Subscriber Update - Jul 2025
A Tired Market!
Dear Subscriber,
Welcome to the July 2025 issue of Equity Midas Capital’s Subscriber Update. In this update, we will cover the year that has been and our expectations in the coming year.
Today, we are more aware than ever that our work carries responsibility beyond research – it touches real investments and real lives. As research analysts, we are mindful that behind every idea we share, real money is invested, and real people – our subscribers – are impacted. This responsibility guides every insight, disclosure, and recommendation we provide.
Markets have a way of keeping even the most seasoned investors humble. No matter how much experience we gain or how deeply we analyze the data, uncertainty remains an inseparable part of investing. That’s why we approach every recommendation with humility and discipline, staying true to the test conditions under which our quantitative model was built and validated.
The investment year 2024–25 was a powerful reminder that successful investing is about more than just identifying good companies. Staying disciplined, digesting volatility, and keeping emotions in check during turbulent periods often matter even more than the initial stock selection.
Overall, the markets were kind to us in IY2024–25, with our recommendations delivering returns well above the broader market. That said, the journey wasn’t without challenges. The last three months (March–May 2025) tested our patience and conviction as volatility spiked and several positions faced short-term pressures.
Through 2024, markets largely ran on “hope”—hope for a strong earnings recovery, a series of interest rate cuts to support growth, consumption growth and higher GDP. We wrote in our previous update in May 2024 that we are worried because there seems no reason to worry at all.
That optimism was challenged when first-quarter results in July 2024 fell short of expectations. Markets peaked a couple of months later in September 2024 and have been in a corrective phase since, with those highs yet to be revisited as of July 2025. GPD growth is now at the lowest in the last four years and capex from companies has remained weak. (Read more here and here)
The ongoing realignment of global trade dynamics, driven in part by pressures from the USA, has left most markets in a state of flux. Every bout of positive news is swiftly countered by negative developments, causing optimism to fade quickly. Similarly, negative sentiment rarely triggers deep or lasting sell-offs.
We are now in an environment where neither good news is fully celebrated, nor bad news sparks significant panic – a reflection of the heightened uncertainty and cautious stance that currently defines market behavior.
As we see, it’s a tired market.
Nothing works all the time in markets. If we look back at the period since Covid, perhaps the more accurate statement is that anything can work in markets—for some time. The rally from 2020 was largely built on the promise of higher operational performance by listed companies. That optimism is now facing a reality check. The strategies that worked well in the post-Covid years may not deliver similar results going forward. This year, success will depend on identifying the right companies and having the conviction to hold them through the volatility we are likely to face.
While markets can fall at any time due to unforeseen events, a sustained move higher will require a clear and credible path to growth. If macroeconomic conditions fail to improve, markets may drift lower—not in panic, but in a slow, weary give-up phase until optimism finds fresh footing.
As a quantitative research-focused service, our recommendations are designed with a one-year holding horizon. In today’s environment, where sentiment shifts by the day—or even the hour—this can mean periods of heightened volatility and stretches of underperformance compared to the indices. We believe this is part of the journey. Staying disciplined is a critical element of our model; “Doing Nothing is the Most Difficult Part”!
We are neither inclined nor equipped to time the markets—and we view that as an advantage.
Our focus has always been on selecting the right stocks and holding them through inevitable bouts of volatility. This is where our Expectations Value Model plays a critical role. Each year, we carefully review the performance of our recommendations, learn from the outcomes, and refine our stock selection process to improve the quality of opportunities we bring to you.
Our stock recommendations are based on EVM and are released irrespective of our opinions on the pre-defined schedule every year.
Due to regulatory guidelines, we are unable to disclose actual figures or include the usual performance chart comparing our recommendations to the index. Nonetheless, we are pleased with the overall outcome while remaining focused on continuous improvement.
Over the past year, our analysis has highlighted key observations:
One advantage of any quantitative model is the ability to rigorously back-test it across historical market cycles, providing valuable insights into its robustness and performance consistency. With this foundation, we began developing a momentum-based product a few years ago, and the strategy is now largely ready.
However, evolving SEBI regulations, particularly around the use of third-party platforms, have caused delays in the launch. We are actively working to address these compliance aspects, and subject to regulatory clarity, we expect to introduce the momentum product in 2025.
Hedging appears to be the more practical of the two, particularly in the latter part of our 12-month holding period (after 9–10 months), when market volatility can meaningfully impact returns. However, hedging involves additional costs and trades in the futures and options (F&O) segment, which runs counter to our long-standing principle of “accepting market returns” through a straightforward, equity-only approach. That said, given the level of subscriber interest, we continue to explore ways to incorporate hedging responsibly, though we have no concrete solution to share yet.
Timing the exit remains an even greater challenge—the “holy grail” of systematic investing. Despite extensive research, we have yet to identify reliable quantitative indicators that consistently improve exit outcomes across historical market cycles. This is an area we will keep investigating, but for now, a fixed schedule remains the most disciplined and evidence-backed approach available to us.
Welcome to the July 2025 issue of Equity Midas Capital’s Subscriber Update. In this update, we will cover the year that has been and our expectations in the coming year.
Fifth Year of Operations
As we step into the 5th year of our research journey, we are deeply grateful for the trust you’ve placed in us and the opportunity to be part of your investment decisions.Today, we are more aware than ever that our work carries responsibility beyond research – it touches real investments and real lives. As research analysts, we are mindful that behind every idea we share, real money is invested, and real people – our subscribers – are impacted. This responsibility guides every insight, disclosure, and recommendation we provide.
Markets have a way of keeping even the most seasoned investors humble. No matter how much experience we gain or how deeply we analyze the data, uncertainty remains an inseparable part of investing. That’s why we approach every recommendation with humility and discipline, staying true to the test conditions under which our quantitative model was built and validated.
The investment year 2024–25 was a powerful reminder that successful investing is about more than just identifying good companies. Staying disciplined, digesting volatility, and keeping emotions in check during turbulent periods often matter even more than the initial stock selection.
Overall, the markets were kind to us in IY2024–25, with our recommendations delivering returns well above the broader market. That said, the journey wasn’t without challenges. The last three months (March–May 2025) tested our patience and conviction as volatility spiked and several positions faced short-term pressures.
IY 2025-26 Outlook – A Tired Market
Looking ahead to the coming year, it’s important to reflect on the backdrop we’ve just experienced.Through 2024, markets largely ran on “hope”—hope for a strong earnings recovery, a series of interest rate cuts to support growth, consumption growth and higher GDP. We wrote in our previous update in May 2024 that we are worried because there seems no reason to worry at all.
That optimism was challenged when first-quarter results in July 2024 fell short of expectations. Markets peaked a couple of months later in September 2024 and have been in a corrective phase since, with those highs yet to be revisited as of July 2025. GPD growth is now at the lowest in the last four years and capex from companies has remained weak. (Read more here and here)
The ongoing realignment of global trade dynamics, driven in part by pressures from the USA, has left most markets in a state of flux. Every bout of positive news is swiftly countered by negative developments, causing optimism to fade quickly. Similarly, negative sentiment rarely triggers deep or lasting sell-offs.
We are now in an environment where neither good news is fully celebrated, nor bad news sparks significant panic – a reflection of the heightened uncertainty and cautious stance that currently defines market behavior.
As we see, it’s a tired market.
Nothing works all the time in markets. If we look back at the period since Covid, perhaps the more accurate statement is that anything can work in markets—for some time. The rally from 2020 was largely built on the promise of higher operational performance by listed companies. That optimism is now facing a reality check. The strategies that worked well in the post-Covid years may not deliver similar results going forward. This year, success will depend on identifying the right companies and having the conviction to hold them through the volatility we are likely to face.
While markets can fall at any time due to unforeseen events, a sustained move higher will require a clear and credible path to growth. If macroeconomic conditions fail to improve, markets may drift lower—not in panic, but in a slow, weary give-up phase until optimism finds fresh footing.
What this means for us
Expecting exceptionally high returns this year will be difficult given the market’s current state. A market running low on conviction often needs a strong external trigger to regain momentum. Until we see meaningful positive developments, we expect the markets to remain subdued, testing our patience along the way.As a quantitative research-focused service, our recommendations are designed with a one-year holding horizon. In today’s environment, where sentiment shifts by the day—or even the hour—this can mean periods of heightened volatility and stretches of underperformance compared to the indices. We believe this is part of the journey. Staying disciplined is a critical element of our model; “Doing Nothing is the Most Difficult Part”!
Accepting Market’s Returns
We have always maintained that we simply accept the returns that markets deliver. We do not set arbitrary “targets” or “stop-losses,” as history has shown that every difficult phase in the market is eventually followed by better times. As long as we remain invested, we believe we can capture the excess returns that markets offer over the long run.We are neither inclined nor equipped to time the markets—and we view that as an advantage.
Our focus has always been on selecting the right stocks and holding them through inevitable bouts of volatility. This is where our Expectations Value Model plays a critical role. Each year, we carefully review the performance of our recommendations, learn from the outcomes, and refine our stock selection process to improve the quality of opportunities we bring to you.
Market Opinions Vs Recommendations
Do note that these are our views/opinions and not recommendations.Our stock recommendations are based on EVM and are released irrespective of our opinions on the pre-defined schedule every year.
Looking Back
Our IY2024-25 BUY recommendations were released on 31st May 2024 and subsequently updated to SELL on 31st May 2025. These recommendations delivered a strong performance as a group during the year, comfortably outpacing the benchmark index.Due to regulatory guidelines, we are unable to disclose actual figures or include the usual performance chart comparing our recommendations to the index. Nonetheless, we are pleased with the overall outcome while remaining focused on continuous improvement.
Over the past year, our analysis has highlighted key observations:
- Winners Beat Operation Performance Expectations: Six of our recommended stocks met or exceeded expectations, generating exceptional returns and validating our research process.
- Operational Underperformance: The remaining six names did not meet the expectations and consequently added little to overall returns.
- FOCUS Underperformance: Our larger-cap FOCUS recommendations (companies with market capitalization above ₹10,000 crore) underperformed significantly, with four of the six recommendations posting double-digit negative returns.
- Operational Underperformance: Three of these four laggards also faced fundamental operational challenges, which the market rightly punished. The ratio of companies not meeting the expectations is very high this year for the FOCUS recommendations, an area to research more.
- Model Refinement Opportunity: While no model can completely avoid underperformers, we believe there is scope to better identify company and industry traits that are more prone to sustained weakness, enabling us to avoid such selections in the future.
- Accepting Market Dynamics: If a company performs well fundamentally but the market does not reward it, we consider that an acceptable outcome – our philosophy has always been to accept market returns.
- Path Forward: Though we have not made immediate changes to our model, we will rigorously test potential enhancements this year for possible implementation in our IY2026-27 recommendations.
Subscriber Queries
Q1. What is the status of your new momentum-based product?
Momentum investing is a natural complement to our existing quantitative framework. Since our EVM model already narrows the universe of stocks before applying the ranking algorithm, half the groundwork for a momentum strategy is inherently in place. Momentum itself is a quantitative concept, making it a seamless fit within our research approach.One advantage of any quantitative model is the ability to rigorously back-test it across historical market cycles, providing valuable insights into its robustness and performance consistency. With this foundation, we began developing a momentum-based product a few years ago, and the strategy is now largely ready.
However, evolving SEBI regulations, particularly around the use of third-party platforms, have caused delays in the launch. We are actively working to address these compliance aspects, and subject to regulatory clarity, we expect to introduce the momentum product in 2025.
Q2. We feel we lost returns due to the fixed nature of your BUY & SELL recommendation schedule. In the last letter, you mentioned exploring better exit timing and hedging—what progress has been made?
We agree that solving either of these challenges—dynamic exit timing or effective hedging—could meaningfully improve the performance of our recommendations. Both remain active areas of research, though progress has been limited so far.Hedging appears to be the more practical of the two, particularly in the latter part of our 12-month holding period (after 9–10 months), when market volatility can meaningfully impact returns. However, hedging involves additional costs and trades in the futures and options (F&O) segment, which runs counter to our long-standing principle of “accepting market returns” through a straightforward, equity-only approach. That said, given the level of subscriber interest, we continue to explore ways to incorporate hedging responsibly, though we have no concrete solution to share yet.
Timing the exit remains an even greater challenge—the “holy grail” of systematic investing. Despite extensive research, we have yet to identify reliable quantitative indicators that consistently improve exit outcomes across historical market cycles. This is an area we will keep investigating, but for now, a fixed schedule remains the most disciplined and evidence-backed approach available to us.