Devina Mehra’s Market Insights: Optimism for India’s Stock Market, Smart Stock Picking, and More
Devina Mehra, Chairperson, Managing Director, and Founder of First Global, remains optimistic about the long-term prospects of mainstream Indian stocks and market indices. In an exclusive interview with Mint, Mehra explains why she believes Indian stocks are still on track for solid returns and how her cautious yet calculated approach to stock picking has shaped her investment philosophy.
How did the Indian stock market perform in 2024, and what lessons can be learned?
2024 was a positive year for Indian markets, but Mehra points out that unrealistic expectations have become a common theme among new investors. Many have entered the market during a bull run and now expect astronomical returns without fully understanding the risks involved. “People say they’re conservative but want 25-30% returns and tripling their money every three years. These are not realistic expectations,” she says.
Mehra emphasizes the importance of risk management, explaining that taking high risks doesn’t guarantee high returns; it often leads to significant losses. For most of 2024, the market saw broad gains, with even poorly performing stocks often rising, which led many investors to falsely attribute success to their own stock-picking abilities.
What is your outlook for 2025, and which sectors are you optimistic about?
While Mehra doesn’t provide annual market forecasts, she remains positive on the long-term potential of mainstream stocks and indices, which are still below their long-term compounding trend lines. She notes that the market’s underperformance from 2011 to 2020 created space for an uptrend post-March 2020.
Regarding sectors, Mehra is currently overweight on pharma, healthcare, IT services, and auto components in First Global’s portfolios. She mentions that while the capital goods and industrial machinery sectors were favored in recent years, they are now underweighted. However, she stresses that these allocations may change as the year progresses, especially as new technologies and sectors emerge.
Can mid and small-cap stocks continue to outperform in 2025?
Mehra advises caution with smaller stocks, acknowledging their potential for high returns but also high risk. She points out that the small-cap segment has seen significant drawdowns in the past and warns against investing in stocks with market caps below ₹5,000 crore. “Risk management is nearly impossible in small-caps when they fall, as exits and hedges become difficult,” she says.
For those who’ve seen significant returns in small-caps, she recommends booking profits and shifting to a more stable portfolio.
What is your approach to stock picking, and how can investors identify multi-bagger stocks?
Mehra’s approach to stock picking is data-driven, relying heavily on artificial intelligence and machine learning to filter stocks. She emphasizes the importance of focusing on factors like cash flow, return ratios, and profit growth, but warns that no one can predict the future. She advises setting clear investment parameters and sticking to them, rather than being swayed by tips from friends or media.
When assessing stocks, Mehra stresses the importance of keeping a strict stop-loss strategy to minimize losses. “Investing is a loser’s game; you win only if you do not lose big money,” she explains.
Can you share details about your upcoming book?
Mehra’s forthcoming book, Myths and Mantras: The Ultimate Investment Guide, distills her decades of market experience and offers valuable insights for both novice investors and professionals. The book explores key investment questions like how to get started, whether investing is only about stocks, and when to break conventional investment rules. Mehra aims to help readers unlearn misguided beliefs and understand what truly works in investing.
The “Money Mindset” for Successful Investing
Mehra defines having a “money mindset” as a deep reflection on one’s attitude towards money, including both spending and investing. She advocates for prioritizing savings, maintaining a balanced risk profile, and adhering to an asset allocation plan that includes global diversification. “Investing should be about long-term planning, not excitement or entertainment,” she advises.
Key Observations About the World’s Top Investors
In her book, Mehra provides a critical analysis of successful investors, offering insights that challenge conventional wisdom. For instance, she reveals that Warren Buffett often sells his positions within six months, and Benjamin Graham made his fortune through an insurance company, not value investing. Mehra encourages investors to look at the results of others following the same strategies and ask tough questions about their long-term success.
Daily Reading Habits and Favorite Books
Mehra’s reading habits focus on staying informed with business newspapers like Business Standard and Mint, along with global market news. However, she cautions against spending too much time in the news cycle, which can often be a distraction.
Her favorite books go beyond basic investing principles, delving into human biases and fallacies in decision-making. Some of her recommended reads include Daniel Kahneman’s Thinking, Fast and Slow, The Halo Effect, and The Art of Thinking Clearly.
Mehra’s thoughtful and disciplined approach to investing offers valuable lessons for anyone looking to navigate the complexities of the stock market with confidence and caution.
