Indian markets possibly took our piece a bit too seriously and collapsed quite a bit throughout the week with multiple accidents. Most importantly, people have begun to appreciate the idea that an overvalued market can fall 20-30% and still remain a lot above fair valuation. What has unfolded is a race to exit first before the fire breaks and if the fire does break out, there will be no exit, especially in times of heightened MTF positions.

 

B.       With our cash positions, we are incredibly bearish on this market. I have been in this market for 9 years now and hasn’t sat on a rupee of cash until now where it is our largest holding at well over 66%. It also means that our views are going to be incredibly biased, and you must remember that while reading this. Why do I take such a call is what I am trying to elucidate. So what are we seeing here:

 

1.        The valuations- You look anywhere and 80-90% of the market looks expensive. Every story is discovered, every position primed for forever growth and there is almost consensus buying on multiple themes with a lot of money chasing a forever supply of stocks from PE funds, promoters and FIIs. I do not understand the thesis of chasing a stock when the Promoter exited the company and people praised his leadership skills and clear communication.

Most importantly, the usual chatter of how LTCG and STT killed the markets and scared away the FII has now begun to flood the conversations on TV and X. People are now crying left and right to pressurize the government in doing away with LTCG or else havens will fall. 

Ask yourself two things. Post imposition of LTCG in 2018, did the Indian market not see the biggest boom ever in the stock markets between 2020-2024? And two, when the market was going up, did all these people not tell you that the FII money is not required and the local money is self-sufficient in keeping up the markets and even sustain a bull run on its own. In that case, why are they crying now?

There is a barrage of such people who are writing long posts about how the poor retailer is hurting; how he is in loss because the FII have vanished from the markets and why you desperately need to lower/remove these taxes to bring back a sense of semblance in the markets. They are forever on TV in a self-congratulatory mood when the times are good- one guy can’t stop telling how he bought Hero Honda in 1990s, the other one is the first ever multi-bagger hunter in Infosys and there are a multitude of them who forever are outperforming the market and who have always caught the stocks which have gone up recently. 

When the times are good, they hail the retailer for SIP culture and how Sensex will be 200000 in three years and so on and so forth. The moment market turns; they cry foul. Do yourself a favor and watch some CNBC or Zee Business videos in the last week of March 2020- there was an entire gang who wanted the government to shut the market down because their portfolios bled. The same guys now are desperate for a tax reversal because their trend following has led to lower returns and their clients have stopped pumping fresh money. They want you to believe that India is the biggest and the best market in the world and government should be out of business but the moment there is a fall, leave aside a bear market, they want the government to bail them out! Bullshitters!

The problem with Indian fund managers is that most of them are momentum chasers. They will all chase the same thing- Kalyan was a darling till very recently and so was Dixon. Call up the people who were extolling virtues of Zudio till last year to see if they would love to buy Trent at half the price? Where are the people who called IRCTC the best monopoly business in 2021 or sold the China+1 story to believing public or who would buy Cochin Shipyard at ₹2900? Funnily, the same bunch now wants you to invest in China!

Funnily, as the Indian markets underperform, those selling you the latest Defense and Manufacturing thematic funds now lament the fact that most Indians do not invest sufficiently across global markets and how they are missing out on the deal of a lifetime. They will then pull out the valuations of Nestle in Europe, Unilever in England or LG in Korea to tell you that the parent is cheaper than its Indian subsidiary. 

Well, two points. One, most Indians cannot invest in global markets due to frictional cost involved and the LRS limits set by the RBI- $250K per annum and the TCS involved therein and two, these very people wanted you to keep buying the LG IPO or the Nestle-Lever shares as long as the market kept going up! Further, most Indian mutual funds offering global investing are nothing but a Fund of Fund ETF of either the NASDAQ or the S&P with hefty fees which nullifies a large part of the return. 

 

2.        This is just the beginning-

 The Indian equity market is in the sixth year of a long, secular bull market where people made a lot of money. Until the beginning of this year, I also believed that there is one final hurrah left before the cycle turns but the flurry of IPO and promoter selling along with the geopolitical setup has convinced me that the fall is here and now. 

If you see carefully, over the past few weeks, the selling was first in the EMS space with Kaynes and Dixon beaten black and blue and last week it was the realty index which took the most beating. There were multiple other accidents as well- Kalyan, Havells, Adani group, etc. So, what I think is that people are first selling wherever they have made the most money or have some profits left. Once that subsides and if the index does not recover, there will be a sharp fall across the broader market. Of course, this doesn’t always happen like this but to my understanding, the fall has just begun. If you look at any stock which is down 30-40% from their previous highs, most likely it is still trading at 60-80 PE multiples. 

What I learnt from my experience of 2018-20 is that a stock which is down 30% from its 52 W highs can still fall 50% and still go down further in a bear market. If you read my very first few posts, I had recollected that I first bought Tata Motors in 2018 at ₹430 levels. By February 2019, it was ₹150 and during Covid it fell to ₹60!

So, a lot of you think that buying something which is down 30% or even 50% from its lows is a good bargain should remember that in a normal bear market, even good stocks fall 70-90% from their peaks. BSE alone has fallen 60% at least twice since its IPO in 2017 and has fallen 40-50% multiple times. 

As far as the indices are concerned, they are hardly down 5% for Nifty and 13% for Small cap index. They are still up to 20% above their 52W lows and the ones claiming that a bottom is near has forgotten not just 2020 but even 2022 and February-April 2025! It is very normal for even Nifty to fall 15-20% in any given year and it won’t be a surprise that we see a sharp drawdown across major indices over the coming few weeks. Yes, there can be a sharp reversal in case the budget does take out the LTCG or if there is any positive announcement on the US tariff front but to my mind, that will be temporary as the FII will happily return to sell at elevated levels and the flurry of IPO will only accentuate. 

If there is a sharp reversal in the markets, I will be happy to go upto 90% cash as there is nothing better than watching the madness of crowds unfold. I have a very clear rule in this market; If we fall from here, there is a chance that the fall will be limited to let’s say 30-40%; in case the markets go up in a hurry, the fall from there will be far more brutal.

As far as the retail money is concerned, if you suddenly see the number of funds setting up offices in GIFT city while trying to sell you the dream of a globally diversified portfolio indicates that the tide is turning. People who used to ridicule gold investing are now offering multi-asset funds with a large portion of it in gold to somehow keep up with the returns generated therein. 

 

3.        Geopolitics trumps Markets

If there is one take away from the events of this month alone, it is that the world we knew has ceased to exist. The Europeans blocked the Russians out of Europe are now staring at an unravelling of NATO. The US which preached to the world is now bickering with Canada. India is also at a position where it must balance a lot of things to keep moving forward and I am happy as an Indian that we do have sensible leadership at the helm. It is no secret that the Deep State wants an unstable India because if you can create some fissures now, the 7% GDP growth can easily become a 4% growth with 8% inflation. In that respect, I also believe to a point that the FII selling is strategic and I am sure the government also understands this. 

At the time of writing, the US is moving its warships to Iranian waters and who knows what happens next. There are just too many things waiting to blow up that every nation is now cautious of the next step. For those of us waiting for a trade deal with the US, ask Europeans. They bootlicked Trump for a deal in 2025 only to be told at Davos that they can have even more sanctions coming their way again! If I can see this clearly, I am sure our leadership also does that you just can’t trust anyone anymore, even with a signed deal!

It is logical for the government to do two things- keep the domestic economy going and maintain the lid on inflation. So I would imagine that the capex push will continue, subject to fiscal situations and any tax cut is simply out of the equation. The government simply does not have any room left, especially with the IT and GST cut. Yes, if anything does happen, it can be a raise in LTCG to 15% with a higher exemption limit to let’s say ₹2.5lakh rupees per person.

4.        History does not repeat but it rhymes

In my limited career in the markets, I have seen the small cap index collapse close to 60% between 2018-2020 and funnily, people have a short memory. There used to be market darlings such as DHFL, PC Jewelers, Gitanjali Gems which all fell over 99% during that period. Yes Bank, the then market favorite fell from ₹400 to less than ₹7, well over 98% fall. The OMCs were market darlings in that period until Arun Jaitley levied ₹1 oil cess in October 2018 when IOC tanked 30% in a single day and fell close to 60% between 2018-2020! Vedanta also fell from ₹ 400 to just around ₹60 and I can go on and on. 

What I am trying to tell you is that it is very normal for stocks to correct 50-70% in a decent correction while a lot of stocks will never see those prices again. It is good to remember that Reliance Power, Reliance Communication, JP Associates, Jet Airways, Suzlon etc were part of the bluest of the blue chips in 2008 bull run and most were part of Nifty 50! DLF has not crossed its 2007 high even in this bull run while UniTech and the likes went bankrupt.

It is not a bad time to revisit history lessons while preparing for a long career in the stock markets. If you go back a few more years, you will witness even worse periods with even better storytelling. In 2007-08, India was the next China with multiple decades of 9-10% GDP growth rate ahead of it because we had decoupled from the USA and have easily survived the great recession. Nifty made a high of 6500 in 2008 and did not cross it meaningfully until 2014! The US markets which is the best performing market currently also gave birth to the Internet just as it did to the AI. NASDAQ did not take out its 2000-01 peak until 2010! So much for American exceptionalism.

 

C.      To conclude-

To make money over long-term, you have to flourish in a bull market and survive the bear market. To make lifechanging money, you not only have to ride the winners of the bull market but also have some firepower to invest in a bear market when the prices are so low that a normal recovery will give you a 2-3x on portfolio, turbo-charging your returns. The prices can be so low that you can’t fathom but the key is to have cash and courage to invest at that point. I believe that a massive downturn can be the biggest opportunity of our lifetime. I am neither aware nor have any ability to predict when such a fall can happen but let me give you a small chronology:

In May 2019, Nifty crossed 12000 for the first time. Three months later, In August 2019, the Government cut the Corporate tax rate. Nifty subsequently made fresh highs of 12430 in February 2020 but one month later, the markets were down 40-60%, depending on the indices you wish to monitor. In this period, small and mid-caps were already down 30-40%. Fast forward a few years. Nifty’s previous high of 26000 was in September 2024. In 2025, the government has cut both the Income Tax as well as the GST and the markets have also made fresh lifetime highs as recently as January of this month. The average small-midcap is also down 30-40% from its peak. I don’t want to predict anything more than this!

 

Disclaimer

Caelis Ventures intends to launch its Portfolio Management Service after obtaining the required Certificate of Registration from the Securities and Exchange Board of India (SEBI). Currently, we do not manage third party funds nor do we offer investment advice to the public of any kind . Any or all activities of such nature will only be undertaken when and if we obtain the Securities and Exchange Board of India (SEBI) registration. Any information shared here on any other social media platform or in any form should not be construed as an advice or solicitation of any kind. At present, all our activities are strictly proprietary only. The directors, officers, and employees of Caelis Ventures do not receive any fee, commission, or remuneration related to such information.