Latest news with #DevinaMehra
Mint
5 days ago
- Business
- Mint
Devina Mehra: Why investing in a bank often takes nerves of steel
To those who ask me why my takiya kalam is 'I am a nervous investor in banks and lenders," here's the answer. My refrain has nothing to do with poor quality bank management or anything of that kind. It's just that the structure of banking differs inherently from that of most other businesses. One, it is in the nature of this business for negative surprises to outnumber positive surprises. The most recent being losses in the currency derivatives of a private sector bank that came to light a couple of months ago, with the result that its share price has halved from its highs even as the Nifty bank index has been doing very well. Also Read: Devina Mehra: Diversified or concentrated portfolio? It's an easy choice Even on the lending side, when bank borrowers do very well, unlike equity investors, lenders do not get any extra income. However, when something goes wrong with a borrower, its lender has to take a hit. So, where can the positive surprises come from? Credit growth? Unfortunately, higher-than-expected growth may not be a good thing at all for banks because problems in a lending book show up only some years later. The financial crisis of 2008-09, for instance, was triggered by a hit on the home mortgage business of US banks where reckless lending resulted in way higher-than-expected defaults. On the other hand, if a bank management remains conservative through a credit boom, it gets penalized for not growing as fast as the competition. As the then CEO of Citigroup Chuck Prince said in the context of the 2008 crisis: 'When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance." Two, while many banking crises start with too much poor lending, this is not always the case. Silicon Valley Bank (SVB), which was tottering at the edge of collapse in early 2024 till it was bailed out by the US Fed, had actually lent out too little. Assets on a bank's balance sheet are not just credit or loans. They also include investments like bonds. In SVB's case, it had channelled most of its deposits into such investments. Also Read: Devina Mehra: Investors must see through gold's glitter as a risk-free investment There was also a considerable asset-liability mismatch (ALM). What this complicated-sounding term means is that while the bank had deposits that were short-term in nature, its assets were long-duration securities. All banks do this to an extent, but in the case of SVB, it was pronounced. The result: it suddenly had losses when interest rates went up and that too in illiquid assets. Three, why do problems on the asset side, whether in lending or investing, go out of hand for banks? This is because a bank is inherently a leveraged institution—it has a balance sheet typically 8 to 10 times that of its equity capital. Simplifying a bit, for every ₹10 of equity put in or retained by equity holders, the bank lends out or buys investments of ₹80-100. Even if ₹5 of the bank's lending goes bad, this is 40-50% of its capital. For similar reasons, a leveraged trading or investment bet can deal a fatal blow to a bank's balance sheet. After all, a single trader took down the 200-plus year-old Barings Bank in 1995. As an outside investor, you never know where problems are hiding in either the credit or trading book of a bank. There is no way to take a really informed bet when investing in a bank. It is mostly a blind wager that the management is doing what it is supposed to. The really interesting part? Banking is the ultimate confidence game. Also Read: Devina Mehra: Forgetting history can be costly, especially so while investing I remember my mother explaining a bank run to me when I was in school (for context, she's a postgraduate in economics): while a bank promises to give you the money you have deposited on demand, in reality no bank can pay back its depositors all at once. The money given by depositors is tied up elsewhere and is not really available with the bank to be returned on the spot. Even the most solid bank in the world will collapse if all or most of its depositors line up at its door asking for their money back. That is why banking regulators move so swiftly anytime there is even a hint of a loss of confidence in a bank. And, as we have seen multiple times in India, when there are rumours of a bank being in trouble, a shotgun marriage in the form of merger is often arranged with a stronger bank. This protects the weak bank's depositors but usually not its shareholders. Further, lessons from history in finance are easily forgotten and institutional memory is notoriously short. As a friend who was working for a major international bank that largely side-stepped the global financial crisis of 2008-09 told me, mostly what saved the bank was the memory of one of the senior management team members who vividly recalled the Asian crisis of a decade ago, when he was barricaded all night in the bank's branch in an Asian capital while people screamed for the heads of bankers outside. That reminded him—and hence the bank—of how bad things could get. Else, risk blindness and failure of imagination are the biggest issues in banking risk management. Ironically, I am writing this at a time when I am probably the most positive I have been—at least in the last three years—on Indian banking stocks as an investment. But this piece is about the framework of banking as a business. Disclosure: I was a banker once upon a time. The author is founder of First Global and author of 'Money, Myths and Mantras: The Ultimate Investment Guide'. Her X handle is @devinamehra
Mint
7 days ago
- Business
- Mint
The silent killer in your portfolio: Why one stock could wreck it all
When equity markets rally, portfolios with concentrated bets often look like winners. Investors in stocks like Gensol Engineering or Mazagon Dock in 2023 may have flaunted triple-digit returns. But beneath that temporary high lies a quiet but dangerous threat: concentration risk. Concentration risk refers to excessive exposure to a single stock, sector, or strategy. While it can magnify gains, it also amplifies losses when things go wrong. In a country where stock investing is now mainstream and mutual funds manage over ₹55 lakh crore (as of April 2025), this risk often goes unnoticed—until the tide turns. Also read: Devina Mehra: Diversified or concentrated portfolio? It's an easy choice The temptation of overconfidence In recent years, retail investors in India have been shifting away from diversified mutual funds and toward direct stock picking. Fuelled by Finfluencers, demat apps, and FOMO, many investors now chase recent winners highlighted under 'top gainers in 1 year" filters. The pattern is familiar: someone sees a stock that has returned 300% over 18 months and bets big, assuming the past will repeat. But markets are rarely so kind. The Gensol lesson Take Gensol Engineering. The stock soared over 200% in 2023. But by early 2024, after reports of financial irregularities and broader corrections, it plunged nearly 30% in just weeks. For those who had 40–50% of their portfolio in Gensol, the damage was severe—even though broader indices were stable. Data speaks: The price of concentration According to the CFA Institute, a well-diversified portfolio needs at least 20–25 uncorrelated stocks. In India, mutual funds typically hold 40–60 stocks. Yet many DIY investors own just 5–8 stocks—often clustered around themes like capital goods, defence, or small caps. The difference isn't theoretical—it's the line between staying invested and panic selling during volatility. Diversification vs. diworsification Many investors argue that too much diversification dilutes returns. It's true—diversification doesn't guarantee the highest return, but it protects against catastrophic loss. Also read: Diversification isn't about how many stocks or funds you own—it's about which ones Let's say you own five stocks. If one stock crashes 80%, and it made up 40% of your portfolio, your entire wealth drops by 32%—even if the rest stay flat. A diversified fund with the same stock at 3% allocation would suffer less than 2.5% impact. Think of diversification like a cricket team. You might have Virat Kohli, but if the other 10 are debutants, your tournament odds shrink. A steady, well-balanced lineup gives you better consistency—even if a star underperforms. Mutual Funds: The diversification you forgot In chasing alpha, many investors have abandoned mutual funds—especially actively managed ones. But mutual funds offer built-in benefits: diversification, professional management, risk-adjusted returns, and regulatory safeguards. Some points to consider: Instead of ditching mutual funds completely, consider a blend. For instance, a 70-30 split between diversified funds and direct equity can offer growth with a cushion. 10/10/10 rule for safer investing To control concentration risk, follow the 10/10/10 rule: Review your SIPs, holdings, and direct investments every six months. If one idea has grown disproportionately, consider trimming it. Final thought In investing, silent risks are often deadlier than visible ones. Concentration risk doesn't show up in daily NAVs or dashboards—it shows up in sleepless nights during market corrections. A portfolio should not just perform in bull runs; it should survive the bear phases. As markets evolve and choices multiply, managing risk is not just about avoiding losses—it's about staying in the game. And for that, diversification isn't optional. It's essential. Also read: Unlocking global markets: How Indian investors can diversify with portfolio management services Viral Bhatt, founder, Money Mantra— a personal finance consultancy
Time of India
15-06-2025
- Business
- Time of India
ET Women's Forum: No finance degree, no guru. Take a SIP of confidence, start walk to freedom
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Being financially independent is not just about having money, it's about having control over your life. That was the central theme of a thought-provoking discussion held at The Economic Times Women's Forum in Mumbai. The panel, titled ' Financial Independence : Own Your Worth,' brought together three influential voices, Devina Mehra, founder of First Global, Nilesh Shah, managing director of Kotak Mahindra AMC, and Rachana Ranade, finance educator and well-known opened the session by stressing the importance of introducing financial literacy in school curricula. While awareness has grown over the last three decades, she noted that young boys are often exposed to financial discussions earlier than girls, who typically begin engaging in it only after starting a job or marriage. She underlined how women themselves develop mental blocks due to social conditioning, often underestimating their capability or deferring to male family pointed out that a meaningful change will take time and must be driven both by shifting mindsets and greater participation from women. "Women need to ask questions, make decisions, and claim their space in money conversations," he cited a story from Nashik, where even men are starting to understand the importance of including their wives in financial discussions. She highlighted how financial empowerment is not just a women's issue but a collective panel agreed that risk-taking is not inherently gendered. Mehra explained how women, though great savers, hesitate to invest due to fear or lack of confidence despite evidence showing women often outperform men in Mehra and Shah advocated starting with systematic investment plans (SIPs) to build discipline and gradually gain confidence. "You don't need to know everything to start investing," Mehra said. "Just begin wisely and consistently."Ranade, who commands a wide audience on social media, spoke about the transformative power of digital platforms in driving financial awareness. While her early YouTube channel had a 90:10 male-to-female ratio, she has since narrowed the gap with her Marathi channel reaching 35% female recalled how her videos inspired a small village in Maharashtra, where women began investing even ₹100 through SIPs. "This is the ripple effect," she said. "Even one small step can spark big change."When the conversation moved to risk-taking, Mehra said that women often go to extremes. They either stay away from investments completely or leave all decisions to someone else. The smarter approach, she said, is balanced asset allocation, a mix of equity, debt, and even global exposure."Never be 100% in equity," she warned, adding that diversification is important for long-term financial encouraged women to take small steps to begin their investment journey. She said starting a monthly SIP of even ₹500 can be a great beginning. "You don't need a finance degree to begin," she on her YouTube experience, she noted that women tend to engage more with financial content when it comes from someone relatable, especially another woman. That's why role models are so also said that more women are needed in top finance roles. For women starting businesses, she advised them to confidently pitch their ventures and not let doubts, especially from others, slow them down. "Be ready to steer the narrative back to your strengths," she said."A man will apply for a promotion if he meets 60% of the criteria. A woman waits till she checks every box," Mehra observed. She also shed light on systemic biases in venture capital funding, where men are asked about growth potential and women about risks."Be a great salesperson for your idea. You will face more rejections, but don't take them personally." The session closed with a strong message: financial independence is not optional, it's essential.
Time of India
06-06-2025
- Business
- Time of India
Underweight on US since January; overweight on Europe, China & India: Devina Mehra
Devina Mehra , Founder & CMD, First Global , says their global funds have been underweight in the US since January, favoring Europe and maintaining overweight positions in China and India. Recent rebalancing in India included overweighting pharma and auto components, a strategy in place since early 2024. FMCG and banks have seen increased weight, with banks still remaining underweight despite recent additions. Let us shift focus to the Indian markets because when you joined us in March, the market sentiment was not that great and you believe that in this time where fear is actually gripping the market sentiment, it is a good time to invest. Stick with the largecaps and have a strategy. But from those levels, markets have already seen a good runup. How are you seeing the Indian markets and the fundamentals shaping up? Devina Mehra: I was looking at some of my podcasts from February which I had done after my book had been released. In everyone I have said the same thing that if you were waiting for a correction to invest, have you invested yet? It was when Nifty was in the 22,000 range. It has gone up since then. But my recommendation is to remain invested because one will have to look at a trade-off; what is the percentage and probability of the downside versus the percentage and probability of the upside? by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Unsold Container Homes in North Cotabato - Prices You Won't Believe! Shipping Container Homes | Search Ads Search Now Undo We are still in a good space in the largecap mainstream stocks. You have to be sector specific and stock specific. Having said that, it is not the time to be sitting out of the market. There is no good reason to do that because most of the time it makes sense to remain invested unless a crash appears imminent, which is not the case. The statistic I have given before says that in 40-odd years, if you miss out on the 10 best days, you miss out on two-thirds of the return. So, your Rs 100 instead of being Rs 75,000 or so, would be Rs 25,000. That is the kind of risk of sitting out. You should not have 100% in equities, but is it a time to be invested as far as your equity allocation is concerned? The answer is yes. In your book, you have advocated the thought of going global because if you are one market centric, there is a risk of your portfolio being concentrated in just one asset class. So, for this particular year, which market and which asset class can be the outperformer? Devina Mehra: A lot of people think globalising means buying a US index or buying half a dozen US stocks. Many funds also run on that strategy. In our global funds, especially since January, we have been underweight the US, we are overweight Europe . We had also increased our fixed income allocation but that has also been very volatile. We also have been overweight China from somewhere last year and we are slightly overweight India. That is broadly where we are as far as global funds are concerned. Live Events You Might Also Like: MF Tracker: Will this Rs 30,000 crore smallcap fund continue to maintain its long-term performance? We have just carried out our India rebalance because we do it every quarter. April end or so was a month. There also in terms of sectors, we have been overweight pharma and auto components from almost the beginning of 2024 and that continues. Pharma and healthcare in just percentage terms probably would be our highest overweight. In the last few quarters, we have been overweight FMCG. That is one area where we have been increasing weight. We have also increased weight in banks, but we are still not overweight there. We are still underweight but in the last couple of rebalances, we have added banks. You Might Also Like: Nilesh Shetty stays cautious; 3 sectors see largest allocations in value portfolio Devina Mehra on Trump-Musk spat, China's chip market manipulation
Mint
28-05-2025
- Business
- Mint
Why a tentative stock market makes sense
For the Indian stock market, it's been a jagged past fortnight or so, with the benchmark index showing moderate volatility post-Operation Sindoor. On Tuesday, the BSE Sensex fell 0.76% to 81,551.63 after rising in the previous two sessions. Indeed, the index has swung between gains and losses. Also Read: Mint Quick Edit | India's military strike didn't faze its stock market The swings are not too sharp, but it's hard to ignore the cloud of uncertainty that hangs over its direction. While rises are triggering profit booking and dips are being bought into, eyes seem set on US tariff policy for broad cues on the index's future course. Also Read: Devina Mehra: Trump stocks? They're mythical at best in this new era of uncertainty Although America's 50% tariff threat aimed at the EU being held off till July was celebrated globally, a day of reckoning for world trade still lies ahead. Washington's disapproval of Apple's plan to import more India-made iPhones has dashed hopes that it wasn't too serious about a push for manufacturing self-sufficiency. Signals from the US have left investors puzzled about what kind of trade reset to expect and what it will mean for businesses. Also Read: The certainty of uncertainty calls for enhanced economic vigilance True, India is far less exposed to global upheavals, but rapid economic growth still hinges on access to markets abroad. It's easy to empathize with investors who are unsure of outcomes.
